Effect of Logistics Outsourcing on the Operational Performance of Shipping Industry in Kenya

Abstract

Logistics services outsourcing has become a popular practice among the shipping companies all in the need to take advantage of the various advantages associated with outsourcing. The objective of the study was to determine logistics outsourcing effect on operational performance of shipping industries in Kenya. Contracting out provision of logistics services to a firm with competitive advantages in terms of reliability, quality and cost was found out to be the main driver of outsourcing. However the various studies covered have not extensively delved into logistics outsourcing in relation to the performance of shipping companies in Kenya. The population of the study in this research was 42 shipping companies’ operating in Kenya as per the KSAA, 2015 and the study was a census survey since the population was pretty small. The study used primary data which was collected through a structured questionnaire from Logistics and operations managers or their equivalents which was administered by ‘drop and pick’ method. The response rate was 76.2%. The data was analyzed using descriptive statistics with the main analysis tools being frequencies, mean and standard deviation and multivariate linear regression by utilizing the Statistical Package for Social Sciences (SPSS). The results established that the firms opted to outsource their services due to its advantages and its possible influence on operational performance, as it enables the firms to focus on its core competencies. The logistics outsourcing practices adopted by the shipping firms will in the long run determine their survival as they would seek to reduce operating costs, improved customer satisfaction and timely delivery of services to clients which in turn increase productivity and reduce lead time and improved profits. The study confined itself to shipping firms in Kenya and the findings may not be applicable in other sectors as a result of uniqueness of the shipping firms. It is therefore recommended that the study is replicated in other service sectors to establish their logistics outsourcing services and performance.