Abstract
Ph.D. (Logistics Management)
Small and medium-sized manufacturing enterprises (also known as manufacturing SMEs) make
a significant contribution to developing countries’ economic growth and development. Not only do
manufacturing SMEs assist their countries’ industrialisation efforts, they also provide employment
to large numbers of people, thereby helping to alleviate poverty. It is therefore unfortunate that,
despite the pivotal role that it could be playing, Kenya’s manufacturing SME sector has put in a
dismal performance over the years. This is partly attributable to SMEs’ logistics resource
limitations and management shortcomings. In this thesis, it is hypothesised that the logistics
function can be run efficiently and effectively through logistics outsourcing, which in turn can
improve overall firm performance. To this end, the relationship between logistics outsourcing and
the performance of manufacturing SMEs in Nairobi is investigated.
Prior research has produced mixed results regarding the influence of logistics outsourcing on firm
performance, with some authors claiming a positive effect and others claiming a neutral or
negative effect. In this study, the relationship between these two phenomena was investigated
using a mixed methods research design. The specific research questions, which focused on
manufacturing SMEs in Nairobi, sought to determine (1) the extent to which logistics outsourcing
had been adopted by the SMEs in question, (2) the nature of the relationship between logistics
outsourcing and the SMEs’ performance, (3) the determinants of logistics outsourcing
performance among the SMEs, and (4) how logistics outsourcing influenced the SMEs’ logistics
performance. The findings revealed a high extent of logistics outsourcing among manufacturing
SMEs in Nairobi, with the majority being light outsourcers. Among the study’s conclusions were
that logistics outsourcing has a positive, indirect influence on the performance of manufacturing
SMEs, with logistics outsourcing performance being a mediating variable. When embarking on a
logistics outsourcing strategy, SMEs should concentrate on nurturing strong relationships with
their logistics service providers by establishing strong communication links, maintaining high
levels of trust and cooperation, negotiating ‘win-win’ contracts and helping the service providers
to be innovative in their service offerings. At the same time, SMEs should retain some logistics
capabilities in-house in order to coordinate and control the outsourced activities.
This study is poised to make a valuable contribution to the literature on logistics management by
presenting a logistics outsourcing critical path model aimed at manufacturing SMEs. This model
will be a particularly useful guide for owners/managers of manufacturing SMEs who are looking
to improve their enterprises’ performance by adopting a logistics outsourcing strategy.