Risk perception on logistics outsourcing of retail chains: model development and empirical verification in Taiwan

Abstract

Purpose

This paper aims to develop a qualitative risk model to empirically identify the important outsourcing risks of logistical functions using the data of Taiwanese retail chains.

Design/methodology/approach

Transaction cost theory (TCT) and resourced based view (RBV) were combined to develop risk events. Analytical hierarchy process was used for risk calibration. Valid data from 75 outsourcer chains and 41 in‐house chains were collected through a three‐stage survey. Outsourcers were further clustered by risk perception using Wards' and K‐mean clustering and examined by an ANOVA. Results of outsourcers and in‐house chains were compared using nonparametric Spearman rank correlation test.

Findings

The risk perception increases as the number of functions outsourced increases. Risks related to transaction costs and strategic resources were both significant. Of the three main risks identified, asset risk and competence risk are more serious concerns than relationship risk. The values of information risk and loss of control account for the bulk of asset risk, while those of poor competence leverage and poor competence in supporting customer service comprise competence risk. Finally, in terms of risk priority, in‐house chains showed no significant difference from outsourcers.

Research limitation/implication

Interrelationships between risk events were limited to avoid complication. Also, due to the sample limit, the risks calibrated may be more associated with outsourcing execution than outsourcing building/abandoning.

Practical implication

The risk structure developed herein can be used as a systematic checklist for outsourcing decision‐making. The qualitative results may provide specific indications for further risk analysis and future risk control.

Originality/value

The study fills a gap in the literature, where prior work has seldom used empirical research to compare how well TCT and the RBV predict logistics outsourcing risk, in particular for the distribution side of the supply chain.

Citation

Tsai, M., Liao, C. and Han, C. (2008), "Risk perception on logistics outsourcing of retail chains: model development and empirical verification in Taiwan", Supply Chain Management, Vol. 13 No. 6, pp. 415-424. https://doi.org/10.1108/13598540810905679