The Effect of Logistics Outsourcing Practices on the Performance of Large Manufacturing Firms in Nairobi, Kenya

Abstract

Outsourcing of services has become a common practice among large manufacturing firms worldwide and this is due to the various benefits that accrue to a firm as a result of outsourcing. Contracting out production of goods and 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 practices in relation to the performance of large scale manufacturing firms. As a result, this study explored outsourcing practices viz a viz the performance of large manufacturing firms Nairobi, Kenya. The population of the study in this research was all the large scale manufacturing companies that are based in Nairobi. Stratified random sampling method was applied to come up with the sample size, since the population in different large manufacturing firms is considered heterogeneous, implying that a simple random sample would have been unrepresentative. The response rate was 83%. The results established that the firms were outsourcing transportation management, warehouse management and material handling management. The firms opted to outsource their services due to its advantages and its possible influence on organizational performance, as it enables the firms to focus on its core competencies. The outsourcing practices adopted by the large manufacturing 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 large manufacturing firms in Nairobi and the findings may not be applicable in other sectors as a result of uniqueness of the manufacturing firms. It is therefore recommended that the study is replicated in other service sectors to establish the logistics outsourcing services and performance.