The utilization of key performance indicator appraisal for logistics outsourcing : a case of Defy appliances.

Abstract

Background: Companies and customers around the world are embracing the trend of outsourcing their logistics requirements to outside logistics service providers. That being said, KPI appraisal can be regarded as an effective and reliable technique as to how a manufacturing company can measure the performance of its 3PL providers. Purpose: This research determined what factors motivate companies in their decisions to outsource their logistics needs to external logistics service providers as well as understand the logistics outsourcing process used to select 3PL providers. Moreover, the purpose of this research understood how performance measurement adds value to Defy’s operations and how KPI appraisal improves Defy’s relationships with its 3PL providers. This research also discovered a distinct list of KPIs that can be used by Defy in its efforts to measure the performance of its transporters. Lastly, the aim of this research is to examine the risks of logistics outsourcing and the remedial strategies that can be utilized to combat these risks. Methodology: This research is descriptive in nature and a case study approach was adopted. The empirical study included in-depth interviews with the executive and senior management of Defy whereby the use of open-ended questions were adopted to provide insight into the various facets of logistics outsourcing at Defy Appliances. A non-probability, purposive sampling method was used to select the participating company and its participants. Findings: The findings of this research indicated that there are eleven motivating factors that drive logistics outsourcing. Defy can also utilize a logistics outsourcing process that comprises seven steps. Additionally, this research determined that there are ten KPIs that Defy’s senior management can use to gauge the performance of its 3PL providers. Lastly, there are thirteen dangers that Defy can encounter in its efforts to outsource its logistics requirements, however, Defy has eleven remedial strategies to combat the dangers. Contribution: The field of logistics outsourcing and KPI appraisal is dynamic. There is a dearth of research dealing with KPI appraisal as a tool for successful logistics outsourcing in the leading companies of South Africa’s appliances industry. Therefore, it is envisaged that this research will play a momentous role in the field by offering fresh insights as well as contributing to the body of knowledge concerning logistics outsourcing and KPI appraisal.