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Home»Articles»Factors Determining Adoption of Outsourcing Logistics Functions: A Study of Manufacturing and Trading Sectors in Sri Lanka

Factors Determining Adoption of Outsourcing Logistics Functions: A Study of Manufacturing and Trading Sectors in Sri Lanka

Author : C.Liyanagamage and R.Ranasinghe
Volume 9 No.2 July-December 2020 pp 36-44

Abstract

This study aims at identifying the determinants of adoption of outsourcing logistic functions in Manufacturing and Trading companies in Sri Lanka. After careful review of the existing literature perceived cost effectiveness, quality concerns of logistics outsourcing, perceived risk and perceived professionalism of logistics service provider were identified for the study as their high theoretical and empirical importance in determining outsourcing decision. Primary data was collected by means of semi structured questionnaire from 60 organizations that carry out manufacturing and trading businesses in Sri Lanka. The collected data was analyzed using descriptive statistics and simple and multiple linear regression analysis. Initial simple linear regression analysis proved the statistically significant impact that each of the identified variables have on the adoption of outsourcing. However the multiple regression estimated in this study to analyze the collective effect of the suggested model concludes that the decision makers perception about the cost effectiveness of outsourcing and their perception of risk of outsourcing better explain the adoption of outsourcing in Manufacturing and trading sector in Sri Lanka. Hence, the outsource decision depends on the careful assessment of the decision-making company on its cost effectiveness and possible risk. Therefore, the findings of the present study suggest that outsourcing partners should be carefully selected in order to get the benefit of outsourcing.

Keywords

Adoption of Outsourcing, Logistics, Determinants of Outsourcing, Risk Of Outsourcing

Full Text:

References

[1] J. Bhagwati, A. Panagariya and T.N. Srinivasan, “The Muddles over Outsourcing,” The Journal of Economic Perspectives, Vol.18, No.4, pp. 93-114, 2004.
[2] M.J. Bidwell, “Politics and Firm Boundaries: How Organizational Structure, Group Interests, and Resources Affect Outsourcing,” Organization Science, Vol.23, No.6, pp.1622-1642, 2012.
[3] Central Bank of Sri Lanka/Annual Report 2017
[4] Christine, “Deployment of vendor capabilities and competences throughout the outsourcing process”, International Journal of Operations & Production Management , Vol.32, No.3, pp, 351-374, 2005.
[5] C. Harland, L. Knight, R. Lammin and H.Walker, “Outsourcing: assessing the risks and benefits for organizations”, sectors and nations,” International Journal of Operations & Production Management, Vol. 25 No.9.
[6] T. R. Holcomb and M.A.Hitt, “Toward a model of strategic outsourcing,” Journal of Operations Management, Vol.25, pp. 464–481. 2007.
[7] R.K. Jain and R. Natarajan, “Factors influencing the outsourcing decisions: A study of the banking sector in India,” Strategic Outsourcing: an International Journal, Vol.4.No.3, 2011.
[8] N. Kakabadse and A. Kakabadse, “Critical review – outsourcing: a paradigm shift,” The Journal of Management Development. Vol.19, No. 8, pp. 670-728, 2000.

[9] G.M. Kenyon and M. Meixell, “Success factors and cost management strategies for logistics outsourcing,” Journal of Management and Marketing Research, Vol.7, No.1, 2010.
[10] A.M. Knemeyer, P.R.Murphy, “Evaluating the performance of third-party logistics arrangements: a relationship marketing perspective,” Journal of Supply Chain Management. Vol.40, No.1, pp.35 – 51, 2004.
[11] T. Kremic, “Outsourcing decision support: A survey of benefits, risks, and decision factors,” Supply Chain Management, Vol. 11, No.6, pp. 467-482, 2006.
[12] C. Liyanagamage, “ Credit multipliers, uncertainty and the future of the Sri Lankan manufacturing sector, Annual Academic Sessions,” Faculty of Humanities and Social Sciences, Open University of Sri Lanka, June 2009.
[13] A. Minondo and G. Rubert, “The effect of outsourcing on the demand for skills in the Spanish manufacturing industry,” Applied economic letters, Vol.13, 2006.
[14] Namusonge and Lilian Nanjala Wabwile, “International Journal of Academic Research in Business and Social Sciences,” Vol.5, No.5, pp.190-202, 2015.
[15] B. Nicholas, and S. Amrik, “Outsourcing in Australia,” International Journal of Operations & Production Management, Vol.24, No.7, 2004.

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This study aims at identifying the determinants of adoption of outsourcing logistic functions in Manufacturing and Trading companies in Sri Lanka. After careful review of the existing literature perceived cost effectiveness, quality concerns of logistics outsourcing, perceived risk and perceived professionalism of logistics service provider were identified for the study as their high theoretical and empirical importance in determining outsourcing decision. Primary data was collected by means of semi structured questionnaire from 60 organizations that carry out manufacturing and trading businesses in Sri Lanka. The collected data was analyzed using descriptive statistics and simple and multiple linear regression analysis. Initial simple linear regression analysis proved the statistically significant impact that each of the identified variables have on the adoption of outsourcing. However the multiple regression estimated in this study to analyze the collective effect of the suggested model concludes that the decision makers perception about the cost effectiveness of outsourcing and their perception of risk of outsourcing better explain the adoption of outsourcing in Manufacturing and trading sector in Sri Lanka. Hence, the outsource decision depends on the careful assessment of the decision-making company on its cost effectiveness and possible risk. Therefore, the findings of the present study suggest that outsourcing partners should be carefully selected in order to get the benefit of outsourcing.

Editor-in-Chief
Dr. Seshadri Ramkumar
Department of Environmental Toxicology, Texas Tech University, Texas
[email protected]
Editorial Advisory Board
Dr. Kamarul Ariffin Bin Noordin
Department of Electrical Engineering, University of Malaya, Malaysia
[email protected]
Dr. Benjamin T.F. Chung
Department of Mechanical Engineering, University of Akron, Akron, USA
[email protected]
Dr. Mohd Faiz Bin Mohd Salleh
Department of Electrical Engineering, University of Malaya, Malaysia
[email protected]
Dr. Suhana Binti Mohd Said
Department of Electrical Engineering, University of Malaya, Malaysia
[email protected]
Dr. Norrima Binti Mokhtar
Department of Electrical Engineering, University of Malaya, Malaysia
[email protected]
Dr. Mohamadariff
Department of Electrical Engineering, University of Malaya, Malaysia
[email protected]

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    Editorial Note

    Editorial Dr. Seshadri Ramkumar

    Editor-in-Chief
    Dr. Seshadri Ramkumar
    Department of Environmental Toxicology, Texas Tech University, Texas
    [email protected]
    Editorial Advisory Board
    Dr. Kamarul Ariffin Bin Noordin
    Department of Electrical Engineering, University of Malaya, Malaysia
    [email protected]
    Dr. Benjamin T.F. Chung
    Department of Mechanical Engineering, University of Akron, Akron, USA
    [email protected]
    Dr. Mohd Faiz Bin Mohd Salleh
    Department of Electrical Engineering, University of Malaya, Malaysia
    [email protected]
    Dr. Suhana Binti Mohd Said
    Department of Electrical Engineering, University of Malaya, Malaysia
    [email protected]
    Dr. Norrima Binti Mokhtar
    Department of Electrical Engineering, University of Malaya, Malaysia
    [email protected]
    Dr. Mohamadariff
    Department of Electrical Engineering, University of Malaya, Malaysia
    [email protected]

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