While much is known about 3PL from an international perspective, knowledge from a South African perspective is limited, which begs the question: “what effect does outsourcing the logistics function have on South African manufacturing companies?”. The aim of this research was to identify the factors that organizations considered important when deciding to outsource.
INTRODUCTION
MOTIVATION FOR THE STUDY
PROBLEM STATEMENT
AIMS AND OBJECTIVES
POPULATION AND SAMPLE
METHODOLOGY
DATA COLLECTION METHODS AND TREATMENT OF DATA
The collected data were analyzed, from which themes and categories were identified, which were then used to structure the presentation of the results. Additional evidence to support the findings is provided by using direct quotes from respondents, while key quotes were selected to illustrate the significance of the data and demonstrate the reliability and validity of the data analysis.
LIMITATIONS OF THE STUDY
Further, quotes were selected to illustrate the strength of opinions, similarities and differences between respondents, and a breadth of ideas. Where appropriate, some qualitative data have been treated quantitatively using tables and figures.
OUTLINE OF THE STUDY
The method used for data collection is justified and any limitations to this study are explained. Next, this chapter describes how the research was conducted and what philosophical assumptions underpin the data collection methods.
SUMMARY
This chapter has given an overview of the research study, stated the aims and objectives of the study, described the population and the motivation for the sampling method used. This chapter introduces further definitions of terms used in outsourcing and reviews the main drivers of outsourcing.
INTRODUCTION
DEFINITION OF TERMS
In addition, other functions included inventory management, information services and sometimes supply chain management. Transportation – examples of OSPs are DHL, FedEx, Supply Chain Services and, locally, Grindrod Logistics Services.
KEY DRIVERS TO OUTSOURCE
In addition, the 3PL has the ability to modify the distribution system to keep up with changes in technology and the market. The organization is getting leaner and meaner, and OSP is tasked with adapting to the changes the organization imposes or demands.
THE DIFFICULTIES AND RISKS SUSTAINED IN OUTSOURCING The main disadvantage cited by many authors, such as Razzaque and Sheng (1998),
Furthermore, the management styles of the companies can also be different, which can lead to loss of focus. Furthermore, none of the literature reviewed for this study makes any mention of reverse logistics.
DEVELOPING A STRATEGY FOR OUTSOURCING
In this framework the organization is more competent in a critical activity than any potential OSP. In this framework the organization is more competent than a potential OSP and the activity is not critical to the success of the business.
KEY SUCCESS FACTORS
To increase the chances of success of the outsourcing strategy, a logical process must be followed. It is essential that all disciplines have input into the outsourcing strategy so that the entire organization understands the reasons and benefits of the strategy. Furthermore, the service provider must always demonstrate the customer's competence and knowledge to maintain customer trust (Ishizaka & Blakiston, 2012).
Implementing the model would be time-consuming and expensive, but the benefits would ensure that the outsourcing strategy is successful.
STEPS TO BE CONSIDERED IN THE OUTSOURCING PROCESS
The first stage requires the organization to examine the purpose of the service to ensure that the outsourced service will deliver the desired benefits. After all areas of evaluation have been considered, the preferred service provider should be identified. Due diligence should be performed on the preferred service provider to check the reliability of the service providers' statements to meet the terms of the contract.
Finally, organizations should always explore ways to improve the provision of an outsourced service by conducting regular reviews.
THE IDENTIFICATION AND SELECTION OF A PROVIDER
MEASUREMENT AND FOLLOW-UP OF THE DECISION TO OUTSOURCE
According to Kathawala et al. 2005), companies need to establish mechanisms for continuous performance monitoring and problem solving, through which effective relationships can be built. The authors further stated that performance monitoring allows the OSP to collaborate with others on how to improve efficiency as issues exist between people, technology and processes. 2005) also stated that outsourcers can also solve problems through intervention or termination of the agreement by third parties.
CONCLUSION
INTRODUCTION
OBJECTIVES
SAMPLING
This type of sampling is limited to certain types of people who are able to provide the data as they are the only ones who have the information. Judgment selection involves the selection of subjects best able to provide the necessary information. They will be able to provide good data or information to the researcher (Sekaran & Bougie, 2011).
When there is a need to focus on one specific question, this type of sampling is called extreme sampling (White, 2002).
THE RESEARCH POPULATION AND SAMPLE
These subjects are reasonably expected to have expert knowledge, having gone through the experiences and process themselves. Quota sampling ensures that certain groups are adequately represented in the study by allocating a predetermined number or quota.
RESEARCH METHODS
Reasoning is logistic and deductive Reasoning is dialectical and inductive Mechanistic: parts equal the whole Organisms: whole is greater than the parts Established relationships, causality Describing meaning, discovery. Basic research, such as a laboratory experiment, is an investigation that contributes to the body of knowledge in a specific area of study but may not have obvious and immediate applications in real-world settings (Vanderstoep & Johnston, 2009). Furthermore, applied research often takes place in real-world settings such as schools, hospitals and businesses.
ADVANTAGES AND DISADVANTAGE OF QUALITATIVE AND QUANTITATIVE RESEARCH
Qualitative research
Quantitative research
The main disadvantage is that the context of the study or experiment is ignored (Jones, 2012).
DATA COLLECTION APPROACH
INTERVIEWS
Given the interviewer's limited experience, this type of research relies less on the interviewer's skills and provides more control over data collection. Another advantage of interviews is that they allow the interviewer to adjust questions and clarify doubts by repeating or reformulating the question. One disadvantage is the cost associated with travel if the study covers a large geographic area (Sekaran & Bougie, 2011).
INTERVIEW DESIGN AND PREPARATION
RELIABILITY AND VALIDITY OF THE INTERVIEWS
ETHICAL CONSIDERATIONS
Permission was obtained from the participant to use a voice recorder during the interview to save time.
INTERVIEW LIMITATIONS
ANALYSIS OF DATA
SUMMARY
INTRODUCTION
DESCRIPTION OF RESPONDENTS
Another dimension introduced by the sample is to whom the company has outsourced its logistics function. Three of the participants in the study outsourced their logistics function to their own drivers, who were former employees of the company. Another three of the participants who used specific 3PL organizations also used multiple organizations at the same time.
INTERVIEW SCHEDULE AND INTERVIEW
DATA ANALYSIS
Objective one: identify the key drivers for outsourcing the logistics function The first objective of this study was to identify the key drivers for outsourcing the logistics
During the interviews, it became apparent that the most common reason for considering outsourcing the logistics function was attributed to HR and IR factors. One of the reasons for the high turnover was HIV/AIDS, as can be seen in Table 4.2. Some respondents agreed that they simply did not have the skills in their organization to deal with the demands of the supply chain function and would prefer to have an expert working in this discipline on their behalf.
Others agreed that they wanted to increase quality and delivery, which was seen as an extension of the product.
What are some of the most important factors considered before
Objective two: identify the financial value created by outsourcing the logistics function
Six of the respondents indicated that there was no significant change in turnover after outsourcing. As expected, almost all respondents indicated that they could convert fixed costs to variable costs. Many respondents agreed that the savings from outsourcing were reinvested in other areas of the business.
Gattorna (2010) mentioned that savings from outsourcing were reinvested in other areas of the business.
Objective three: identify organisational process efficiencies from outsourcing the logistics function
Almost all the participating companies agreed that they had achieved increased production efficiency. More than half of respondents commented that by using an OSP there was an increase in delivery predictability. More than half of the respondents stated that no cuts were made as a result of outsourcing.
Almost all of the benefits that were mentioned in the literature review were realized in some form by the respondents.
Objective four: identify areas of concern resulting from outsourcing the logistics function
However, most respondents confirmed that the OSP usually paid a low wage compared to the company for the same work. At least half of the respondents confirmed that the OSP was often reactive rather than proactive in solving problems. At least half of respondents commented that senior management was retained to reduce risk.
Almost all respondents agreed that they had lost control of the situation and relied heavily on OSP.
Objective 5 - To establish what factors companies considering outsourcing should consider in their planning
Almost all respondents agreed that it is important for a company to have the necessary skills to manage outsourcing. Many respondents agreed that the nature of the product supplied should be considered. Just over half of respondents agreed that cost is the main factor to consider when deciding to outsource.
Some respondents agreed that the culture and management style of the OSP should match the companies.
Summary
INTRODUCTION
KEY FINDINGS
While cost and efficiency are identified as primary factors in the literature, they were identified as secondary in this study. The information obtained from industry experts in this study fully supports and reinforces what is already known in the field. This study added a South African perspective by considering the benefits and challenges facing the country.
RECOMMENDATIONS BASED ON FINDINGS
- Failure of owner driver programmes
- Use of 4PL logistics service providers
- Consideration of an exit strategy
- Use of multiple service providers
None of the respondents mention the existence of an exit strategy in case outsourcing fails. A good exit strategy prepares a company for a successful exit from outsourcing, with as few business interruptions as possible. For example, if the OSP closes due to financial problems, the company will be temporarily stranded without product deliveries.
Furthermore, using multiple suppliers allows a company to measure service and costs and negotiate even more favorable rates and service levels.
LIMITATIONS OF THIS STUDY
There can be many reasons for a company to terminate the outsourcing agreement, such as performance problems or a change in strategy. Given the nature and size of these organizations, these companies must consider using at least more than one service provider. Although OSPs may provide companies with incentives to use them exclusively, the risk borne by the company far outweighs these benefits.
Through constant comparison, the researcher was able to identify emerging and unexpected themes within the study.
RECOMMENDATIONS FOR FUTURE STUDIES Further studies should consider the following aspects of outsourcing
SUMMARY
Available at: http://www.sairr.org.za/sairr-today-1/research-and-policy-brief-five-bills-building-state-and-union-power-8th-february-2011. Logistics Outsourcing Issues in the South African Manufacturing Sector, Johannesburg: University of Johannesburg - South Africa.
Introductory letter
Consent letter
Interview Schedule
Ethical clearance
