Strategic outsourcing of supply chain

Survey on: Strategic outsourcing of supply chain- The India Model

Subject Area: Education / Adult Learning / Quantitative Statistics

Modified: 3rd September 2025

This study investigates the strategic outsourcing of supply chain activities, focusing on the India model of outsourcing logistics services. The primary aim is to identify the underlying factors driving outsourcing decisions and to analyze the demographic characteristics of respondents in this context. The study leverages a survey sample of 297 respondents from various sectors, examining key variables such as outsourcing logistics services, reasons for outsourcing, logistics objectives, hindrance factors, and criteria for selecting third-party logistics (3PL) providers. The study employs a combination of exploratory data analysis (EDA), factor analysis, and reliability testing to assess the normality, reliability, and validity of the measures used. The findings are crucial for understanding the strategic motivations behind outsourcing decisions and how firms in India leverage logistics outsourcing for competitive advantage.

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Table Of Content

Referencing Tools

S. No

1

Demographic Characteristics of respondents

2

Summary statistics for Outsourcing Logistics Services,

3

Reason for Outsourcing

6

4

Reliability confirmation-Outsourcing logistics services

7

5

Factor analysis for Reason for Outsourcing (n=297)

7

6 Evaluation of Structural Models

7

Table 1: Demographic Characteristics of respondents

	Frequency	Percent (%)
Gender
Male	256	86.2
Female	41	13.8
Total	297	100.0
Age group
<20	7	2.4
21-30	142	47.8
31-40	110	37.0
41-50	23	7.7
>50	15	5.1
Total	297	100.0
Education
Secondary school	1	.3
High school	3	1.0
High Institute level	9	3.0
University level	108	36.4
Post graduate level	176	59.3
Total	297	100.0
Type of Organization
Manufacturing	65	21.9
Service	196	66.0
Others	36	12.1
Total	297	100.0
Experience
<2 years	137	46.1
< 4 years	62	20.9
< 6 years	35	11.8
< 8 years	29	9.8
> 8 years	34	11.4
Total	297	100.0
Your functional area in this organization
Accounting	1	.3
Finance	4	1.3
Marketing	50	16.8
Manufacturing	16	5.4
Research and Development	19	6.4
Personnel	1	.3
Logistics and SCM	177	59.6
Information systems	9	3.0
Others	20	6.7
Total	297	100.0
Level of your position within your organization
Specialist	60	20.2
Manager	92	31.0
Team Leader	48	16.2
Director	18	6.1
Executive / VP	26	8.8
Others	53	17.8
Total	297	100.0

The study had 86.2% male participants and 13.8% female. Age distribution: 47.8% were 21-30 years, 37.0% were 31-40 years, 7.7% were 41-50 years, 5.1% were >50 years, and 2.4% were <20 years. Education level: 59.3% had post-graduate education, 36.4% had university level, and the rest had high institute, high school, or secondary school. Most participants (66.0%) were from the service sector, followed by manufacturing (21.9%) and others (12.1%). In terms of experience: 46.1% had <2 years, 20.9% had <4 years, and the rest had varying levels of experience. Functional areas: 59.6% worked in logistics/SCM, 16.8% in marketing, 6.7% in others, 6.4% in R&D, and smaller percentages in manufacturing, IT, finance, and accounting. Position levels: 31.0% were managers, 20.2% specialists, 17.8% in other roles, 16.2% team leaders, 8.8% executives/VPs, and 6.1% directors.

Table 2: Summary statistics for Outsourcing Logistics Services, Reason for Outsourcing, Outsourcing Logistics Objective, Hindrance factors/ Problems encountered in Outsourcing, In-Sourcing reasons and Criteria for selecting 3 PL Provider

	Outsourcing Logistics Services	Reason for Outsourcing	Outsourcing Logistics Objective	Hindrance factors/ Problems encountered in Outsourcing	In-Sourcing reasons	Criteria for selecting 3 PL Provider (Langey et al., 2009)
Mean	3.25	3.58	6.60	6.60	3.47	3.48
Median	3.30	3.55	6.91	6.91	3.50	3.37
SD	0.91	0.71	2.21	2.21	0.88	0.96
Skewness	-0.09	-0.34	-0.92	-0.92	-0.52	-0.12
S. E of Skewness	0.14	0.14	0.14	0.14	0.14	0.14
Kurtosis	-0.84	1.09	1.14	1.14	0.36	-0.91
S.E of Kurtosis	0.28	0.28	0.28	0.28	0.28	0.28

Exploratory data analysis (EDA) was conducted for variables such as Outsourcing Logistics Services, Reason for Outsourcing, Outsourcing Logistics Objectives, Hindrance Factors in Outsourcing, In-Sourcing Reasons, and Criteria for selecting 3PL Providers, using a sample of 297 cases. The analysis included histograms and z-tests for skewness and kurtosis. All variables showed normal distribution:

Outsourcing Logistics Services: Mean = 3.25, Median = 3.30, SD = 0.91
Reason for Outsourcing: Mean = 3.58, Median = 3.55, SD = 0.71
Outsourcing Logistics Objective: Mean = 6.60, Median = 6.91, SD = 2.21
Hindrance Factors in Outsourcing: Mean = 6.60, Median = 6.91, SD = 2.21
In-Sourcing Reasons: Mean = 3.47, Median = 3.50, SD = 0.88
Criteria for selecting 3PL Provider: Mean = 3.48, Median = 3.37, SD = 0.96

All variables had significance of p<0.05, indicating normality, allowing for the use of parametric tests.

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Table 3: Reason for Outsourcing

Reason for outsourcing	Mean	Ranking
Improve profitability	3.82	1
Improve operating efficiency	3.79	2
Enhance customer satisfaction	3.70	3
Improve cash flow	3.70	3
To Increase competitive advantage[SF4]	3.67	4
Reduce constraints of organization’s own production	3.65	5
Increase responsiveness to market change	3.64	6
capital funds more available for core area Make	3.62	7
Leverage the firm’s skill and resources	3.59	8
Improve Business focus	3.59	8
To enable partnering to improve service quality and customer service and increase competitive advantage[EF5]	3.58	9
Increase Efficiency	3.58	9
To achieve Competitive advantage[SF2]	3.57	10
Improve Performance	3.56	11
Add value to the product	3.50	12
To enable partnering to improve service quality	3.50	12
Convert fixed costs to variable costs	3.48	13
Improve return on assets	3.47	14
Reduce Risk	3.43	15
To help companies gain global advantage	3.40	16
To meet increase demand for new IS and resource more efficiently and economically	3.37	17

In the “Reason for Outsourcing,” the highest-ranked factor is Improve profitability (mean = 3.82), followed by Improve operating efficiency (3.79) and Enhance customer satisfaction & Improve cash flow (both 3.70). Other important reasons include Increase competitive advantage (3.67), Reduce constraints of own production (3.65), and Increase responsiveness to market change (3.64). Make capital funds more available for core areas (3.62) and Leverage firm’s skills/resources & Improve business focus (both 3.59) are also key factors. Further down the list, Enable partnering to improve service quality & increase competitive advantage (3.58) and Achieve competitive advantage (3.57) rank highly, with other factors like Improve performance (3.56) and Add value to product (3.50) also contributing. Convert fixed costs to variable costs (3.48), Improve return on assets (3.47), and Reduce risk (3.43) follow, while Help gain global advantage (3.40) and Meet increasing demand for IS/resources more efficiently (3.37) rank lowest.

Reliability and Validity

Table 4: Reliability confirmation-Outsourcing logistics services

Factor	Statement	Cronbach’s Alpha if Item Deleted	Items	Cronbach’s alpha
Outsourcing logistics services	International transportation	0.909	21	0.912
	Domestic Transportation	0.914
	Warehousing(pick& pack)	0.909
	Freight Forwarding	0.911
	Customs Brokerage	0.913
	Reverse Logistics	0.908
	Cross docking	0.907
	Product labelling, knitting and packaging	0.907
	Transportation planning and management	0.905
	Inventory management	0.906
	Fright Bill Auditing & Payment	0.905
	IT Service	0.907
	Order management	0.906
	Service parts logistics	0.904
	Customer Service	0.906
	Supply Chain Consultancy	0.908
	Fleet management	0.905
	Lead logistics service/4PL	0.907
	Sustainability & green logistics	0.908
	Financial Services such as Inventory Financing	0.910
	Financial Services such as Inventory Financing	0.910

Factor Analysis

Exploratory Factor Analysis (EFA) was conducted using principal components analysis with varimax rotation in SPSS 18.0 to identify underlying dimensions of multi-item scales (Economic factors, Strategic factors, Environmental enhancement). A minimum eigenvalue of 1.0 and factor loadings above 0.50 were used to retain factors. The factorability of 22 items was examined initially.

Table 5: Factor analysis for Reason for Outsourcing (n=297)

Rotated Component Matrix

Factors	Component			% Total variance explained
Factors	1	2	3	% Total variance explained
To Increase competitive advantage [SF4]	0.770			38.98
Increase responsiveness to market change	0.730
Enhance customer satisfaction	0.727
Improve Business focus	0.712
To achieve Competitive advantage [SF2]	0.675
Reduce Risk	0.668
Convert fixed costs to variable costs	0.666
Improve Performance	0.657
Reduce constraints of organization’s own production	0.563
Leverage the firm’s skill and resources	0.552
Improve cash flow		0.837		50.43
Improve operating efficiency		0.713
Improve profitability		0.695
Make capital funds more available for core area		0.656
Increase Efficiency		0.645
Add value to the product		0.636
Improve return on assets		0.572
To improve Customer Service			0.860	58.99
To enable partnering to improve service quality			0.797
To help companies gain global advantage			0.793
To meet increase demand for new IS and resource more efficiently and economically			0.789
To enable partnering to improve service quality and customer service and increase competitive advantage [EF5]			0.748

Table 5 presents the results of the factor analysis and a detailed description of each item for of the three main factors. Factor loadings ranged from 0.552 to 0.860. All the factors accounted for 38-58% of the variance.

Conclusion:

The findings of this study highlight the significant factors influencing the outsourcing of logistics services in India. Key reasons for outsourcing include improving profitability, enhancing customer satisfaction, and increasing operating efficiency. The factor analysis revealed three main components: Competitive Advantage and Efficiency, Financial Improvements, and Customer Service and Global Expansion, each accounting for 38% to 58% of the variance. The results suggest that firms in India prioritize economic benefits, operational efficiency, and customer service improvements when considering outsourcing logistics services. Furthermore, the reliability and validity of the measures used were confirmed, ensuring the robustness of the analysis. This study provides valuable insights into the motivations behind strategic outsourcing and the key criteria companies consider when selecting 3PL providers, contributing to the broader understanding of supply chain strategies in India.