The effects of outsourcing the logistics function at South African manufacturing companies.
Logistics is an integral part of every economy and every business entity. The worldwide trend in globalisation has led many organisations to outsource their logistics function to third-party logistics (3PL) companies and focus on their core competencies. It is therefore imperative that organisations fully understand the implications of outsourcing so that a well thought-out strategy will derive the maximum benefit. Whilst much is known about 3PL from an international perspective, knowledge from a South African perspective is limited which raised the question, “what effect does outsourcing the logistics function have on South African manufacturing companies?” The objective of this study was to identify the factors that organisations considered important in the decision to outsource. Further, benefits and limitations of outsourcing were identified. As 3PL is a strategic decision, senior managers were considered as a source of data. Due to their time constraints, it was felt that participating in a survey may prove fruitless. Therefore, a qualitative study was conducted. The objectives were achieved by conducting face-to-face interviews with senior managers of 15 companies across various industries in South Africa who had outsourced their logistics functions to 3PL service providers. The challenges and experiences collected from these interviews are presented in this study. The main conclusion drawn from this study is that the participants are in a better position than before they had outsourced logistics. Some companies achieved financial benefits, while some realised benefits such as increased efficiencies and economies of scale, and some realised a combination of both. The data analysis confirmed that while there are many benefits that accrue to companies who outsource, there are also numerous challenges and major risk factors that have to be overcome. Several recommendations have been made for companies contemplating outsourcing the logistics function.