A classification of logistic outsourcing levels and their impact on service performance: Evidence from the food processing industry

Abstract

Most studies of logistics outsourcing have focused on cost reduction, while few studies have reported on service benefits. This study empirically examines if outsourcing different logistics activities results in differences in logistics service performance. We identify and analyze the outsourcing of four levels of logistics activities: transportation (level 1), packaging (level 2), transportation management (level 3), and distribution network management (level 4). A research framework was formulated to discuss the effect of the outsourcing decision of different levels on perceived logistics service performance and includes the moderating role that supply chain complexity may play in the proposed relationships. Our findings show that outsourcing has no direct impact on service performance (delivery reliability, flexibility and lead-time) in any of the four levels. However, the performance when outsourcing level 4 activities increases with an increasing degree of demand complexity. Furthermore, chilled foods have higher service performance than non-chilled foods. These findings show the complex relationships between levels of outsourcing, performance and supply chain characteristics. © 2009 Elsevier B.V. All rights reserved.