Effect Of Logistics Outsourcing Management On Cost Reduction And Companies Profitability Of Consumer Goods Industries

Thousands of new products and services have been introduced over recent decades and are sold and distributed to consumers all over the world. In view of these, market has thus become increasingly competitive over the last two decades, in particular, companies have found it increasingly difficult to maintain traditional profit level and growth rates. These companies have not only had to increase in complexity to meet the challenges of demand and expanding markets, products and services but must constantly be investigating new strategies for improving their competitive advantage and profitability. This paper examines the effect of logistics outsourcing management on cost reduction and companies’ profitability of consumer goods industries. The study was carried out in six states within the six geopolitical zones in Nigeria. Twelve (12) manufacturing companies with 12,054 staff strengths were selected from the list of quoted consumer goods companies (Nigerian Stock Exchange, 2019). Multistage sampling procedures such as cluster sampling was used to pool the manufacturing firms within the study area; stratified sampling was used to group the firms into sectors; and purposive sampling was used to select twelve (12) consumer goods companies. Total of 12 consumer goods industries were selected out of 21 consumer goods industries. This also cut across the six geopolitical zones in Nigeria. The respondents for the study were chosen from senior staff and directors from the logistics department, financial department and procurement department of the industries due to their involvement in decision making for the smooth operations of the industry. The sample size represents 15% of the staff strength of each department under study; 81 respondents were sampled from logistics department of the 12 companies, 49 respondents from the finance department form 12 companies, 61 respondents from procurement department from 12 companies and 36 directors (1 director from each department) from 12 companies, this makes 227 respondents. 227 questionnaires were therefore administered and 200 were returned (88.1percent) and used for the analysis. and secondary data sourced from the financial records of the companies were used for the study. Regression model postulated for the findings showed that logistics outsourcing has positive significant effect at 0.05 level of significance on cost reduction and companies’ profitability. It is therefore important that Companies should recognise the importance of logistics management outsourcing in a competitive business environment.