Hi Adam,

that's right, 50% failure rate.... especially in Logistics Outsourcing.

Firms need to be more strategic in their logistics outsourcing decisions..

First: they need to determine if they Really need to outsource logistics activities or Not? if yes, what are the logistics activities that they need to outsource.....and how could it help them to achieve their strategic objectives.

Second: they need to determine the Logistics Requirements that LSPs have to provide in order to help them to achieve their strategic objectives

Third: The Identified logistics requirements help to determine a number of factors/criteria that should be used to evaluate and select the right LSP(s) to deal with.

Fourth: Continuous monitoring and evaluation of the LSPs performance based on Agreed on logistics KPIs  to ensure that the Logistics outsourcing is working well....

Regards

I am particularly interested in how a firm can foster long-term  dynamic capabilities when outsourcing major parts of its  fundamental maintenance.

hi Jane....very interesting question but need deep and thoughtful answer as it relates with actual practice in business. Usually for short term the company may not indulge with so much problem as the control is there by the company but in long term situation it needs lot of plan and strategically too it relate to the company fundamental cost spending, quality expectations, output-input quantities requirements, locations, warehousing, logistics and transportation activities and vendor capabilities. To toe the lines for such fundamental maintenance in outsourcing needs a close rapport loop to the vendors development and many more. Good relationships alone is not a guarantee that the company can achieve a good long term dynamic capabilities but the results and willingness of the particular vendor to explore and meet the company specifications from time to time is the most important situation. Are they willing to invest more on the said fundamental requirements, including the technological investments?

Hi Adam. You may have post a broad issue behind the outsourcing concept. The study on outsourcing failure should have specified in which scope of business operation; either logistic ( as clearly mentioned by Saleh), or Marketing outsourcing (to have international dealership) or HR outsourcing (to subcontract workers). Certainly each of them would have different effects based on the nature of business and relationship (either short or long term).

Hi Noor Azman.I'm referring to general perspective of business globalization. Indeed its a broad scope but let our esteemed readers narrowed their own perspective of studies and disciplines. There are many pros and cons to be anticipated which we too would like to learn from them. Cheers.

This is about comparative advantage. Theory of comparative advantage will give you a good perspective of the issue.

The first question is what drives the decision, and specifically how do firms expect to generate value from the decision to outsource. Here are a couple of good papers for you to consider. The first, "Toward a Model of Strategic Outsourcing", describes the value proposition for outsourcing holistically through the TCT and RBV lenses. The second, "Examining Managerial Preferences and Choices: The Role of Value Creation and Value Appropriation Drivers in Strategic Outsourcing", examines underlying decision making processes and attributes related to the decision to outsource. 

Article Toward a Model of Strategic Outsourcing

Article Examining Managerial Preferences and Choice: The Role of Val...

Thanks Tim. A thoughtful drives for the decision making. Will consider that.