Original Research

The application of outsourcing decision-making methods in a logistics context in South Africa

Naomi Bloem, Wilna L. Bean
Journal of Transport and Supply Chain Management | Vol 9, No 1 | a168 | DOI: https://doi.org/10.4102/jtscm.v9i1.168 | © 2015 Naomi Bloem, Wilna L. Bean | This work is licensed under CC Attribution 4.0
Submitted: 08 December 2014 | Published: 28 July 2015

About the author(s)

Naomi Bloem, Clover Industries Limited, Roodepoort, South Africa; Department of Industrial and Systems Engineering, University of Pretoria, South Africa, South Africa
Wilna L. Bean, Department of Industrial and Systems Engineering, University of Pretoria, South Africa


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Abstract

Background: Companies have often relinquished the control of important business functions to outside suppliers for the sake of short-term savings and because of the lack of use of proper decision-making methods within the business.

Objectives: This article identified three methods of decision-making and applied it to a logistics outsourcing problem. The logistics outsourcing problem consisted of a make-or-buy decision as well as a supplier selection process. The purpose of the study was to determine the most suitable method in the case of logistics outsourcing.

Method: The decision-making methods were applied to a South African case study within the fast moving consumer goods (FMCG) industry. The logistics functions considered in the case study included secondary distribution and warehousing of finished goods. Each method considered the same evaluation criteria and the results were analysed and compared.

Results: Each method produced different results to the logistics outsourcing problem. The method developed by Platts, Probert and Canez (2000) suggested that the logistics functions be insourced. The decision tree method suggested outsourcing both functions, with a unit rate cost model. The results from the linear programming (LP) method indicated that the secondary distribution function should be insourced and the warehousing function outsourced, with a fixed and variable cost model pending further analysis of the demand trends.

Conclusion: The study provides empirical evidence that proven outsourcing decision-making methods, such as the method developed by Platts et al. (2000), the LP method and the decision tree method traditionally applied to a manufacturing outsourcing decision problem, can be adapted and applied to a logistics outsourcing decision problem of a South African FMCG company.


Keywords

Logistics outsourcing; decision making; logistics strategy;

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Crossref Citations

1. Industry expectations of supply chain management graduates: Perspectives from third-party logistics providers in South Africa
Marc Allden, Wesley Niemann, Theuns Kotzé
Journal of Transport and Supply Chain Management  vol: 12  year: 2018  
doi: 10.4102/jtscm.v12i0.379