Logistics is a one of the common function that companies usually outsourced. The decision to keep this function in-house or contract with one or many third-party logistics (3PL) companies is entirely strategic and can dramatically impact any organization's bottom line. 3PL users report an average of 44% of their total logistics expenditures are related to outsourcing. 72% of firms are increasing their use of outsourced logistics services in 2015, which is up slightly from the average reported in recent years. Most developed outsourcing logistics market belongs to the U.S. with 88%. It is followed by Asia 48%, and Europe – 46% (O’Reilly, 2010). In Italy some industries can reach the 70%, in particular food, groceries and fashion (Osservatorio Contract Logistics del Politecnico di Milano). There are many researches about logistics and large enterprises. There are less studies about Small and medium-sized enterprises (SMEs) and logistics outsourcing. SMEs play a major role in the Italian economic system. Their business activities have become an important component of the Italian economy. This paper aims to depict the adoption level of outsourcing by Italian SMEs. By direct interviews to 30 companies’ representatives we investigate which services or processes are outsourced. We investigate the reasons why companies adopt or don’t adopt the externalization. Moreover, for every company we calculate the logistics costs of simple logistics processes. In effect, we wish to compare the logistics costs communicated by the firms and the same costs calculated with ABC (Activity Based Cost) model. This research demonstrate that SMEs adopt 3PLs only for transportation. SMEs do not know all the logistics services offered by 3PLs and SMEs think the services are dedicated only to large enterprises. Finally, many companies are not able to calculate logistics costs, then they cannot compare a 3PL offer with their real costs.

1. Logistics Outsourcing.
Why do not any Italian SMEs adopt the externalization?
Andrea Payaro, Ph.D.
Anna Rita Papa
P&P Consulting & Services
Padua - ITALY
20th EBES Conference – Vienna
Real Estate and Facility Management at University of Wien

2. Andrea Payaro
• 1999: Degree in Management Information System at University of
Padua
• 2002: Ph.D. in Business Management at University of Padua
• 2004: Post Doc. in Business Management at University of Padua
• 2004-2011: Visiting Professor at University of Padua
• Today:
– Vice President of SCM Academy (Supply Chain Management
Academy), Italian association of logistics and supply chain
management
– Consultant certified by European Logistics Association
– CEO of P&P Consulting & Services
– Visiting Professor Transilvania University – Brasov ROMANIA
– Marketing Researcher at Largo Consumo, Italian magazine of
marketing and economics
• Author: Payaro, 2014. Help! How defend yourself from marketing and
its strategies. Aras Ed.
EBES 2016Payaro A., Papa A.R. 2

3. Andrea Payaro
• 1999: Degree in Management Information System at University of
Padua
• 2002: Ph.D. in Business Management at University of Padua
• 2004: Post Doc. in Business Management at University of Padua
• 2004-2011: Visiting Professor at University of Padua
• Today:
– Vice President of SCM Academy (Supply Chain Management
Academy), Italian association of logistics and supply chain
management
– Consultant certified by European Logistics Association
– CEO of P&P Consulting & Services
– Visiting Professor Transilvania University – Brasov ROMANIA
– Marketing Researcher at Largo Consumo, Italian magazine of
marketing and economics
• Author: Payaro, 2014. Help! How defend yourself from marketing and
its strategies. Aras Ed.
EBES 2016Payaro A., Papa A.R. 2

4. Logistics
• Logistics encompasses all of the information and material flows throughout an
organization (Pollitt, 1998).
• The scope of logistics has changed since the emergence of new technologies and
strategic alliances in order to compete on flexibility and responsiveness. The
growing importance of logistics arises from companies becoming globalized to gain
access to new markets, realize greater production efficiencies, and tap
technological competencies beyond their own geographical borders (McFarlan,
1984; Bovet, 1991; Cooper, 1993; Fawcett et al., 1993).
Payaro A., Papa A.R. 4EBES 2016
Source: Top 100 in European
Transport and Logistics Services
2015/2016
Fraunhofer Center for Applied
Research on Supply Chain
Services SCS

5. Outsourcing
• Logistics is a one of the common
functions that companies usually
outsourced
• The most often activities outsourced
are (Hrušecká et al.,2015):
– Transport and shipment
– Warehousing and inventory
– Information systems
– Other, related to value added services
(Product returns, Product assembly &
installation, Labelling, Customisation,
Assembly, Packaging)
Payaro A., Papa A.R. EBES 2016 5
Source: Krarup F., Bailey P., 2016. Outsourcing in Europe.
An in-depth review of drivers, risks and trends in the
European outsourcing market, EYGM Limited

6. 3PL
Payaro A., Papa A.R. EBES 2016 6
• Third-party logistics (3PL) are
activities carried out by an external
company on behalf of a shipper and
consisting of at least provision of
management of multiple logistics
services (Andersson, 2003).
• 3PL is the use of external companies
to perform logistics functions that
have traditionally been performed
within an organization. The functions
performed by the third party can
encompass the entire logistics process
or selected activities within that
process.(Lieb, 1992) Source: Aldin and Stahre (2003)
Information
Reporting
Logistics
Structure
Logistics
Processes

7. Pros and cons of Outsourcing
Payaro A., Papa A.R. EBES 2016 7
Source: Outsourcing in Europe. An un-depth review of drivers, risks and trends in the European outsourcing market, EY

8. SMEs
• There are many researches about logistics and large enterprises.
• There are less studies about Small and medium-sized enterprises (SMEs) and
logistics outsourcing
• Italian National Institute of Statistics (ISTAT) affirms SMEs represent 99% of
national enterprises.
• SMEs continue to increase their importance as a force for national economic
resilience in terms of their contribution towards growth (United Nations
Development Programme, 2007).
Payaro A., Papa A.R. EBES 2016 8

9. SMEs and Outsourcing
• The technical literature on the logistics of small and medium-sized
enterprises is not particularly extensive.
• The bulk of logistics research still focuses on the logistics of large
companies. Probably, this is due to the fact that the logistics functions of
large companies are sounder and easier to research (Pearson and Semeijn,
1999).
• Unfortunately, SMEs have different organizational settings and are not
miniature-versions of large enterprises (Hagelaar et al., 2014).
Payaro A., Papa A.R. EBES 2016 9

10. The research
• The research has been conducted through an empirical
analysis of exploratory multiple case study.
• The results are based on interviews both with owner and
with employees.
• The sample is composed of 30 SMEs belong to different
industries situated in the North East of Italy.
• The choice of 30 firms is supported by the Eisenhardt’s
approach to case study research which argues for the use of
more than a single case. She concludes that “between 4
and 10 cases usually works well” (Eisenhardt, 1989).
• All firms belong to Confindustria, the General
Confederation of Italian Industry. Confindustria of Padua,
with almost 1,600 associated companies, involves over
64,000 people.
Payaro A., Papa A.R. EBES 2016 10

11. Obiectives
• The main objectives of our study are:
– determine if SMEs know the services provided by 3PL.
– investigate the reasons why SMEs adopt or do not adopt outsourcing
– Verify the knowledge of some internal logistics costs
Payaro A., Papa A.R. EBES 2016 11

12. Main questions and results
Payaro A., Papa A.R. EBES 2016 12
Questions Yes No
Do you outsource transport? 28 2
Do you outsource the warehouse of finished goods 3 27
Are you aware of logistics services provided by 3PL: Information Systems,
Shipment Planning, Packaging, Product Returns? 1 29
Are you aware of logistics services provided by 3PL: Transport, Fleet
Management? 25 5
Are you afraid about the loss of control of logistics processes after
outsourcing? 8 22
Are the outsourcing services only for Large Enterprises? 22 8
Are you aware of yours logistics costs 5 25
How are your costs for unload and storage activities (cost/pallet)? (the
answers reflect the exact costs calculation of logistics activities) 1 29

13. Conclusions
• Our paper confirms conclusions found in literature
• SMEs do not outsource because
– they don’t want lose control of inventory;
– they are afraid of the flexibility reduction;
• Our paper adds two other motivations
• SMEs do not outsource because
– they don’t know all the services provided by a 3PL, they know only
transportation;
– they don’t know real logistics costs. We define it “Ignorance”
Payaro A., Papa A.R. EBES 2016 13
Ignorance: the state of being
uninformed or lack of
knoledge. From Latin
Ignorantia = unknowing

14. Further researches
• This research presents some limits:
– the analysis was conducted using qualitative data which can be affected by
subjectivity;
– the number of firms is limited;
– the study considers only SMEs concentrated in a limited territory;
– we consider only few processes to determine the costs.
Payaro A., Papa A.R. EBES 2016 14

15. Thanks for your attention!
Today we live the choices made in the past.
Now we can choose how to live in the future.
.
Andrea Payaro
andrea@pepconsulenze.it
Anna Rita Papa
annarita@pepconsulenze.it
EBES 2016Payaro A., Papa A.R. 15
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