Influence of Outsourcing Third-Party Logistics on the Performance of Food and Beverages Manufacturing Companies in Kenya

Abstract

Manufacturing companies in Kenya have been experiencing problems in the performance of their production and operations management. One strategy of improving their performance is resorting to logistics outsourcing. Emerging trends in Logistics have led to development of new ways of doing business to cope with the inherent logistics uncertainty and market volatility. Outsourcing of non-core activities to Third Party Logistics providers (3PL) is one of the ways of ensuring efficient and effective performance of companies’ supply chain management by controlling logistics cost, risk, delivery lead-times and sustaining quality to achieve the desired level of service to satisfy their customers. This study therefore, sought to establish the influence of outsourcing Third Party Logistics providers on the performance of food and beverages manufacturing companies in Kenya. The study adopted cross-sectional survey design using both quantitative and qualitative approaches. The target population of this study was 197 registered food and beverages manufacturing companies in Kenya as per Kenya Association of Manufacturers (KAM) Directory 2015. The study used stratified random sampling to pick a sample size of 116 respondents from food and beverages manufacturing companies. Data was collected using a questionnaire. Descriptive statistics was used aided by Statistical Packages for Social Sciences (SPSS) version 24 to compute percentages of respondents’ answers. Inferential statistics using linear regression and correlation analysis was applied in examining relationship between the research variables. The study found out that cost, service quality, lead-time and risk assessment were significant predictors in the performance of food and beverages manufacturing companies in Kenya. On cost, the study found out that transportation and distribution costs, customs clearance, document processing, freight forwarding, tracking and tracing affected performance of food and beverages manufacturing companies in Kenya. Concerning lead-time, the study established that order processing rate, high order fulfilment rate, inventory replenishment, delivery speed, delivery to location and delivery planning improved the performance of food and beverages manufacturing companies in Kenya. Based on service quality, it was revealed that timeliness, consistency and accuracy of service delivery, willingness to help customers, prompt services to the customers and flexibility of service delivery affected performance of food and beverages manufacturing companies in Kenya. Based on risk assessment, it was established that delay in logistics service delivery and logistics service providers’ capacity, logistics provider system, loss or damage of assets, interruptions of service levels, loss of income and liability incurred affected performance of food and beverages manufacturing companies. Lastly, the study established that food and beverages manufacturing companies in Kenya were outsourcing from multiple logistics companies which is not only costly but also cumbersome to manage. Therefore, the study recommended that it would be appropriate for management to consider cost, lead-time, service quality and risk assessment as a criteria of outsourcing 3PL providers in improving performance of food and beverages manufacturing companies in Kenya.