Freight forwarding outsourcing and supply chain efficiency in Uganda: a case study of Mukwano Industries Ltd.

Abstract

In support of modern supply chain management approaches, organizations world over are rapidly outsourcing their non-core functions in order to drive sustainable competitive advantage and supply chain efficiency. In Uganda, firms have hurriedly outsourced their freight forwarding function to third parties in the hope of realizing substantial cost savings, improved service levels and competitive advantage, since freight forwarding costs in Uganda significantly account for up to 40% of the value of imports and 7 5% of the value of exports. Much as various literature sources applaud outsourcing, current studies have demonstrated high failure rates on the global and local scene! This study therefore questions whether the hype of firms in Uganda to quickly outsource freight forwarding on the promise of realizing cost savings, improved service quality and delivery precision alone is justified, that is whether freight forwarding outsourcing influences supply chain efficiency, and to what extent it does. A case study design, incorporating questionnaires and interviews, was used to test the variables, wherein 37 samples were drawn, and results analyzed using correlation and regression tools to examine the influence of freight forwarding outsourcing on supply chain efficiency, and the extent to which decision-making, planning and administration influence supply chain efficiency. A 0.731 and 0.822 correlation coefficients were registered against planning and administration respectively, while administration registered the highest significant Beta coefficient of 0.944. It was established from the above that, contrary to expectation, freight forwarding outsourcing may not necessarily result in supply chain efficiency, owing to supplier profit margins, supplier deficiencies in the human resource composition, supplier non-compliance issues, non-aligned working culture and lack of collaboration in the outsourcing relationship. In conclusion, I recommend that outsourcing initiatives should emphasize outsourcing decision-making and planning with a strategic dimension, foster collaboration and win-win approaches in establishing and sustaining outsourcing relationships and putting more emphasis on the administration of the outsourcing relationship, while keeping the human resource factor in mind.