The relationship between logistics sophistication and drivers of the outsourcing of logistics activities

Abstract

A strong link has been established between operational excellence and the degree of sophistication of logistics organization, a function of factors such as performance monitoring, investment in Information Technology [IT] and the formalization of logistics organization, as proposed in the Bowersox, Daugherty, Dröge, Germain and Rogers (1992) Leading Edge model. At the same time, shippers have been increasingly outsourcing their logistics activities to third party providers. This paper, based on a survey with large Brazilian shippers, addresses a gap in the literature by investigating the relationship between dimensions of logistics organization sophistication and drivers of logistics outsourcing. To this end, the dimensions behind the logistics sophistication construct were first investigated. Results from factor analysis led to the identification of six dimensions of logistics sophistication. By means of multivariate logistical regression analyses it was possible to relate some of these dimensions, such as the formalization of the logistics organization, to certain drivers of the outsourcing of logistics activities of Brazilian shippers, such as cost savings. These results indicate the possibility of segmenting shippers according to characteristics of their logistics organization, which may be particularly useful to logistics service providers.

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