Strategic Outsourcing: An International Journal

Role of logistics outsourcing on supply chain strategy and management: Survey findings
from Northern Europe
Per Hilletofth Olli-Pekka Hilmola
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To cite this document:
Per Hilletofth Olli-Pekka Hilmola, (2010),"Role of logistics outsourcing on supply chain strategy and
managementSurvey findings from Northern Europe", Strategic Outsourcing: An International Journal, Vol. 3
Iss 1 pp. 46 - 61
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(1998),"Outsourcing of logistics functions: a literature survey", International Journal of Physical Distribution
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(1994),"Global Supply Chains: Factors Influencing Outsourcing of Logistics Functions", International
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SO
3,1
Role of logistics outsourcing on
supply chain strategy and
management
46 Survey findings from Northern Europe
Per Hilletofth
School of Technology and Society, University of Skovde, Skovde, Sweden, and
Olli-Pekka Hilmola
Lappeenranta University of Technology, Kouvola Research Unit (Finland),
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Kouvola, Finland
Abstract
Purpose The purpose of this paper is to investigate the effects of logistics outsourcing in Northern
Europe through survey research. Research work intends to shed more light on logistics outsourcing
with other than case-based company examples.
Design/methodology/approach Survey was completed during late 2007 and early 2008 in
Finland and Sweden for the largest companies in industrial and service sectors. Altogether 34
answers were received, and they were gained mostly from industrial and trading companies.
Findings The research results show that warehousing, IT, and customs brokerage outsourcing could
have impact on some managerial and strategic aspects of supply chains (SC). Thus, none of the identified
difference areas was found to be statistically significant. Potential impact areas of SC strategy and
management are integrated IT systems of manufacturing and logistics, reverse logistics procedures,
and re-engineering of logistics processes. However, research shows that in-house produced IT function,
and potentially outsourced warehousing, have important roles in more international purchasing.
Research limitations/implications Altogether, the amount of responses in the survey was
relatively low, but treating Finnish and Swedish companies as one group gives us some opportunity
for statistical analysis. This grouping might be one limiting factors of our study, and especially in its
generalization power; however, our earlier analysis with the data shows that these countries operate
in a rather similar interest area. Another limiting factor of our research findings is the difference in
respondent profiles operating principles of logistics and trade companies are different as compared
to manufacturing.
Practical implications Research shows that IT is potentially having an important role in both,
international purchasing emphasis as well as on warehousing outsourcing activities. Contrary to the
common view, this research gives some indication that in-house IT is valuable, and more integrated
applications are needed for example, when warehousing is being outsourced.
Originality/value This is one of the seminal research works regarding North European
outsourcing practices, and their affects on SC strategies and management. Both of the countries have
an advanced industrial sector, which gives perspective for the readers world wide.
Keywords Outsourcing, Supply chain management, Finland, Sweden, Distribution management
Paper type Research paper

Strategic Outsourcing: An
International Journal
Vol. 3 No. 1, 2010
pp. 46-61
# Emerald Group Publishing Limited
1753-8297
DOI 10.1108/17538291011023070
1. Introduction
Globalization has lead in an increased competition between companies, which has
in turn resulted in several market developments such as increased product variety,
increased amounts of customer-specific products, and shortening product life cycles
(Christopher et al., 2004). To remain competitive in this business environment,
companies have started to concentrate on those activities that they regard as their core
business, and outsource the rest to specialists (Sahay and Mohan, 2006). The increased
outsourcing of non-core activities has created an emerging business opportunity
 attracting several new actors to enter the market and fill the demand for new services Role of logistics
(Hertz and Alfredsson, 2003), especially in the logistics area. Outsourcing of logistics
in general, also referred to as third party logistics (3PL), has received considerable
outsourcing
attention in the literature (Marasco, 2008). It involves the use of external companies
generally referred to as 3PL providers to perform logistics functions, which have
traditionally been performed by the company itself (Selviaridis and Spring, 2007). The
functions performed by 3PL providers can encompass the entire logistics process or
selected activities within that process (Lieb et al., 1993). It can involve traditional
47
logistics functions such as in- and outbound transportation, warehousing as well as
other services such as reverse logistics and information systems (Rabinovich et al.,
1999; Sink and Langley, 1997). Still, they typically specialize in integrated warehousing
and transportation services that can be scaled and customized according to customers
requirements (Jharkharia and Shankar, 2007). These services have to be provided
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faster, in higher quality, and in more efficient manner than ever before (Jespersen and
Skjoett-Larsen, 2005; Faisal et al., 2006; Helo, 2004).
The majority of research in this area has centered on the type of activities
outsourced, the reasons behind these decisions, and on benefits of logistics outsourcing
(Power et al., 2007). Examples of outsourced logistics activities described in the
literature are order intake data typing, procurement, inventory management, fleet
management, warehousing, and distribution (e.g. Chopra and Meindl, 2007), as well as
the entire logistics function (e.g. Jager et al., 2007). There are several reasons reported
in the literature as a motivation to why companies outsource logistics activities, such
as the lack of the needed competence and resources within the own company (Ericsson
et al., 2004), reduction of capital employed (Andersson et al., 2003), increased
environmental awareness (Skjoett-Larsen, 2002), expansion into unfamiliar markets,
trends towards centralized distribution systems (Razzaque and Sheng, 1998), and
increased flexibility (Jager et al., 2009; Lau and Zhang, 2006). Several benefits of
logistics outsourcing have also been reported in the literature, such as increased
market coverage (Skjoett-Larsen, 2002), improved customer service (Richardson, 1995),
reduction in capital investments (Richardson, 1992; Lacity et al., 1995; Fantasia, 1993),
cost savings (Lau and Zhang, 2006; Richardson, 1995), reduction in the complexity of
logistics operations (Bradley, 1995), and increased flexibility towards the changing
requirements of customers (Lau and Zhang, 2006). One key issue to succeed with
logistics outsourcing, discussed in the literature, is the utilization of information and
communication technology (ICT) to fulfill the requirements of many and varying
customers (Jager et al., 2007). However, research concerning how logistics outsourcing
actually affects supply chain (SC) strategy and management appears to be neglected. It
would, for example, be interesting to know whether outsourcing affects management
orientation (e.g. customer or production oriented; vertical or horizontal hierarchy),
business relationships (e.g. short or long term; equality regarding risks and rewards),
performance measurements (cost, productivity, customer service, asset management,
and/or quality), ICT (e.g. large or small systems; standalone or integrated applications),
and utilized SC strategies (e.g. time-based solutions, standardization, or postponement).
Among these, it would also be interesting to know whether outsourcing increases the
importance of logistics, reverse logistics, reengineering, and the importance of ICT
within logistics, as well as if outsourcing of various SC activities affect the relation
between local and overseas market share and source of supply.
The purpose of this research is to address these types of questions by investigating
how outsourcing of different logistics activities influence company strategies and
 SO directions. Especially, how logistics outsourcing affects SC strategy and management
is investigated as well as if the outsourcing has an effect on local and overseas market
3,1 share and source of supply. The primary research strategy is an online survey
conducted in Sweden and Finland during late 2007 and early parts of 2008. In total,
45 responses from the population of 546 were received (response rate of 8.2 percent);
research targeted largest companies from these two countries. Among the 45 responses
there were 34 valid answers (of which 23 were Finnish and 11 Swedish).
48 The remaining of this paper is structured as follows: In the following section 2
we review literature regarding to logistics outsourcing. Thereafter, in section 3 the
research environment is introduced and methodological issues concerning this
completed study are being discussed. Empirical data analysis is completed in section 4,
where logistics outsourcing relationship on company strategies and directions are
analyzed from responses gained through survey, as well as analyzing, if the
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outsourcing has an effect on local and overseas market share and source of supply. In
final section 5 research is being concluded and discussed; also further research avenues
are being proposed.

2. Literature review: logistics outsourcing

Nowadays, manufacturers of logistically convenient end-items (i.e. it is economical and,
within time dimension, sensible to move items around) usually follow the principles
of focused factory. This was Skinners main proposal for productivity improvement
during 1970s (Skinner, 1974). The idea behind focused factories is simple; by limiting
the number of manufacturing plants (quite often below ten), as well as the range and
mix of products manufactured in a single manufacturing plant, the company can
achieve economies of scale. In other words, a low number of manufacturing plants,
each focusing on a small number of different product families, take care of the entire
world production. In some situations, it could be necessary to establish regional
focused factories due to geographical issues. These focused factories are located,
where production is most profitable, which depends on numerous aspects, such as
manufacturing costs, availability of raw-materials, proximity to final markets, and
transportation costs (Christopher and Towill, 2002). They can be supplied by national
or international supplier networks, which need to be developed to serve high volume
challenges, and tight delivery schedules. Still, as the responsiveness of focused
manufacturing plant and its supplier network increases (which results to significantly
lower inventory levels), the management of global distribution becomes difficult. The
major issue is that the manufacturer will experience increased demand variability
(both in volume and mix) in different markets due to the Bullwhip effect (Lee et al.,
1997) and therefore its efficiency of outbound logistics operations suffers. Due to the
challenges related to distribution, manufactures have started increasingly to favor the
use of services offered by 3PL providers.
3PL has been defined in numerous ways in the literature; Lieb (1992) states that
3PL involves the following: The use of external companies to perform logistics
functions that have traditionally been performed within an organization. The functions
performed by the third party can encompass the entire logistics process or selected
activities within that process. This broad definition suggests that 3PL includes any
form of outsourcing of logistics activities previously performed in-house. However,
there also exist narrower definitions, which link the 3PL concept to some distinctive
functional and/or inter-organizational features of the logistics outsourcing relationship
(Marasco, 2008). For example, Berglund et al. (1999) define 3PL as: Third-party
 logistics are activities carried out by a logistics service provider on behalf of a Role of logistics
shipper and consisting of at least management and execution of transportation and
warehousing. In addition, other activities can be included, for example inventory
outsourcing
management, information related activities (e.g. tracking and tracing), value added
activities (e.g. secondary assembly and installation of products), or even supply chain
management. Also, the contract is required to contain some management, analytical or
design activities, and the length of the co-operation between shipper and provider
to be at least one year, to distinguish 3PL from traditional arms length sourcing of
49
transportation and/or warehousing. There are also definitions that join together the
broader and narrower views of 3PL, e.g. Bask (2001) describes 3PL as follows:
Relationships between interfaces in the supply chains and third-party logistics
providers, where logistics services are offered, from basic to customized ones, in a
shorter or longer term relationship, with the aim of effectiveness and efficiency.
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In this study, the latter one is used since it captures the essence of the 3PL concept as
stated by Berglund (2000) involving business-to-business relationships, where external
service providers fulfill the logistics needs of their customers, but still recognizing the
potentially wide range of these relationships in terms of scope, content, and duration.
3PL providers can be engaged in many relationships on operative, tactic, or strategic
level with differing customers as well as customers customers and suppliers (Ericsson
et al., 2004). The scope, content and duration of these business-to-business relationships
differs between customers, when the relationship is long term it can involve exchange of
either technology, knowledge, or information (Hertz and Alfredsson, 2003). Irrespective
of the scope, content and duration, openness and trust are important to make the
relationships successful (Halldorsson and Skjoett-Larsen, 2004).
In recent decades, there has been an increased demand, both in terms of volume and
variety, in the 3PL industry, leading to the development of different business models
in this sector. Hertz and Alfredsson (2003) provide a useful classification model that
distinguishes between four types of 3PL providers:
(1) Standard 3PL providers: offer standardized services such as pick and pack,
warehousing, and distribution, or even assembly, as argued by Hilmola et al. (2005).
These providers usually have many customers who can choose from different
standard services or make uncomplicated combinations of them. This type of actor
usually offers no help with problem solving besides the standard services.
(2) Service developers: offers, in addition to standardized services, more value-
added services, such as tracking and tracing, cross-docking, specific
packaging, or providing a unique security system. These actors provide
somewhat advanced services involving several sets of more standardized
activities. The focus is more on creating economies of scale and scope rather
than on satisfying unique customer requirements. The services are often turned
into standard modules and these can be combined according to specific
customer requirements. The customer base is often large and the customers can
also be very different with regard of size and type of business. Relationships
with customers therefore are normally undeveloped, due to the large number of
transactions with different organizations. However, long-term and more
developed relationships can exist with some of the more important customers.
(3) Customer adapters: take complete control of the customers logistics function and
processes, at the request of the customer. This implies that they manage, operate,
and improve the customers whole logistics processes; these providers usually
 SO improve the logistics dramatically, but do not develop the processes further. The
3,1 customer base is typically quite small, and they work closely with their customers.
(4) Customer developers: in addition to complete control of the customers logistics
function and processes also develop the processes further by developing new and
customer adapted services. It is the highest level that a 3PL provider can attain and
implies more advanced services involving high integration with the customers. The
50 customer base is often limited and they work very intensively with their customers.
ICT is an important enabler to synchronize and integrate companies across the SC and
this is also quite true for 3PL providers. ICT has become increasingly important to gain
competitive advantage (Rantala and Hilmola, 2005; Helo and Szekely, 2005; Leger et al.,
2006), still, the utilization of ICT differs significantly between these four 3PL categories.
Standard 3PL providers basically use ICT for internal purposes and the most common
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type of applications is transactional providing an overview of previous and current

operations such as quarterly sales reports, e-commerce systems, and general ledger
systems. In addition to the above service developers also use ICT to a high extent to
manage and fulfill the requirements of many and varying customers. Common
applications are warehouse and transportation management systems; these systems
provide real-time views of material flows within a warehouse including tracking,
keeping note of movement and storage, optimal use of space, labor, and equipment (Helo
and Szekely, 2005). For the customer adapter the use of ICT depends on the service they
provide which may require different types of applications. They need both transactional
and analytical applications since these actors work closely with their customer and on a
long-term basis (Hertz and Alfredsson, 2003). Analytical applications are different types
of planning and evaluating systems such as production scheduling and forecasting
systems. Customer developers, in addition to the above, also use ICT to design new and
customer adapted services, moreover some 3PL providers work in own systems while
others work in their customers systems (Jager et al., 2007).

3. Research environment and methodology

In this study online questionnaire was used to examine how outsourcing of different
logistics operations influence company strategies and directions in Sweden and
Finland. Especially, how logistics outsourcing affects SC strategy and management is
investigated among, if the outsourcing has an effect on local and overseas market share
and source of supply. Answers were collected through three survey rounds, which
occurred in December 2007 to January 2008 time (response forms were available in
Finnish, Swedish, and English). Results analyzed in this manuscript are part of
larger study, which is interested about SC management practices, and adaptation of
information technology. Overall survey is more than five pages long, and concentrates
in number of related issues of these fields.
Altogether survey was sent to roughly 650 companies; 371 companies were from
Finland and 286 companies correspondingly from Sweden. In the sample, 546 contacts
were able to reach email system, and all of the companies had approximately four
weeks time to respond for first request. Reminder letters were sent twice after this
initial contact. As a result we gained 45 answers from sample (34 were valid), although
in some parts quite number of respondents did not at all answer into detailed
questions. As a result there were, in total 45 responses from the population of 546
companies adding up to response rate of 8.2 percent. Among the 45 responses there
were 34 valid answers (23 from Finland, and remaining 11 from Sweden); five answers
 were submitted with empty forms, three of the answers were double responses from Role of logistics
companies and another three answers did not have correct identification code typed in outsourcing
the answer. These reported percentages are rather typical for online surveys conducted
by other scholars (e.g. Hakkinen et al., 2004; Lorentz, 2008). However, it should be noted
that online surveys receive lower response rate than ordinary mail questionnaires (e.g.
from this exemplary recent research works are Prajogo et al., 2007; Tian et al., 2008),
but generally through online surveys respondent population is much larger, and in the 51
end analyzed populations have similar absolute sizes.
Respondents of the survey were either manufacturers (62 percent) or trading
companies (18 percent), while the remainder of the companies was from logistics and
other sectors. Respondents were usually multinationals (59 percent) and most of the
companies employed more than 300 employees (74 percent). In the following answers
from Sweden and Finland are analyzed together, due to similarity in answers as well as
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due to low amount of answers gained through survey.

Our survey results revealed that large part of the companies have outsourced some
logistics activities (see Figure 1), but surprisingly small number of these have given
responsibility for external parties in inventory control, order processing, product
assembly/labeling, and product returns. In contrary, transportation is in nearly all of the
cases outsourced and significant levels of outsourcing could be found from warehousing/
terminaling and customs brokerage. One particular interest area of this research work,
IT outsourcing, is with equal amounts outsourced or produced in-house. Interestingly,
only handful of companies is at the planning to stage regarding to outsourcing of
activities among these sub-items of logistics processes. Although, we did not ask from
the respondent companies, how long they have outsourced particular sub-area; planning
to option indicates that these decisions have at least medium-term history behind.
As level of logistics outsourcing is being compared to the results on European level
Cap Gemini (2007) study, Northern European companies seem to be more or less lagging
behind overall European development, when measured by the level of outsourcing
(actually as shown by Jensen et al. (2009), some areas in Scandinavia might have
experienced net-benefits from offshoring in terms of having more advanced work

Figure 1.
Outsourcing of different
logistics and SC
management functions in
respondent companies
 SO in-shoring). Only outsourcing of transportation and order processing are on somewhat
same level with the whole Europe, while outsourcing of warehousing, production
3,1 (including labeling, etc.), and product returns are much rarer than in Europe in general.
However, it should be remembered that in Northern Europe there exist also some more
European examples with regard of offshore outsourcing, like reported in Slepniov and
Vejrum Waehrens (2008). Among this globalization of markets has forced companies in
north to expand their operations in emerging markets, like described in case study of
52 Hameri and Tunkelo (2009). However, it should be noted that this followed global
outsourcing path is more cautious rather than proactive. As Oke et al. (2009) described
case study Danish company of having strategy of favoring Hungary and Estonia; similar
finding could also be generalized for Finnish and Swedish actors too. For example, mobile
phone and electronics industry in Northern Europe relied upon these two countries in its
contract manufacturing for long period of time, and to some extent still does. However,
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Northern Europe is much more than this one industrial branch, and e.g. Hamalainen and
Tapaninen (2008) recently illustrated through paper industry case study that the cost
benefits in paper industry arising from logistics outsourcing in Finland are not that
directly showing long-term decline as compared to general European development.
Mostly distance and low transportation volumes do their harm for companies to increase
remarkably their cost efficiency in north, even in outsourced environment.
In the following outsourcing analysis, we are interested from the outsourcing sub-
items, which are having sufficient amounts of outsourced and not-outsourced answers.
Therefore, we are investigating whether warehousing/terminaling, IT, or customs
brokerage outsourcing has an effect on SC strategies and management. In warehousing/
terminaling outsourcing we received two answers, which indicated that companies are
planning to outsource this function; in the following analysis these responses have been
disregarded from the analysis (not belonging to either of the groups).

4. Survey research findings

4.1 SC strategy and management
In order to analyze how company strategies and directions are influenced by logistics
outsourcing the respondents were asked to rate 13 statements individually on a Likert
scale from one to five. Statements included topic such as management orientation
(e.g. customer or production oriented; vertical or horizontal hierarchy), business
relationships (e.g. short- or long term; equality regarding risks and rewards),
performance measurements (cost, productivity, customer service, asset management,
and/or quality), IT (e.g. large or small systems; standalone or integrated applications),
and utilized SC strategies (e.g. time-based solutions, standardization, or postponement).
In another section of the survey, the respondents answered if their company has
outsourced activities such as warehousing, IT, and customer brokerage. Based on this
information it is possible to analyze whether company strategies and directions are
affected by outsourcing of warehousing, IT, and customer brokerage.
Rather interestingly, survey analysis did not provide any statistically significant
differences as if organizations were using more external services (statistical
significances for having differences in mostly differing response areas of three
outsourcing decisions is shown in Table I); however, there were several potential
places of difference, which are naturally good avenues for further research. As
highlighted in Figure 2, companies with outsourced warehousing, to a larger extent has
altered its management orientation from managing business as the process starting
from suppliers and ending up to fulfilling consumer orders (item A in Figure 2, which
 p-value Role of logistics
outsourcing
Outsourced warehousing
(A) The orientation of my company has shifted from managing vertical functions to
integrating full stream processes from the supplier to the consumer 0.234
(D) My company successfully utilizes time-based logistics solutions like continuous
replenishment, quick response, and just-in-time with customers and/or suppliers 0.348
(F) Manufacturing or logistics information systems in my company are being expanded 53
to include more integrated applications 0.075
(H) My company utilizes more strategies to postpone movement and final product
configuration today than two years ago 0.252
(I) My company has procedures in place to facilitate reverse logistics 0.163
(L) My company considers logistics as one of the core strengths 0.362
(M) My company believes in the strategic values of using IT in our supply chain.
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Therefore the development of IT is driven and planned by senior management 0.407

Outsourced IT
(C) My company extensively measures logistics performance in terms of cost,
productivity, customer seveice, asset management, and quality 0.247
(I) My company has procedures in place to facilitate reverse logistics 0.230
Outsourced customs brokerage
(B) My company has developed and is pursuing a plan to establish and maintain
business parnerships 0.264
(C) My company extensively measures logistics performance in terms of cost,
productivity, customer service, asset management, and quality 0.358 Table I.
(F) Manufacturing or logistics information systems in my company are being expanded ANOVA single factor
to include more integrated applications 0.286 test results (p-values) for
(I) My company has procedures in place to facilitate reverse logistics 0528 the most likely differing
(K) My company has undergone extensive logistics process re-engineering during the areas of outsourced
pas two years 0.158 warehousing, IT, and
(L) My company considers logistics as one of the core strengths 0.225 customs brokerage

has p-value of 0.234 in ANOVA single factor test in Table I). This possibly implies that
they have understood that the SC needs to be managed according to actual demand and
to realize this every part of the SC need to focus on the consumer, which requires
coordination and specialization, promoting outsourcing of non-core activities.
Companies with outsourced warehousing also, to a larger extent, have expanded their
information systems to include more integrated applications (item F in Figure 1,
which has p-value of 0.075 in ANOVA single factor test). As statistical significance is so
close to the limit of 5 percent, this finding is nearly having its argumentation ground in
larger scale too. This finding makes sense, since outsourcing of warehousing results
into increasing number of business relationships and increased information exchange.
So, promoting integrated applications to simplify information exchange is the basic
requirement to operate in new outsourced environment. One interesting, and
contradictory finding, is that companies, which have not outsourced warehousing, to a
larger extent have procedures to facilitate reverse logistics in place (item I in Figure 2,
which has p-value of 0.163 in ANOVA single factor test as shown in Table I). Although,
this finding is not even nearly statistically significant, it is interesting to note really
large gap between average values of different warehousing outsourcing approaches.
As could be noted in Figure 3, companies which have not outsourced IT, to a larger
extent measure logistics performance in terms of cost, productivity, customer service,
asset management, and quality (item C in Figure 3, which has p-value of 0.247). Thus, it
 SO
3,1

54
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Figure 2.
How outsourced
warehousing affects SC
strategy and management

Figure 3.
How outsourced IT affects
SC strategy and
management

should be noted that this difference is by no means even nearly statistically significant.
Also from Figure 3 it seems to be apparent that companies having outsourced IT, to a
larger extent have procedures to facilitate reverse logistics in place (item I in Figure 3,
which has p-value of 0.230). However, statistical significance as well is without any further
ground for this noted difference. Noteworthy with this difference is the contradiction to the
findings reported concerning that companies which have not outsourced warehousing, to
a larger extent, have procedures to facilitate reverse logistics in place (in Figure 2).
 As could be seen in Figure 4, companies with outsourced customs brokerage, to Role of logistics
a larger extent have undergone extensive logistics process re-engineering during the outsourcing
past two years (item K in Figure 4, which has p-value of 0.158). Companies with
outsourced customs brokerage also consider logistics as one of the core strengths (item
L in Figure 4, which has p-value of 0.225). This finding is interesting, since companies
that regard logistics as the core competence theoretically should not outsource it.
However, the topic could also be targeted in a way, that companys logistics becomes
one of the core strengths due to the involvement of experts.
55

4.2 Market share and source of supply

As was shown in the literature review, outsourcing is typically argued to be used due
to geographical coverage purposes (both purchasing and sales) and gain advantages
for purchasing (cost savings and higher quality from different more specialized
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factories in other parts of the world, but these of course come with risk, see e.g. Li and
Barnes, 2008). In completed questionnaire we asked respondents also to reveal to what
extent their source of supply (purchased components, raw materials, and semi-finished
items) and sales market share (own final products) is arising from locally or overseas
context (binary question, named as major source). To analyze, whether outsourcing
has connection on geographical coverage, we used chi-square test. However, initial
support for statistical analysis could be found from Figures 5 and 6. Based on Figure 5
it seems potential that in-house provided IT, and outsourced warehousing have
connection on the overseas source of supply, while Figure 6 indicates that warehousing
outsourcing is having this connection with market share.
In chi-square analyses we also separated data between outsourcing of warehousing
(Appendix Table AI), IT (Appendix Table AII), and customs brokerage (Appendix
Table AIII) with respect of two geographical coverage measures. Statistical analysis

Figure 4.
How outsourced customs
brokerage affects SC
strategy and management
 SO
3,1

56
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Figure 5.
Overseas as a major
source of supply divided
with respective
outsourcing decision

Figure 6.
Overseas as a major
source of market share
divided with respective
outsourcing decision

shows that non-outsourced IT is used mostly due to the reason of controlling suppliers
from all of the corners of the world, and is significant with level of 5 percent.
Potentially, warehousing could also be assumed to go hand in hand with
 geographical coverage, although, being not being statistically significant (more Role of logistics
probable in source of supply than market share). However, customs brokerage did not outsourcing
show any potential to be connected into either measures of geographical coverage.
These results could indicate that outsourcing of these three functions is not driven
by more internationalization and distant markets to be served. So, rather interestingly
not outsourced IT leads into higher share of international purchases, and potentially
this is supported by outsourced warehousing/terminaling. This finding is naturally 57
very initial, but as a such one potential avenue for research in outsourcing area.

5. Conclusions
As outsourcing is a general phenomenon to increase logistics and SC management
efficiency is relatively new issue, it is not surprising to find that this completed survey
research merely opened new questions and specified new investigation areas, rather than
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answered to hypotheses set a priori based on earlier research. Our analysis shows
that warehousing and customs brokerage outsourcing could have connections on SC
strategies and management; warehousing outsourcing seems to be possibly connected
on more integrated IT applications of manufacturing and logistics information systems,
while customs brokerage outsourcing is tied upon earlier re-engineering activities of
logistics process, and seeing logistics as one core strengths. Rather interestingly our
survey results also give indication that reverse logistics arrangements could be
connected on outsourcing decisions: IT outsourcing increases the facilitation of reverse
logistics procedures, while warehousing outsourcing decreases these. As a final part of
our empirical data analysis in this research work, we examined whether outsourcing of
selected three logistical functions has connection on geographical coverage of purchases
and sales. We found that IT produced in-house is connected to more international supply
of purchases, while potentially warehousing outsourcing facilitates this same
international activity. Interestingly, any of these three outsourcing areas was not found to
be even near of statistical significance on market share (sales).
For further research we have already mentioned some potential areas earlier on the
article, but worth of investigating further is the nature of IT function in outsourcing
decisions. Our survey analysis results indicate that IT should possibly be produced in-
house, and to enable e.g. warehousing outsourcing initiatives, organizations need to
have more integrated applications for mastering their logistics operations. This is of
course very initial assumption based on current small-scale survey analysis, but we
feel that it creates interesting new area for SC-related outsourcing research. Another
interesting avenue arising from this completed research work is to repeat survey in
other countries and/or to gather more answers from current ones. Would it be
interesting to analyze impact of all different outsourcing alternatives of logistics
functions rather than these selected three only.

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Appendix

Source of supply (should be) Yes No Source of supply (act.) Yes No Chi-square test

Local 7.13 5.87 Local 5 8 0.119

Table AI. Overseas 9.87 8.13 Overseas 12 6
Chi-square test
concerning how
outsourcing of Market share (should be) Yes No Market share (act.) Yes No Chi-square test
warehousing affect
source of supply and Local 7.68 6.32 Local 6 8 0.224
market share Overseas 9.32 7.68 Overseas 11 6

Source of supply (should be) Yes No Source of supply (act.) Yes No Chi-square test

Local 6.13 7.88 Local 10 4 0.005

Overseas 7.88 10.13 Overseas 4 14
Table AII.
Chi-square test
concerning how Market share (should be) Yes No Market share (act.) Yes No Chi-square test
outsourcing of IT affect
source of supply and Local 7.00 9.00 Local 7 9 1.000
market share Overseas 7.00 9.00 Overseas 7 9

Source of supply (should be) Yes No Source of supply (act.) Yes No Chi-square test

Local 6.79 7.21 Local 6 8 0.579

Overseas 9.21 9.79 Overseas 10 9
Table AIII.
Chi-square test
concerning how Market share (should be) Yes No Market share (act.) Yes No Chi-square test
outsourcing customs
brokerage affect source of Local 7.76 8.24 Local 7 9 0.598
supply and market share Overseas 8.24 8.76 Overseas 9 8
 About the authors Role of logistics
Per Hilletofth, Lic.Sc., is currently working as a Lecturer at University of Skovde (Skovde,
Sweden). As well as lecturing and research project responsibilities in Skovde, he is completing outsourcing
his PhD studies at Chalmers University of Technology (Gothenburg, Sweden). His research
interests include supply and demand chain management, production logistics, decision making,
and information fusion.
Olli-Pekka Hilmola, PhD, is an Acting Professor of Logistics in Lappeenranta University of
Technology (LUT), in Kouvola, Finland. Concurrently, he serves as a Visiting Prof. of Logistics in 61
Univ. of Skovde, Sweden. He is affiliated with numerous int. journals through editorial boards,
including Baltic Journal of Management, Industrial Management and Data Systems, as well as
Decision Support Systems.
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