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School of Business and Economics

Logistic Outsourcing Process in SMEsCase Studies of Four Taiwanese SMEs

Degree project in Business Economics (4FE02E) Advanced Level (15 ECTS credits) Master Programme in Business Process and Supply Chain Management (60 Higher Education Credits) Author s: Hoyu Chao Mansoor Ali Shah Tutor : Dr. Helena Forslund helena.forslund@ln u.se Examine r: sa Gustafsson asa.gustafsson@ln u.se

Summa ry

Degree project in Business Economics (4FE02E) Advance Level. School of Business and Economics at Linnaeus University Authors: Shah Tutor: Forslund Examiner: Gustafsson Title: in SMEs Hoyu Chao and Mansoor Ali Dr. Dr. Helena sa

Logistic Outsourcing ProcessCase Studies of Four Taiwanese SMEs

Backgrou nd: According to experts logistics outsourcing is a process and companies should develop their Literature suggests a understanding systematic about it as a process. and strategic approach for this

process and also presents different models and aspects to improve logistics outsourcing as a process. But some scholars reveal a SMEs. gap in literature regarding logistics outsourcing process in

They suggest in the discussion regarding logistics outsourcing as a process SMEs are totally ignored and there is a need to conduct research on this topic with perspective of SMEs. They also suggest the practices of SMEs in logistics outsourcing process are different from suggested process in literature. Research Questions: Q.1: According to the literature, how should companies develop and perform logistics outsourcing process?

Q.2: How does the logistics outsourcing process in SMEs differ from the process suggested in the literature? Q.3: Why do the practices of SMEs regarding logistics outsourcing process differ from the process suggested in the literature? i

Purpose Study:

of

the

The purpose of this study is to reduce the gap in literature regarding logistics outsourcing in SMEs by studying their logistics the differences in outsourcing process to identify and understand

their practices as compare to suggested process in literature. Methodolo gy: This thesis is written from a positivistic perspective with a deductive approach. For this thesis multiple-case studies are employed by using qualitative research method. For structured interviews are used analysis method. Conclusio n: Taiwanese SMEs do not have very structured and systematic process for logistics outsourcing which is exactly opposite to the suggested process by literature. suggested aspects of These SMEs are also performing logistics outsourcing process but some not as empirical and data collection semipattern matching is used as

recommended in literature and these aspects are also not integrated as a process. According to our findings, lack of understanding about logistics outsourcing as a process, limitation of resources and lack of interest of top management are main reasons for these differences in the practices of SMEs regarding logistics outsourcing process from the suggested process in literature. We also find that the reviewed literature and suggested models of logistics outsourcing process are focusing on strategic partnership between 3PLs and companies but the partnership of between SMEs and their logistics services this providers is more tactical in nature. This is also a possible reason difference.

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Acknowledgem ent

Our profound gratitude goes to God Almighty, most gracious, most merciful, who gives us wisdom, knowledge and understanding to live our lives as human being. After that we would like to thank all four Taiwanese companies (PAHSCO; La Luz Industrial Corp.; PEZ Crown International Corp. and J&W Parts Industrial Company) and participated in our investigations. their Without employees who their contributions this

thesis would not possible. We would also like to thank our tutor Dr. Helena Forslund and examiner Dr. sa Gustafsson who guided us during this whole process of thesis writing and made it possible for us to complete our research work in the best way. And finally we would like to thank our opposition-group for their valuable inputs that helped us tremendously to improve this thesis.

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Hoyu Chao and Mansoor Ali Shah

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Table of ContentsSummary ................................................................................................... ............................................................. i Acknowledgement...................................................................................... .................................................... iii 1. Introduction ................................................................................................................... ...........................1 1.1 Background: ................................................................................................................. .....................1 1.2 Problem Discussion:............................................................................................... .......................2 1.3 Research Questions: ................................................................................................................. .....4 1.4 Purpose of the Study:....................................................................................................... .............5 1.5 Delimitations: ................................................................................................................. ..................5 1.6 Disposition:.............................................................................................. ..........................................5 2. Methodology............................................................................................... ...............................................6 2.1 Scientific Perspective: Positivistic and Hermeneutic ....................................................7 2.2 Research Approach: Deductive and Inductive .................................................................8 2.3 Research Method: Qualitative and Quantitative..............................................................9 2.4 Research Strategy: Multiple-Case Studies .......................................................................10 2.5 Probability and Non-Probability Selection .....................................................................11 2.6 Data Collection in Case Study ................................................................................................12 2.6.1 Theoretical Data Collection ............................................................................................13 2.6.2 Empirical Data

Collection.............................................................................................. ..13 2.7 Analysis Method ................................................................................................................. ..........14 2.8 Structure of Thesis ................................................................................................................. .....15 2.9 Scientific Credibility ................................................................................................................. .. 15 2.9.1 Validity .............................................................................................................. .......................15 2.9.2 Reliability.............................................................................................. ..................................17 3. Theory .................................................................................................................... ...................................18 3.1 Logistics Outsourcing:............................................................................................. ..................18 3.2 Third Party Logistics (3PL) Providers: .............................................................................19 3.3 Types of Logistics Outsourcing Partnership: .................................................................20 3.3.1 Transactional/Tactical Partnership:..........................................................................20 3.3.2 Strategic Partnership: .......................................................................................................21 3.3.3 Transformational Partnership: ..................................................................................... 22 3.4 Logistics Outsourcing Process: .............................................................................................23 3.4.1 Models of Logistics Outsourcing Process: .................................................................23 3.4.2 Discussion about Logistics Outsourcing Process in Literature:.......................33 3.5 Logistics Outsourcing and SMEs ..........................................................................................38 3.6 Conceptual Model for this Research: .................................................................................40 4 Theoretical Analysis .................................................................................................................... .......42

4.1 Research Question 1: ................................................................................................................. 42 4.1.1 Identify Need of Logistics Outsourcing: .....................................................................44 4.1.2 Objectives of Logistics O u t s o u r ci n g :. ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...

... ... ... ... ... ... ... ... 4 5 iv

4.1.3 Evaluation and Selection of 3PL ................................................................................... 45 4.1.4 Outsourcing Contract: ................................................................

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