The challenges regarding outsourcing of key maintenance functions in the liquid petroleum gas sector, South Africa.

Abstract

The Liquid Petroleum Gas (LPG) industry within South Africa is highly competitive and the competitive advantage lies in its ability to penetrate the market through its local infrastructure of retail outlets, the personal and the rational prices of product. It is therefore imperative to contain cost within the entire supply chain in order to be more agile and profitable. Through strategic planning analysis the researcher has found that the current outsourced maintenance costs are colossal and there seems to be a correlation to lost business. This study was undertaken to evaluate the merits of outsourcing verse in-sourcing of the maintenance function within Oryx Energies South Africa. The main objectives were to identify whether scarcity of skills, reputation, costs, quality of work, response times, variation orders and prejudice amongst contractors has a negative effect on business as a whole. This study has adopted the quantitative methodology using a semi structured questionnaire based interview design. The results show that 86.7% of the sample population were concerned that due to the scarcity of skills contractors can pass over critical key information to oppositions. In addition majority of sample population agreed that if hurting the company’s reputation, delays in response, variation orders, and biasness amongst contractors will negatively impact the success of the business. Most respondents believe that insourcing will be more effective in terms of profit margins, timely response to clients, avoid biasness and the leakage of confidential information. It is recommended that a hybrid system could be piloted where a combination of insourcing and outsourcing can be used strategically without compromising the business negatively. These findings contribute to the growing body of outsourcing versus in-sourcing literature and are unique to the LPG industry. Most importantly, the study yielded practical understanding and information that could be used by Oryx Energies to guide its decision making and shape its future strategy.