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.
Highlights
The definition of small and medium-sized enterprises (SMEs) varies from one country or region to another (Buculescu 2013:106)
The study revealed that the majority of SMEs practice logistics outsourcing to some extent, confirming the resource-based theory
Most of the SMEs practice logistics outsourcing, the majority of them only use it to a limited extent
Summary
The definition of small and medium-sized enterprises (SMEs) varies from one country or region to another (Buculescu 2013:106). Small and medium-sized enterprises are regarded as drivers of economic development, industrialisation and job creation, and are considered to be critical in addressing the high poverty rates in developing economies (Buculescu 2013:104; Nasr & Rostom 2013:4; Okpara & Wynn 2007:24). Chege, Ngui and Kimuyu (2016:21) argued that the underperformance of manufacturing SMEs in Kenya can be attributed to inappropriate managerial decisions, inconsistent deliveries, high inventory costs and poor logistics infrastructure, as well as other traditional challenges that include limited access to capital, and competition. The performance of SMEs in Kenya has, been poor, despite their significance This poor performance is attributed to the high costs of logistics operations in the country. Manufacturing SMEs can, improve the performance of their logistics operations by adopting appropriate logistics outsourcing strategies
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