Effect of Logistics Outsourcing on the Performance of Dairy Processing Firms in Kenya

Abstract

The concept of logistics outsourcing has become increasingly popular in the dairy industry in attempt to reduce operational cost amongst other benefits that accrue. The studys objective was to determine effect of outsourcing logistics functions on performance of dairy processors , Kenya. Previous studies had indicate that firms outsource their logistics operations in attempt concentrate on their core to enhance their competitive advantages. Further contracting of service providers increased reliability, efficiency and quality. However the relationship between logisticsoutsourcing and firms’ performance had not been solely established, specifically in the dairy industry. The population of study in this research was 28 dairy processors in Kenya as per KDB, 2017 and the study was a census survey of all this firms. Primary data was used and collected throughastructured questionnaire from Logistics managers or their equivalents. They were administered by ‘drop and pick’ method. The response rate was 89.3%. Data was analyzed using Statistical Package for Social Sciences (SPSS), descriptive statistics were generated with the main analysis tools being frequencies, mean and standard deviation to achieve the first objective. Thereafter regression analysis was done to achieve the second objective. The results established that the concept of logistics outsourcing has not been fully adopted. The firms opted to outsource services like warehouse management only during high seasons. However, the study established that firms outsource logistics operations to reduce costs such as cost of vehicle acquisitions and maintenance, fuel costs, risks cost amongst other. The study also established a high correlation between logistics outsourcing and firm’s performance. Hence the research concluded that if fully adopted, logistics outsourcing can enhance firms’ performance. The study recommended that dairy processing firms should fully adopt outsourcing strategy so as to cut cost on non- core activities in its logistics functions. The study was limited to dairy processing firms in Kenya as such, due to the uniqueness of dairy processing firms, the findings may not apply in other sectors. Thus, it is recommended that the study is conducted in other food processing and manufacturing sectors to establish the relationship between logistics outsourcing and performance.