Revisiting critical factors of logistics outsourcing relationship: a multiple-case study approach

• DOI: https://doi.org/10.1108/IJLM-10-2020-0394
• Published date: 02 August 2021
• Date: 02 August 2021
• Pages: 165-189
• Subject Matter: Management science & operations,Logistics
• Author: Vinh Van Thai,Shams Rahman,Dong Mai Tran

Revisiting critical factors of

logistics outsourcing relationship:

a multiple-case study approach

Vinh Van Thai and Shams Rahman

School of Accounting, Information Systems and Supply Chain, RMIT University,

Melbourne, Australia and

University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam, and

Dong Mai Tran

University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam

Abstract

Purpose –This paper aims to examine critical factors of successfullogistics outsourcing relationship from the

perspectives of both LSPs and shippers employing case studies in Singapore and Vietnam as examples of well-

established and growing logistics outsourcing markets.

Design/methodology/approach –The case study design is adopted to empirically examine logistics

outsourcing practices. Data were collected through in-depth interviews with senior managersfrom four cases

in Singapore and seven cases in Vietnam. These case organisations are engaged comprehensively in logistics

outsourcing activities and encompass both international firms that have their local operations and those local

firms whose operations expand internationally.

Findings –Results suggestthat the success of logisticsoutsourcing may depend on fivestrategic factors and

five operationalfactors, with some of thembeing the same between LSPs and shippersin both countries and in

line with the literature. There also seemed to be a difference between logistics outsourcing practitioners in a

developedcountry (Singapore),and those in a developingcountry (Vietnam),in which factors,i.e. having the right

peopleand management support,business processes integrationand culturalintelligence, tend to be emphasised

and practisedmore in the former. A strategy matrixof logistics outsourcing was mappedaccordingly.

Research limitations/implications –The generalisation of this study would require further empirical

examination from more quantitative research, for example, the use of surveys with shippers who engage

with LSPs.

Practical implications –Findings from this research can assist managers in charge of outsourcing to reflect

on their practices and devise and implement appropriate strategies for successful logistics outsourcing.

Especially for growing logistics outsourcing markets and not-yet-standardised practices like Vietnam, the

findings of this research are significant as they provide policy and managerial insights into how logistics

outsourcing can be performed successfully. Specifically, adequate guidelines and resources including training

relating to strategic factors of logistics outsourcing must be provided.

Originality/value –This research is one of the first studies that categorise success factors of logistics

outsourcing into strategic and operational factors and postulates their conceptualisation in a strategy matrix

that can be applied in future research.

Keywords Asia, Case study, Buyer-supplier relationships, Logistics services, Logistics industry,

Outsourcing-insourcing

Paper type Research paper

1. Introduction

Nowadays, thebusiness success of many firms, regardless of their product or service offering

and business sector, relies heavily on how well their logistics and supply chainmanagement

activitiesare operated and managed, eitherby internal or external resources(CSCMP, 2021). A

Critical factors

of logistics

outsourcing

165

The authors sincerely thank the editor of IJLM and anonymous reviewers whose comments and

suggestions have contributed to the final version of this manuscript. The authors also acknowledge the

great assistance of the interviewees from the case organisations in this research.

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/0957-4093.htm

Received 9 October 2020

Revised 23 April 2021

20 June 2021

Accepted 4 July 2021

The International Journal of

Logistics Management

Vol. 33 No. 1, 2022

pp. 165-189

© Emerald Publishing Limited

0957-4093

DOI 10.1108/IJLM-10-2020-0394

firm is sometimes faced with a “make or buy decision”, which means that it needs to decide

whether to outsource an activity that it is currently performing. Conventionally, firms

employed their staff to perform a wide range of activities internally, such as advertising,

warehousing, transport, maintenance, and repair. This resulted in the development of large,

verticallyintegrated organisations thatwere self-sufficient; thatis, they could carry out all the

necessaryactivities with theirinternal resources. Overthe years, this concepthas changed, and

organisationshave been prepared to engage the services of third-party specialiststo perform

some or all of the specific activities on their behalf (Simchi-levi et al., 2008). Outsourcing

componentshave increased progressivelyover the years, and some industriessuch as fashion

(with companies like Nike) and electronics (major firms such as Cisco and Apple) have been

outsourcingfor an extended time (Dinu, 2015;Neiderer,2011;Simchi-levi et al., 2008;Brown and

Allen, 2001).In the IT sector, the outsourcing marketis estimated to reach USD 937.6 billionby

2027, registering a CAGR of 7.7% (PR Newswire, 2020). It was also reported that the global

procurementoutsourcing market would posta CAGR (compound annual growthrate) of more

than 17% during the 2018–2022 period (BusinessWire, 2018). Meanwhile, in the US market

alone,the market size of the third-partylogistics industry is about $225billion, with an average

industry growth rateof 5.2% during the 2015–2020 period (IBISWorld,2020).

In the logistics domain, outsourcing has also been a common business practice owing to its

prospective benefits, i.e. helping the firm to gain access to the latest technology and

equipment employed by the third-party logistics service provider, concentrate capital

investment and management on core competencies (Simchi-levi et al., 2008). There are also

potential cost reductions, for example, by the shared use of facilities and equipment, volume

buying of vehicles, warehouses and mechanical handling equipment and systems, thanks to

specialisation of the contractor, etc. (Myerson, 2015;Dinu, 2015;Neiderer, 2011;Simchi-levi

et al., 2008;Brown and Allen, 2001). The popularly cited Annual Third-Party Logistics Study

reported in its latest version (InfoSys Consulting, 2020) that shippers worldwide continue to

outsource a wide variety of services. Indeed, the importance of the logistics outsourcing

relationship was asserted in the literature by many authors, for example, Deepen (2007), who

highlighted the complexity of outsourcing performance and argued that its true drivers lie in

the relationship between service providers and their customers. It was also acknowledged

that while many companies outsource their logistics functions, creating a collaborative

relationship with third-party logistics service providers remains a challenge (De Grahl, 2012;

Chen et al., 2010). Further research on this domain is thus desired. Besides, research on

whether these critical success factors are different to both shippers and Logistics Service

Providers (LSPs) and in both well-established and growing logistics outsourcing markets is

also scarce, given that there might be differences in these contexts. Hence, research

addressing this issue in these contexts would contribute to enhancing both the knowledge

and management practices of logistics outsourcing.

This paper, therefore, examines critical factors contributing to successful logistics

outsourcing relationships from the perspectives of both LSPs and shippers employing case

studies in Singapore and Vietnam, where the former is a regional logistics hub, while the

latter is a rising logistics outsourcing country in the South East Asia region. Given the

widespread trend of logistics outsourcing in today’s business world, the practice must be

implemented successfully. Therefore, the identification and validation of critical factors for

the successful implementation of logistics outsourcing play a pivotal role. The remainder of

the paper is organised as follows: First, the theoretical foundation and literature review to

identifying factors for successful logistics outsourcing relationships is given in Section 2.

Then, a brief introduction to the context of this research is provided in Section 3. The research

methodology is given in Section 4. Findings from the empirical validation and discussion are

presented in Section 5, and the paper is concluded with a brief discussion on academic and

empirical implications in Section 6.

IJLM

33,1

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