Risk perception on logistics outsourcing of retail chains: model development and empirical verification in Taiwan

Abstract

Purpose - This paper aims to develop a qualitative risk model to empirically identify the important outsourcing risks of logistical functions using the data of Taiwanese retail chains. Design/methodology/approach - Transaction cost theory (TCT) and resourced based view (RBV) were combined to develop risk events. Analytical hierarchy process was used for risk calibration. Valid data from 75 outsourcer chains and 41 in-house chains were collected through a three-stage survey. Outsourcers were further clustered by risk perception using Wards' and K-mean clustering and examined by an ANOVA. Results of outsourcers and in-house chains were compared using nonparametric Spearman rank correlation test. Findings - The risk perception increases as the number of functions outsourced increases. Risks related to transaction costs and strategic resources were both significant. Of the three main risks identified, asset risk and competence risk are more serious concerns than relationship risk. The values of information risk and loss of control account for the bulk of asset risk, while those of poor competence leverage and poor competence in supporting customer service comprise competence risk. Finally, in terms of risk priority, in-house chains showed no significant difference from outsourcers. Research limitation/implication - interrelationships between risk events were limited to avoid complication. Also, due to the sample limit, the risks calibrated may be more associated with outsourcing execution than outsourcing building/abandoning. Practical implication - The risk structure developed herein can be used as a systematic checklist for outsourcing decision-making. The qualitative results may provide specific indications for further risk analysis and future risk control. Originality/value - The study fills a gap in the literature, where prior work has seldom used empirical research to compare how well TCT and the RBV predict logistics outsourcing risk, in particular for the distribution side of the supply chain

Sourcing strategies, practices and effects on organisational performance

“…However, there are disadvantages in adopting buy strategy as it can make a firm dependent on outside suppliers, fail to realise the purported hidden cost saving to outsourcing, losing control over critical functions and lowering the morale of permanent employees (Kliem, 1999;Tsai et al, 2008).…”

Outsourcing purchasing services by Third Party Logistics providers: a conceptual model

“…However, there are also some reasons against 3PL usage: loss of control over the logistics function (Sanders et al, 2007), uncertainty in service levels offered (Lau and Zhang, 2006), hidden true cost of outsourcing (Sanders et al, 2007), losing touch with important information and customer feedback (Sanders et al, 2007), and lack of shared goals (Tsai et al, 2008).…”

Framework built on resource based view for outsourcing strategy on hiring logistics service provider

“…One such area is information technology capacity to reduce costs and improve service quality (Lai et al, 2008;Perunovic et al, 2012), since a lack of relational capacity can affect supply (Tsai et al, 2008;Lai et al, 2013). The relationships between integration capabilities, organizational learning ability, service performance, and financial performance are suggested using a model of structural equation (Shang, 2009), to hire an LSP with service capacity (Vasiliauskiene et al, 2011).…”

“…Identifying the logistical resources needed for the outsourced operation, with the objective of improving the communication and relationship between the supply chain participants (Lai et al, 2008;McIvor, 2009;Perunovic et al, 2012); iii. Assessing risks to the organization due to possible failures of the outsourcing process (Tsai et al, 2008;Govindan et al, 2013), and resilience for the contracting company in coping with possible periods of turbulence and vulnerability (Glas et al, 2013); iv. Achieving the objective of selecting an appropriate LSP by means of hierarchical processes (Chiang & Tzeng, 2009;Chen et al, 2011;Anderson et al, 2011), resources (Chen et al, 2010;Perunovic et al, 2012), and the lowest possible transaction cost (Ferreira & Serra, 2010;Vasiliauskiene et al, 2011;Lee et al, 2012); and v. Building a partnership (Hofer et al, 2009;Lai et al, 2013).…”