The extent of logistics outsourcing among small and medium-sized manufacturing enterprises in Nairobi

Abstract

Background: Small and medium-sized manufacturing enterprises (manufacturing SMEs) can facilitate economic growth and development by creating employment and spurring economic activities at low levels of the economy. The performance of SMEs in Kenya has, however, been poor, despite their significance. This poor performance is attributed to the high costs of logistics operations in the country. Manufacturing SMEs can, however, improve the performance of their logistics operations by adopting appropriate logistics outsourcing strategies.

Aim: The purpose of this study is to determine the extent of logistics outsourcing among manufacturing SMEs in Nairobi.

Setting: Manufacturing SMEs in Nairobi operate from the industrial zones of the Nairobi City County. The enterprises’ logistics operations are characterised by long cycle times, high transportation costs and limited resources. The high operational costs experienced by the SMEs threaten their survival, and they are therefore required, among other things, to manage their logistics more efficiently to improve overall performance.

Method: A quantitative research design was used in this study. Data were collected from 163 manufacturing SMEs using a structured questionnaire. Descriptive statistics and (a one-way analysis of variance) ANOVA were used to analyse the data.

Results: Most (94%) of the manufacturing SMEs opted to outsource their logistics operations, although the extent of outsourcing was limited (1% – 50% of logistics operations were outsourced). Logistics outsourcing by the SMEs is intended to reduce logistics costs and supplement the limited in-house capabilities. In addition, there were significant differences in the extent of outsourcing of operational, information processing and value-added categories of logistics activities.

Conclusion: The results motivate SME owners and managers to acquire logistics resources and capabilities that are lacking in-house through logistics outsourcing to achieve the required efficiencies. Although the majority of SMEs have embraced logistics outsourcing, the low extent of its usage within the enterprises might have limited the ability to achieve high efficiencies.