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Logistical Outsourcing Of SME's

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Chapter 1

Introduction To Logistical Outsourcing

The aspect of logistics refers to the management of operations as well as the flow of materials for an organization from supply of raw materials to that of supply of finished products to the final consumer. It can be said as the management of the flow of resources from one point to another or between their point of origin and at their consumption. The logistics of physical items include integration of information along with handling of production, packaging and inventory as well as transportation (Chopra and Meindl, 2010).

Structure Of The Research

In order to ensure that dissertation has been clearly presented to the readers it is important to clear about structure of dissertation done on part of the researcher. For this, it is important to follow an ordered pattern so that research can flow in the correct manner.

Focus And Purpose

The main aim of the research is to determine, and recommend a solution that will enable the companies in Papua New Guinea to lessen the bottlenecks and cut cost in their current logistics operation.

In order to reach at the final aim, some objectives have been framed as follows –

  • To evaluate whether SMEs and other firms in Papua New Guinea should outsource their logistics and overall supply chain.
  • To assess the gains and risks logistics outsourcing can bring to the companies of Papua New Guinea.
  • To analyze the conditions of business environment that would affect the decision of outsourcing of logistics by the companies in Papua New Guinea.
  • To explore on the type of logistics functions that can be outsourced by SMEs in Papua New Guinea.

Research Questions

  1. Should SMEs and other firms in Papua New Guinea outsource their logistics and overall supply chain?
  2. What will be the gains and risks that logistics outsourcing can bring to the companies of Papua New Guinea?
  3. What are the conditions of business environment that would affect the decision of outsourcing of logistics by the companies in Papua New Guinea?
  4. What type of logistics functions should be outsourced by SMEs in Papua New Guinea?

Framework And Analysis

Framework and analysis give the precise details regarding the research methodology that will be adapted while conducting the research. This is as follows-

  • Research Approach – An epistemological approach will be adopted by the researcher so as to produce a subjective and objective framework in order to find the answer the research questions and the topic of study can be presented in the correct manner.
  • Research Type – The types of research is both qualitative and quantitative so as to have an in depth understanding of the dissertation.
  • Research Design – Research design chosen for the study is exploratory so that the subject matter of dissertation can be examined accurately.
  • Research philosophy – Research philosophy is that of constructionism by use of which more and more knowledge can be appraised with help of more and more of interaction and use of social sciences (Constructionism, social, 2013).
  • Data collection – Data has been collected by use of both primary and secondary methods. In primary method, data is gathered by conducting interviews with various companies of Papua New Guinea. For secondary information, information is collected from various scholar articles in published journals and books and online articles and websites.
  • Data Analysis – Data will be gathered with help of both qualitative and quantitative techniques. The data will be translated into a qualitative form and statistics of the company reports will be quantified and the final result will be represented in the qualitative form.

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Potential Significance Of Research

The current dissertation holds significance both in practical and academic aspect. The existing theories and practices that exist in the business environment and the logistics operations of Papua New Guinea that will be known through the study will be a help to the industries. This is so as the study will help them to know the factors that could lead to the decision of outsourcing in logistics and how the companies can take the benefit of the decision.


Literature Review

The chapter following the introduction is that of literature review. The chapter consists of theoretical background related to the logistics and its outsourcing decisions and activities. Various studies and studies done in the related field of logistics outsourcing of Small Medium Enterprises (SMEs) Papua New Guinea will be reviewed and views of researchers will be given and interpreted.

Logistics and Logistics Outsourcing

Aron, Clemons and Reddi, 2005 has defined logistics “as the process of planning, implementing as well as controlling the effective storage and flow of goods and services form their point of origin to the point where they are consumed.” The purpose is to conform to the requirements of the customers and this includes inbound and outbound movement of raw materials and transfer of finished products to the consumers (Aron, Clemons and Reddi, 2005).

Logistics market in Papua New Guinea

Papua New Guinea (PNG) is a country that is situated in Oceania and can said to be a rising economy as Gross Domestic Product (GDP) growth of the country has been showing an increase in the nation. PNG is said to be a developing economy which has now been able to improve its infrastructure and economy to a good extent.

Need of logistics outsourcing in Papua New Guinea

The economy of Papua New Guinea is mainly characterized by large portion of SMEs functioning in the economy. It is also a fact that these enterprises contribute to the economic development in terms of output and employment of the nation to a significant extent. In spite of this fact, SMEs in PNG have the drawbacks of small size, underdeveloped capital markets and lack of finance and credit ratings (Leavy, 2004).

Business environment factors affecting logistics outsourcing decisions in Papua New Guinea

Papua New Guinea has been a growing economy but still it is facing the lack of infrastructure and proper road networks. Most of the manufacturers are facing the problem of high costs in their operations as they do not have the appropriate reach to the raw materials and also to the target market.

Gains of outsourcing logistics for companies in Papua New Guinea

If the companies in Papua New Guinea go for the decision of outsource logistics then they will gain a lot from this decision. The gains that the enterprises can have by acting on this function of management are as follows-

  • Savings – The process of outsource logistics can bring a reduction in the overall costs of distribution for the enterprises.
  • Higher control of business – With outsourcing of logistics, products of the companies can remain accessible throughout all the stages of distribution and thus, it becomes easier for the enterprises to respond to the new opportunities or issues quickly.
  • Financial leverage – By adopting the outsourcing in logistics, enterprises are free from the warehousing and transportation function which reduces the equipments, personnel and facilities requirement which frees their cash.
  • Free up management – If companies in PNG take the decision of outsource logistics then their management is free to focus on other important businesses like manufacturing and marketing.


From the literature review it can be concluded that logistics is an important function of management within an organization and with time outsource logistics is gaining significance. Companies now prefer to outsource this function and transfer logistics to a third party logistics or service provider as various it is possible that production and consumption point for companies are diversified geographically (Rushton and Walker, 2007).

Chapter 3

Research Methodology

The following chapter to literature review is that of research methodology. This is the most important part of a research as this lays down the framework for methods that are going to be adopted in conducting the study (Ireland, Webb and Coombs, 2005). In the present research study, data has been collected and analyzed by keeping focus on scope of logistical outsourcing for small medium enterprises in Papua New Guinea (PNG).

Aims and objectives

Aim – The main aim of present research is determine and recommend a solution that will enable the companies in Papua New Guinea to lessen the bottlenecks and cut cost in their current logistics operation.


  • To assess the gains and risks logistics outsourcing can bring to the companies of Papua New Guinea
  • To analyze the conditions of business environment that would affect the decision of outsourcing of logistics by the companies in Papua New Guinea
  • To evaluate whether SMEs and other firms in Papua New Guinea should outsource their logistics and overall supply chain.
  • To explore on the type of logistics functions that can be outsourced by SMEs in Papua New Guinea.

Research philosophy

Research philosophy as a part of research methodology refers to a comprehensive idea that is related with various approaches and methods being adopted by the researcher for conducting an entire process of investigation.

Research Design

A research design is an important part of research which is a framework of the way in which data is collected and analyzed by the researcher. This helps the researcher to determine the various sources of information and data that can be collected by the researcher. There are mainly three types of research designs, namely, exploratory, descriptive and causal designs.

Research Approach

Speaking about research approach, it is a method of producing new knowledge and increasing the understanding related to the topic of study being conducted. It is about complying with the methodology that has been decided by the researcher.

Research Type

The particular study is a mixture of both qualitative and quantitative type of research. The nature is qualitative as it involves collection of data with help of qualitative methods like interview method of manufacturers of Papua New Guinea.

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Chapter 4

Data Analysis And Interpretation

Data analysis after collection of data is the most important and crucial part of a dissertation. In this chapter, researcher analyses and appraises the data that has been collected from various sources and is represented in an appropriate manner. The final results and conclusion also depend on the data analysis being conducted.

Thematic analysis

  • Theme 1: Warehouse of raw materials or finished goods is different from the place of manufacturing for companies in Papua New Guinea.
  • Theme 2: Companies are moderately aware of logistic service providers functioning in Papua New Guinea.
  • Theme 3: Logistics outsourcing is used only moderately in Papua New Guinea.
  • Theme 4: Transportation and freight forwarding are highest cost incurred logistics services in Papua New Guinea (PNG).
  • Theme 5: Outsourcing is done through road transport in Papua New Guinea.
  • Theme 6: Opinion of management affects decision of outsource of logistics in PNG.
  • Theme 7: Lack of adequate information in taking logistics outsourcing decision in PNG.
  • Theme 8: Loss of control is the major risk with logistics outsourcing in PNG.
  • Theme 9: Logistics outsourcing market in PNG is in developing stage.
  • Theme 10: Due to lack of infrastructure logistic outsource market in PNG is not completely developed.

Financial analysis

The financial analysis has been done of a Company-A, which is one of the largest small medium enterprises in Papua New Guinea (PNG). The financial data for two years, 2010 and 2011 is taken and it can be interpreted that the enterprise has increased its sales from 2010 to the following year.

Chapter 5

Conclusion And Recommendations

After having completed with section of data analysis and interpretation next part is that of conclusion which is related to the previous chapter. Conclusion is drawn from the analysis of data that has been gathered by the researcher. In this dissertation, primary data has been collected by interview method of manufacturers and wholesalers or retailers and also of third party logistic providers.

After having concluded from data analysis chapter that small medium enterprises in Papua New Guinea (PNG) can go for making use of logistics outsource service and attain benefits from this, recommendations are being provided in this chapter regarding use of this service in future. It can be suggested to SMEs in PNG that by making use of third-party logistic services they will be able to get benefits of reduction in cost and enhancement of efficiency in their operations.

Chapter 6

Reflective Statement

The entire journey of this dissertation on logistical outsourcing of small and medium enterprises in Papua New Guinea was an important one for me in increasing my knowledge and learning related to the topic. The main focus of the study was to find the scope of using third-party logistics providers in PNG by SMEs and to recommend ways to remove shortcomings infunction of logistics. This led to an in depth understanding of circumstances in PNG and effect on use of enterprisesfunctioning in the country (Lowe, 2006).

In addition to bring in an increment in my knowledge base about the topic, the dissertation was also a source of enhancing my reading and writing skills. This is so as in order to search for the secondary data, I read huge quantity of reading material available related to logistical outsourcing and its gains and risks and finally selected the most suitable one according to the study (Monsen, and Horn, 2007).


  • 5th Annual Analysis of Third-Party Logistics Provider (3PL) Customers Identifies Trends and Market Segments. (2005) [Online] Available at: (Accessed: 29th November 2013).
  • Arnold, U. (2000) ‘New dimensions of outsourcing: a combination of transaction cost economics and the core competencies concept’, European Journal of Purchasing & Supply Management, Volume 6 Issue 1, pp. 23-90.
  • Aron, R., Clemons, E. and Reddi, S. (2005) ‘Just right outsourcing: Understanding and managing risk’, Journal of management information systems, Volume 22 Issue 2, pp 37-55.
  • Ayers, J. B. (2001) Making Supply Chain Management Work: Design, Implementation, Partnerships, Technology, and Profits, CRC Press.
  • Babbie, R. E. (2010) The Practice of Social Research, 12thedition, Cengage Learning.
  • Belcourt, M. (2006) ‘Outsourcing – The benefits and the risks’, Science direct, Vol. 16, pp 269-279.
  • Best Logistics Guide. (2008) [Online] Available at: (Accessed: 29th November 2013).
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