Effects of outsourcing on the logistics performance of selected small and medium manufacturing enterprises in Cape Town, South Africa

Abstract

South Africa for more than three decades has been described as the economic capital of Africa because of its level of industrialization, production, interactions and business transactions with other companies locally, nationally, regionally and globally. This situation goes hand in hand with the continual emergence in South Africa of business organizations, notably major international groups or their subsidiaries, other foreign or national large corporations, as well as small and medium enterprises (SMEs). The SME sector has significantly emerged in industries such as retail and manufacturing that produce a wide variety of consumer goods and related services. They produce services and goods that are destined for both local and international consumption. Similarly, they are also sourcing goods and services from local or international suppliers. Consequently, SMEs are involved in a complex supply chain management challenges and are exposed to the chain’s intense logistics activities. The main objective of this study was to determine how outsourcing can improve effectively the logistics performance of wine producing SMEs in the manufacturing sector. The findings from the interviews conducted with 16 personnel responsible for logistics performance from selected small and medium wine producers in Constantia, Stellenbosch, and Paarl, offer support for the assumption that outsourcing is a key to logistics performance in SMEs. The general outcome of the study suggests that logistics performance of SMEs is dependent on their ability to manage outsourcing of logistics services. Thus, knowing beforehand the “what for” of outsourcing is very important determinant for driving logistics performance, especially defining, assessing and measuring the performance objectives the SMEs expect from outsourcing and choosing logistics partners that can meet these objectives.