| dc.description.abstract | Competitive advantage is found in the corporate technologies and production skills
that are organised into core competencies. The root of competitive advantage lies in
the core competencies, which allow businesses to adapt to the marketplace
opportunities. Outsourcing is the tool that allows organisations to focus on their core
competencies. As organisations outsource those activities that are non-core, it frees
management time and resources to focus on activities that are core.
The strategic benefits to outsourcing are wide reaching and in some cases,
unexpected. Greater value, higher service levels, lower costs, innovation and business
partnerships that encourage new thinking and introduction of new ideas are as a result
of the new tight business relationships that outsourcing fosters. Historically,
outsourcing relationships created during the first 20-30 years of the outsourcing
industry were by companies that were in financial trouble. These old structured
relationships tended to favour the Outsourcer, in the end the company lost.
British American Tobacco (BAT) Kenya was among the first few companies in the
country to have successfully outsourced its non-core logistics activities to a
professional logistics company. This research aimed at providing an in dept study of
what triggered this outsourcing at BAT Kenya, document the experience, challenges
and how they were overcome. The study was justified by the fact that while the
benefits of outsourcing were known, research had shown 95% of outsourcing cases
implemented all over the world failed. The answer to successful outsourcing pointed
towards the manner in which the outsourcing relationships were managed.
Eight executives working in the supply chain function of BAT Kenya were
interviewed in depth regarding why, how and the benefits achieved from outsourcing
the non-core logistics activities within the supply chain function. Similar interviews
were also carried out with top two executives of the professional Logistics Company,
Tibbet & Britten (T&B), who are directly involved in the BAT Kenya Contract so as
to obtain a balanced view. The feedback from the questionnaires completed by the
respondents formed primary data which was then analysed qualitatively.
The study established that BAT Kenya reaped maximum benefits from outsourcing
the activities because it looked at the outsourcer as a long-term asset that is a source
of ongoing value. It dedicated time and resources in managing the relationship and
maximising its value. The intention from the word go was to keep the relationship for
as long as-it brought value - understanding that over time, new parties and alliances
may need to be formed as technology and organisations change. Services Level
Agreements and Key Performance Indicators dashboards were among the tools put in
place to objectively measure the outsourcer's performance and contributions as well
as foster communication. The customer and the outsourcer behaved as integrated
supply chain rather than winllose adversaries, they are interdependent during the
relationship. Cross-functional teams involving both parties were put in place to drive
the process forwarding a structured project management manner to achieve continuous
improvement. Through this outsourcing, BAT Kenya achieved better focus on its core
business, reduced logistics costs, and improved management of working capital and
service quality to its customers.
- . Because logistics is central to a company's service quality as well as its cost structure,
innovative approaches to logistics management such as outsourcing of non-core
logistics activities are of particular importance. As companies in Kenya become more
familiar with outsourcing within their logistics functions and as credibility and
capabilities of outsourcers increase, outsourcing is certain to increase. | en |
