IMPACT OF LOGISTICS OUTSOURCING SERVICES ON COMPANY TRANSPORT COST IN SELECTED MANUFACTURING COMPANIES IN SOUTH WESTERN NIGERIA

By

Dr. Somuyiwa Adebambo O*, Odepidan Omolola M, and Dr. Dosunmu Victor A.

Presented To

Department of Transport Management

Transport costs arise from carrying inventory in-transit, from numerous operations connected with frequent and small deliveries resulted from just in time deliveries. Low costs, short time of transport and accepted level of risk are crucial for logistics managers. Focus on customer needs’ satisfaction, order fulfillment, short transit time, on-time delivery; gives transport costs a new dimension. The research was carried out within manufacturing companies in south western Nigeria. The population of the study consists of top management staff, this includes logistics, procurement and marketing managers. The sample of this study consisted 10 Manufacturing companies from the list of fifty (50) quoted companies on the Nigerian Stock Exchange modified by Manufacturing Association of Nigeria in 2005. The data collected was analyzed using of regression analysis. The analysis shows that logistics outsourcing helps manufacturing companies to reduce transport cost. Transport is needed throughout the whole supply chain being the link between supply chain members. Consequently quality of transport service affects the competitiveness of the entire supply chain. The findings revealed efficient transport cost among outbound logistics activities indicating their significant effect on reducing transport cost. The paper recommended that outsourcing be encouraged. This is in order to promote economies of scale which reduces cost, enhances fleet management, as well as customers’ satisfaction.
KEYWORD: Outsourcing, Transport, Logistics Services, Logistic Management, Transport Cost, Fleet Management, Customer Satisfaction  

The globalization of business and the competitive pressures have led companies to the growing strategic importance of the logistics function within the organization (Kumar, Vrat and Shankar, 2006). The new competitive advantages also come up in front in the form of flexibility, lead-time reductions, reliable and quality deliveries, where Logistics Service Providers (LSP) play a key role in this regard (Parashkevova, 2007). Logistics and the management thereof are key impact on the daily lives of people, as well as on the economic state and development of countries
Logistics management is thus part of the supply chain that includes the process, planning, implementing and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption (in-bound, outbound, internal and external flows) for the purpose of conforming to customer requirements cost effectively and ensure that current and future profitability is maximized. (CSCMP, 2006). The definition above includes the flow of goods,
European service and information in both manufacturing and service sector. Manufacturing includes the production of goods as diverse as consumer products, automobiles, chemical products, electronics, medical supplies and devices, computers and telecommunication products. The service sector includes entities such as government departments and organizations, universities, wholesalers and retailers. There is also need to consider the economic perspective of logistics definition. This includes the micro-economic and the macro â€" economic.
Logistics knowledge is highly specialized and so external logistics organizations, i.e. logistics service providers or 3PL’s, are often engaged by firms to provide transportation and warehousing services, and sometimes to guide the development and implementation of best practices for both the transportation service itself as well as management of the transportation companies providing the service. Firms typically outsource a variety of activities in order to achieve specific objective, which includes reducing costs ,improving product quality ,improving flexibility (Lau & Zhang, 2006), increasing market coverage (Skjoett-Larsen, 2002), or perhaps to gain ready access to additional capacity -