Perceptions of service outsourcing on organizational performance in manufacturing sector in Kenya: a case of Mayfair bakery Kisumu

Abstract

Since the 1990s, outsourcing has been a topic of discussion and has drawn interest from corporate entities worldwide. The advent of globalization has led to a widespread adoption of outsourcing by corporate entities, mostly due to its advantages, which include cost reduction, technology access, and business expansion. While some companies have benefited greatly from outsourcing, others have not capitalized on the arrangement in its entirety. This variation demonstrates that outsourcing certain services contributes more to the performance of the organization than others. However, little is known about the perspective of outsourcing and the extent to which it affects organizational performance. Additionally, the Kenyan food industry's perception of outsourcing has not been well examined. The purpose of the study was to investigate the perceived effect of service outsourcing on organizational performance in production sector in Kenya. Specifically, the study sought to establish the effect of outsourcing security services on organizational performance, determine the influence of outsourcing cleaning services on organizational performance and finally establish the role of outsourcing logistics services in enhancing organizational performance within Mayfair Bakery Limited. The study was guided by Transaction Cost Economic Theory and Resource Based View Theory. The study adopted a descriptive research design. The study population was 300 employees drawn from different departments of Mayfair bakery limited. The study sample of 75 employees was obtained using Yamane (1967) simplified formula for calculating samples. A pilot study was conducted with 10 participants from a different company with similar characteristics to test reliability and validity of the research instruments. Data were majorly collected using unstructured questionnaires. Purposive and simple random sampling procedures were employed to obtain the respondents. Content analysis was used to analyze qualitative data. The study reveals that logistics services outsourcing increased the profitability of Mayfair bakery. This was achieved through the reduction in logistic costs and improvement in supply chain management. In addition, the company was able to share some risks with the vendors thus reducing the level of transportation risks. Cleaning services outsourcing led to improved hygiene of the bakery. The improved hygiene attracted many customers into the business increasing sales. Cleaning service outsourcing also reduced the cost incurred for cleaning which has a positive impact on the profitability of the business. The cost reduction associated with building internal competencies increased the profitability of the bakery. The study showed that outsourcing security services reduced the cost of hiring in-house security. The cost associated with training and supervision was eliminated. Based on the findings of the study, the study concludes that service outsourcing in Mayfair bakery positively impacted on its performance. Service outsourcing increased its profitability, efficiency, effectiveness and its flexibility which reduced cost and improved the supply chain. The study recommends that other manufacturing firms should adopt these practices. This study will fill knowledge gaps and help supply chain managers develop guidelines and make decisions on service outsourcing. Additionally, it will also benefit government, academic, and supply chain stakeholders.