Contemporary Engineering Sciences, Vol. 11, 2018, no. 8, 357 - 370

HIKARI Ltd, www.m-hikari.com

https://doi.org/10.12988/ces.2018.8223

Analysis of the Adoption of Third Party in

the Logistics Operations of a Sample of Companies

Constituted in the City of Neiva

Andrés Mauricio Navarrete Ramos

Industrial Engineering, University Corporation of Huila Corhuila, Colombia

Denicce Licht Ardila

Industrial Engineering, University Corporation of Huila Corhuila, Colombia

Jorge Bernardo Ramírez Zarta

Industrial Engineering, University Corporation of Huila Corhuila, Colombia

Ana Lucia Paque Salazar

Industrial Engineering, University Corporation of Huila Corhuila, Colombia

Copyright © 2018 Andrés Mauricio Navarrete Ramos et al. This article is distributed under the

Creative Commons Attribution License, which permits unrestricted use, distribution, and

reproduction in any medium, provided the original work is properly cited.

Abstract

The outsourcing of logistics operations has become a strategic option for companies

today. In the city of Neiva, capital of the Department of Huila in Colombia, this

model is recently used. In the present work, an analysis of the degree of outsourcing

of the logistic activities presented in the companies of the city of Neiva,

contemplating its main factors, advantages and disadvantages of its application, as

well as the degree of contribution to the competitiveness of the organizations that

decided to generate an outsourcing contract for said operations.

Keywords: logistics, outsourcing degree, outsourcing

358 Andrés Mauricio Navarrete Ramos et al.

1 Introduction

Logistic operations have evolved exponentially during the last decades. The

technology, infrastructure, equipment and personnel have been the components

with the greatest evolution, allowing a better response to the needs of its customers

resulting in a better service. The logistics operators thus become an option that

supports the strategy of organizations. These must adapt to the continuous change

of the sector, be flexible but specialized at the same time, and constantly increase

their capacity to face the challenges demanded by the management of the supply

chain in organizations.

However, why do companies decide to outsource activities related to logistics? In

this article we present the factors identified as those that motivate the management

of an organization to outsource and how to monitor and evaluate the performance

of these third parties, taking into account that every day that passes, the logistics

outsourcing has been consolidated as a tool and strategic methodology to manage

business [1], [2].

The population for the present work is established as a set of 100 companies

incorporated in the city of Neiva belonging to different productive sectors

(transport, services, industrial production, fish farming, oil & gas, financial, public

sector, construction, trade, automotive and agroindustrial). This population also

generates a series of factors that become disadvantages when outsourcing [2], [3].

The presence of advantages and disadvantages in a certain way is related to the

culture and idiosyncrasy of the region and to this extent it is necessary to ask

additionally what kind of processes are outsourced related to logistics within the

organizations in Neiva. Because it is outsourced, what is the degree of outsourcing

of these processes, specialized companies are contracted or not in logistics, or, in

case of not being outsourced these activities, as they are developed within the

organization, which resources are designated for them and in both cases, how the

cost-benefit ratio has been analyzed [4], [5].

An additional group of companies present in the city of Neiva is made up of

hotels. This sector has been identified as of great importance because it is a direct

actor in the strengthening of tourism as one of the productive bets of the region. In

this sector, performance has been characterized by poor customer service, and since

companies dedicated to this activity have been constituted exponentially, the union

of these is scarce and does not support the achievement of objectives. The hotels

see as a competitive advantage the adoption of quality management systems, which

in their support processes would support the logistics processes making them more

effective. The hotels with greater capacity and that currently have these systems as

a management tool; have outsourced logistics services [6], [7].

The Chamber of Commerce of Neiva [8] has identified the activities developed

by the registered companies that are part of the logistics chain. Table 1.

Analysis of the adoption of third party in the logistics operations 359

Table 1. Logistics operator activities in Neiva

ACTIVITY %

Municipal freight transport by road 67,2%

Storage and deposit 10,5%

River transport 6,0%

Coastal shipping 4,5%

Other activities with less participation are: international transport of cargo by

road, handling of cargo and transport of railway.

The Chamber of Commerce of Neiva [8], [9] also identified some of the

difficulties presented in these companies dedicated to the logistics sector. The main

difficulty with a 74% presence in the total number of companies corresponds to the

fact that the employees are hired as temporary staff, which contrasts with the fact

that the same study established that 60% of the organizations have higher annual

sales 250 million pesos.

Additionally, the city of Neiva, as a region in the way of technological, industrial

and economic development, presents a series of its own characteristics, evidenced

by the culture, norms and customs present in its inhabitants and that influence the

way of doing business or manage an organization. The study indicated that 44.5%

of the companies in the city concentrate their time and resources in controlling sales

due to a large extent and as indicated by [10], [11]. Which isn’t counted within the

organizations with the interest of knowing their own processes; nor are there any

tools that identify their relevant variables, so that improvements cannot be applied

or adequate information can be acquired to make timely decisions that result in

better production, greater sales. In addition, these in the generation of sufficient

resources to innovate in technology applied to the organization and continue to

improve in its competitiveness. In contrast, only 2.5% cares to participate in

processes of integration to productive chains at a national or international level. The

absence of strategic planning in most companies is identified as a problem to correct

according to the study of the Chamber of Commerce [8].

The municipal development plan, as well as the departmental since 2015, have

contemplated and established as a bet that contributes to competitiveness the

implementation of tools and logistics chains that in turn support other productive

bets in the region such as fish farming, The agroindustrial sector, tourism,

construction, thus seeking the improvement of the indicators that have kept the city

in the low middle range in terms of competitiveness at the national level [8].

A logistics operator is then presented as an ally for those companies that decide

to improve their competitiveness and after strategic planning, deliver their logistics

operations such as transport, storage and distribution of products, materials in process and additional services, maquila, packaging, delivery management and returns.

360 Andrés Mauricio Navarrete Ramos et al.

Being a specialized ally, its contribution to the effectiveness of its clients' processes

becomes a benefit that represents a significant benefit to management, working with

attractive income-cost relationships for clients [12], [13]

The logistics operator also allows identifying and realizing synergies between the

company and the different stages of its supply chain, making it appropriate to the

capacity and magnitude of this, through a structured and methodological process

[14], [15].

Figure 1 shows the percentage of outsourcing of logistics operations worldwide

according to [16], [17].

Figure 1. % Outsourcing of logistics operations worldwide.

2 Methodology

The main objective of the research is to determine the degree of adoption of

outsourcing of logistics operations within the city of Neiva. A sample of 100

companies from different economic sectors is contemplated according to Table 2;

to these companies an instrument is applied with the same objective of measuring

the degree of outsourcing of the logistics processes, which is given an internal

validation supported in a reliability analysis of cronbach coefficient [18], [19].

Table 2. Sample size

VARIABLES VALUES

POPULATION 3.091

CONFIDENCE LEVEL 95% 1,96

ERROR 7% 0,07

PROBABILITY OF ACCIDENT 0,87

PROBABILITY OF ERROR 0,13

SAMPLE SIZE 100

Analysis of the adoption of third party in the logistics operations 361

Figure 2. Cronbach coefficient reliability analysis

The type of company was identified for each of the 100 companies that are part

of the sample. Figure 3 shows this classification.

Figure 3. Size of the companies in the sample

The research was developed on six areas of interest, these are:

• Company Profile

• Competitive advantages

• Degree of outsourcing of logistics operations

• Cost benefit ratio of outsourcing

• Disadvantages and advantages of outsourcing

• Opinion of businessmen

The 100 companies identified for the analysis, domiciled in the city of Neiva are

part of the following productive sectors: transport, services, and industrial

production, fish farming, oil & gas, financial, public sector, construction, trade,

automotive and agroindustrial [20].

In order to be able to execute an adequate analysis, the first thing that was

developed was an investigation about the behavior that presented the constitution

of new companies in the city, related to the sector to which each one belongs. Table

3 gives us this information [20], [21].

25%

38%8%

29%

SIZE OF THE COMPANY

MICRO SMALL MEDIUM BIG

362 Andrés Mauricio Navarrete Ramos et al.

Table 3. Constitution and assets of companies in Neiva by economic sector

Source: Taken from Chamber of Commerce of Neiva, business movement 2016.

The variation shows us a particular behavior, although the total of companies

incorporated in the city increased (27%), the capital with which they enrolled

decreased (-45%).

According to the information obtained previously, we proceed to obtain the

sample size to perform the respective analysis. In Table 4, we found this

information.

Table 4. Sample size

VARIABLES VALORES

POPULATION 3.091

CONFIDENCE LEVEL 95% 1,96

ERROR 7% 0,07

PROBABILITY OF ACCIDENT 0,87

PROBABILITY OF ERROR 0,13

SAMPLE SIZE 100

With this sample of 100 companies will work on the application of an instrument

that contains questions corresponding to the following inquiries: who is responsible

for logistics operations in the company, how are the employees in your company,

which considers that are the advantages to outsource and if you have outsourced

services or not in your operation [22], [23].

3 Results

Once the instrument for the identification of those responsible for logistics

activities in the sample of companies has been applied, it has been identified that,

Participation

Code Economic activity company Assets company Assets company Assets Investment

1 Farming 87 10.735 122 1.417 40% -87% 5,0%

2 Exploitation of Mines and Quarries 13 728 11 418 -15% -43% 1,0%

3 Manufacturing industry 56 801 72 1.082 29% 35% 4,0%

4 Electricity, Gas and Water 11 174 15 447 36% 157% 1,0%

5 building 113 3.632 156 6.183 38% 70% 20,0%

6 Commerce 189 29.817 233 6.130 23% -79% 20,7%

7 Transport and comunication 68 5.408 69 1.539 1% -72% 5,0%

8 Finance and insurance 11 88 16 96 45% 9% 0,3%

9 Services 254 4.756 324 13.293 28% 179% 43,0%

TOTAL 802 56.139 1018 30.605 27% -45% 100,0%

2015 2016 Variation

Analysis of the adoption of third party in the logistics operations 363

in most of them, the role of Manager or Administrative Chief is responsible for the

development of logistics operations. You can find the other roles commissioned in

Figure 4.

Figure 4. Responsible role of logistics in the company

On the other hand, the instrument has established that, of the total sample, 54

companies claim to have outsourced some of the logistics activities required by

their organization. It was possible to identify in the same way that the larger the

size of the company, in relation to the number of employees, the greater the degree

of outsourcing of the logistics activities. Table 5.

Table 5. Pearson Correlations

Correlación Pearson Number of employees

Quality of Outsourcing

Outsourcing Cost

Number of outsourced

logistics activities

Number of employees 1 ,279* 0,256 ,305**

Quality of Outsourcing ,279* 1 0,227 -0,093

Outsourcing Cost 0,256 0,227 1 0,097

Number of outsourced logistics activities

,305** -0,093 0,097 1

Figure 5 shows the data, which makes it possible to identify the logistics activities

outsourced by the companies in Neiva, as well as the level of satisfaction with the

same provided by the third party, who in all cases is a specialized logistics operator.

The outsourced activities correspond to:

364 Andrés Mauricio Navarrete Ramos et al.

• Transportation and distribution

• Purchases and management of suppliers

• Inventory management

• Storage

• Foreign trade

• Additional services such as marking, labeling, packaging, assembly

• Other logistic activities

The information obtained allows us to identify that, in general, companies are

satisfied with the management carried out by the contracted logistics operators. The

78.95% of the evaluations place the perception in "good", 17.54% in "Excellent"

and 3.51% in "Bad". It is established that there is a balance between the costs

generated by the logistics operation and the perceived satisfaction of the service,

hence the role of administrative manager is the most frequent in charge of the

logistics operations of the company, since it is also the person who performs a

control of the costs of the management of the company [14], [15].

Figure 5. Outsourced logistics activities and level of satisfaction.

The contracting with logistics operators and outsourcing these activities, according

to the research, responds to the following reasons within the organization. Figure 6.

20,5%11,1%

50,0%

24,0%

0,0% 0,0%

28,6%

79,5%88,9%

0,0%

72,0%

100,0% 100,0%

71,4%

0,0% 0,0%

50,0%

4,0% 0,0% 0,0% 0,0%

0,0%

20,0%

40,0%

60,0%

80,0%

100,0%

120,0%

Regular

Good

Excellent

Analysis of the adoption of third party in the logistics operations 365

Figure 6. What caused him to outsource logistic activities in his company.

Source. IBM SPSS Statistics Data Editor

The most frequent reason corresponds to the possible cost reduction with 39.4%.

For this reason, it is necessary to include in the instrument, the identification of the

impact of the costs of the different logistics activities outsourced by the companies

in Neiva. Table 6 gives us this characterization.

Table 6. Contingency logistic activities contracted with the logistics cost ranges

PLEASE INDICATE WHICH OF

THESE LOGISTIC ACTIVITIES YOU

CONTRACT OR THIRD PARTY.

WHERE OF THE FOLLOWING RANGES IS THE LOGISTICAL

COST IN YOUR COMPANY ON SALES

2% al

3%

3,1% al

6%

6,1%

al 9%

9,1% al

13%

13,1% al

16%

Más del

16,1%

Transport and distribution 30,8% 53,8% 20,3% 2,6% 2,6%

Purchasing and handling of suppliers 11,1% 33,3% 11,1% 11,1% 33,3%

Inventory management 50% 25% 25%

Storage 16% 72% 8% 4%

Comercio exterior 100%

Additional services (marking, labeling,

packaging, assembly)

25% 25% 50%

Others 25% 25% 25% 25%

Source. IBM SPSS Statistics Data Editor

4. Conclusions

The logistics within the organizations has become one of the main axes to be able

to guarantee the attainment of the goals in the organizations regarding the level of

16,0%

39,4%

11,7%

4,3%7,4%

20,2%

1,1%

05

10152025303540

Dedicate toyour main

activity

Possiblecost

reduction

Riskreduction

Greaterspeed toadapt tomarketchanges

Stockreduction

Improve theservice

Others

366 Andrés Mauricio Navarrete Ramos et al.

sales of the products or services rendered. Outsourcing this type of activity has been

established as a worldwide practice among companies that want to reduce costs and

improve performance, ensuring that the cost-benefit ratio will be in favor of the

organization. In Europe, the United States, this practice has become widespread and

it is common to outsource activities such as transportation and distribution,

purchasing and handling of suppliers, storage.

At the level of South America, this practice is still under development, with

culture and customs in the form of doing business one of the main barriers to

outsourcing these operations with total peace of mind.

In Neiva, capital city of the Department of Huila in Colombia, a city located in a

low average position in the national competitiveness indicator, outsourcing is an

uncommon practice. However, thanks to the presence of specialized logistics

operators in the country, it has been gaining ground by facilitating outsourcing.

Only a little more than half of a sample of 100 companies from different economic

sectors in the city, have outsourced logistics activities. The main motivation lies in

the reduction of costs, but it was evidenced that there is no specialized staff

dedicated solely to logistics activities within the organization to control the

performance of the third party. To a large extent, the administrative manager of the

organizations, being aware of the cost control of the operation, is the one in charge

of the logistic activities, but has weaknesses against criteria to evaluate the

management of the operators according to their own indicators of the performance

of the supply chain. The other group of companies that do not have outsourced

logistics activities, indicates that the cost generated by the third party is greater than

that generated by the operation from within the organization, and this is

proportional to the size of the organization and by culture, it is not has peace of

mind by providing essential information about the organization to a third party.

The logistics operators have presented a good performance in general, which has

facilitated the incursion in the outsourcing of more companies motivated by the

reduction of costs in their operations. However, if companies do not incorporate

strategic management into their operations, the benefit of outsourcing logistics

operations will not be seen as support for management.

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Received: February 16, 2018; Published: March 12, 2018