Trust, commitment, logistics outsourcing relationship quality, relationship satisfaction, strategy alignment and logistics performance – a case of selected manufacturing firms in Uganda

• DOI: https://doi.org/10.1108/IJLM-05-2020-0215
• Published date: 22 December 2021
• Date: 22 December 2021
• Pages: 102-140
• Subject Matter: Management science & operations,Logistics
• Author: Matthew Kalubanga,Sheila Namagembe

Trust, commitment, logistics

outsourcing relationship quality,

relationship satisfaction, strategy

alignment and logistics

performance –a case of selected

manufacturing firms in Uganda

Matthew Kalubanga and Sheila Namagembe

Makerere University Business School, Kampala, Uganda

Abstract

Purpose –This study examines the relationships among trust, commitment, logistics outsourcing

relationship quality (LORQ), relation ship satisfaction, strategy alignmen t and logistics performance

considering selected manufacturing firms in a developing country, Uganda.

Design/methodology/approach –Drawing on insights from the commitment-trust theory and strategy

alignment literature, and using a cross-sectional survey design with a self-administered questionnaire, and

applying the partial least squares structural equation modeling (PLS-SEM) approach to analyze quantifiable

data obtained from managers of 103 manufacturing firms in Uganda outsourcing logistics operations, the

study examined the logistics performance effects of trust, through commitment, LORQ and relationship

satisfaction.

Findings –The study findings reveal that trust influences logistics performance, indirectly through its effects

on commitment, LORQ and relationship satisfaction, sequentially, and that the positive effects of relationship

satisfaction on logistics performance strengthen with improvements in LORQ. Strategy alignment exerted a

strong positive influence on LORQ.

Research limitations/implications –The study findings have important implications for theory

development and literature. The study applies the commitment-trust view toboth theoretically and empirically

examine logistics outsourcing as a competitive strategy to enhance logistics performance, and thereby

providing a theoretical base for future research. However, this research is confined to manufacturing firms in

Uganda, and the results are not necessarily generalizable to other contexts.

Practical implications –The study findings provide insights for logistics managers regarding the role of

trust, commitment, LORQ, relationship satisfaction and strategy alignment in enabling successful logistics

outsourcing relationships, and how drawing on these, managers can improve firm logistics performance.

Originality/value –This study contributes to logistics management literature by empirically examining the

relationship of trust, commitment, LORQ, relationship satisfaction and strategy alignment with logistics

performance, considering manufacturing firms in a developing country, where these aspects have not been

largelyexplored before. Ithighlights the need to build trust,promote greater commitment of logistics user firms

in logistics outsourcing relationships as well as aligning logistics outsourcing strategies to improve LORQ and

enhance logistics performance. Additionally, the study provides for the first-time new evidence for the

moderation effect of LORQ on the influence of relationship satisfaction on logistics performance. The study

findings suggest advancing further scholarly discussions on logistics outsourcing as a critical strategy to

enhance firm logistics performance within a developing country context. Due to limitations in logistics

infrastructure, and existing low-level technologies, logistics in developing countries still revolves around

conventional materials hand ling, packaging, inventory and transportation operation s, and logistics

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The authors are sincerely thankful to the editors and reviewers for their helpful comments. In addition,

the authors acknowledge the two blind reviewers of the ORSEA (Operations Research Society of East

Africa) conferences, and the 9th ORSEA Conference participants for the initial comments on the

preliminary findings of this study. The authors also acknowledge Makerere University Business School

for the financial support granted through the institution’s faculty research development program.

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 1 May 2020

Revised 24 September 2020

17 March 2021

15 June 2021

8 August 2021

8 October 2021

Accepted 19 November 2021

The International Journal of

Logistics Management

Vol. 33 No. 1, 2022

pp. 102-140

© Emerald Publishing Limited

0957-4093

DOI 10.1108/IJLM-05-2020-0215

outsourcing is new, thereby presenting an interesting research context for empirical investigationson logistics

in general, and logistics outsourcing in particular.

Keywords Commitment, Logistics outsourcing relationship quality, Logistics performance, Relationship

satisfaction, Strategy alignment, Trust

Paper type Research paper

Introduction

Logistics outsourcing refers to the process in which a third-party logistics (3PL) provider or a

logistics service provider is contracted for all or part of a firm’s logistics operations (Deepen

et al., 2008). Logistics outsourcing has gained increasing scholarly attention (Chen et al., 2010;

Goldsby et al., 2019;Joto and Odock, 2019;Knemeyer and Murphy, 2005). This is because of

its positive contribution to operational efficiency (Gammelgaard, 2019;Joto and Odock, 2019).

Logistics outsourcing further coincides with mounting pressure in firms to increase their

profitability and improve business competitiveness (Baier et al., 2008). Increasing

profitability and competitiveness entails ensuring efficiency and effect iveness when

executing logistics activities (Deepen, 2007;Gunasekaran et al., 2017 ). Furthermore,

achievement of such efficiency and effectiveness requires firms to focus on the core

logistics operations (Tayles and Drury, 2001). Thus, most firms are strategically outsourcing

the less core logistics operations so as to focus on strategic activities that are a source of

competitive advantage (Gattorna, 2016).

While literature seems to suggest that logistics outsourcing is more evident in highly

developed economies, such as the United States of America, where 3PL providers are better

established (Barthelemy, 2003), in developing countries the practice has taken a faster pace

due to heightened competition, and increasing complexity in aspects of business logistics

operations (Joto and Odock, 2019). According to Sheen and Tai (2006), logistics creates place,

time, quantity and space value, which are essential to customer satisfaction. Outsourcing

logistics operations, such as inventories storage and handling, transportation, packaging,

forwarding and freight, create better customer value and improved customer satisfaction

(Subramanian et al., 2014;Wang et al., 2019). Within the context of Uganda, logistics

outsourcing is a recently emerging practice (Bagenda, 2012;Muhindo et al., 2014). Like in

most developing economies, Uganda’s 3PL and the logistics industry is still very nascent

(Bagenda, 2012), though steadily growing in terms of membership –for instance the number

of licensed clearing and forwarding firms has risen from about 200 in 2012 (Bagenda, 2012)to

572 in 2020 (URA, 2020 list of licensed clearing and forwarding agents: www.ura.go.ug).

Similarly, the number of firms in Uganda using 3PL is increasing, with most of these firms

found in sectors such as oil and gas, brewing (alcohol, spirits and wines), chemicals and

paints, and food and non-alcoholic beverages that mostly outsource logistics services due to

their demanding logistics operations (Bagenda, 2012;Muhindo et al., 2014).

Logistics outsourcing brings about logistics performance improvements in terms of

improved efficiency and effectiveness in delivery processes, increased collaborations and

freed organizational resources which are allocated to more core activities (Gadde and

Hulth

en, 2009a;Kalubanga and Namagembe, 2014). Turning non-core functions over to

external providers enables firms to leverage their resources, spread risks and concentrate on

issues critical to survival and future growth (Gattorna, 2016), attain reduced infrastructure

investments, increased access to state-of-the-heart technologies, products or services,

improved ability to react quickly to changes in business environment, better cash flow,

reduced operating costs, enhanced customer service capabilities and access to resources not

available internally (Bourlakis and Melewar, 2011;Persson and Virum, 2001). In addition,

through outsourcing of logistics operations, firms can restructure their distribution

networks, thus reducing operational risks and creating competitive advantages

Trust –

manufacturing

firms in

Uganda

103

(Gunasekaran et al., 2017;Sangka et al., 2019). Notwithstanding, outsourcing of logistics

activities is identified with some shortfalls, such as the logistics user firm’s loss of control over

the logistics function, and loss of human touch with customers (Hofer, 2015).

It is noteworthy that the success of logistics outsourcing highly depends on the quality of

the existing relationship between the logistics user firm and the 3PL provider (Gadde and

Hulth

en, 2009a). Thus, as Gadde and Hulth

en (2009a) suggest, increasing business

interactions between a logistics user firm and 3PL providers, and improving their

interaction quality will benefit logistics outsourcing outcomes. As Rhea and Schrock

(1987) postulate, effectively managing an outsourcing relationship requires commitment

from all included parties. Nyaga and Whipple (2011) contend that commitment and trust

positively influence relationship closeness, where relationship closeness denotes the degree of

interdependence between the logistics user and the 3PL provider. Hence, successful logistics

outsourcing relationships are more likely with growing commitment and trust between the

logistics user firm and the 3PL provider, ability of the logistics user to manage relationships

with the 3PL provider (Gadde and Hulth

en, 2009a;Wilding and Juriado, 2004), and strategy

alignment –when a firm’s logistics outsourcing efforts align well with its corporate strategy

(Katz et al., 2016).

Despite their importance, the elements of commitment, trust, relationship quality,

relationship satisfaction and strategy alignment have been sparsely investigated in empirical

studies addressing relationships amongst interacting firms in logistics outsourcing

collaborations (Deepen et al., 2008;Joto and Odock, 2019). There are very few empirical

studies of logistics outsourcing (Deepen, 2007;Wallenburg et al., 2010), and logistics

performance (Fugate et al., 2010;Green et al., 2008) that examine these elements. Hence, the

need for more empirical research to investigate further these aspects (Joto and Odock, 2019).

Accordingly, Yuan et al. (2020) calls for further empirical research investigating the

determinants of logistics outsourcing success. Such r esearch endeavors would help

increasing managers’knowledge about, and understanding of, the issues concerning

logistics outsourcing and enhancing their ability to more effectively coordinate and manage

logistics outsourcing relationships (Chu et al., 2019).

To contribute toward such ongoing research endeavors, this study draws on commitment-

trust theory (Morgan and Hunt, 1994) and the strategy alignment literature (e.g. Wallenburg

et al., 2019) to theoretically and empirically examine the relationships among commitment,

trust, logistics outsourcing relationship quality (LORQ), relationship satisfaction and

strategy alignment, and logistics performance. The commitment-trust theory presents

commitment and trust as the central tenets in building successful long-term logistics

outsourcing relationships (Morgan and Hunt, 1994). The empirical investigations are

conducted on a sample of 103 selected manufacturing firms in Uganda, from the alcohol,

wines and spirits, chemicals, paints and rubber products, and food and non-alcoholic

beverages sub-sectors. Considering Uganda’s context, majority of the firms outsourcing their

logistics activities operate in these industries (Bagenda, 2012). The firms involved are

identified with highly demanding large volume logistics operations, and do outsource their

logistics activities more than their counterparts in other sectors. These firms manufacture

fast moving products, and are thus involved in high volumes of logistics operations,

including warehousing, transportation, packaging and labeling among others. As such, they

provide an appropriate context to investigate the aspects explored in this research. The

empirical data supports the predictions made concerning the investigated relationships

among trust, commitment, LORQ, relationship satisfaction, strategy alignment and logistics

performance. Specifically, trust influences logistics performance indirectly through

commitment, LORQ and relationship satisfaction. Strategy alignment positively influences

LORQ and firm logistics performance. The influence of relationship satisfaction on logistics

performance strengthens with improving LORQ.

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