Modeling the 'make-or-buy' logistics decision: An empirical analysis of the logistic decision drivers for suppliers and manufacturers in vendor managed inventory relationships

Managing the movement of components and products from suppliers to customers and ultimately to end-users is undergoing rapid changes. Supply chain management has increasingly gained attention as companies have sought to reduce costs and improve service performance in a quest for gaining an advantage on the competition.; Previous studies have examined the nature of vendor managed inventory relationships between suppliers and retailers as well as those factors that influence the third-party logistics outsourcing decision. However, researchers to date have not examined the issue of logistics outsourcing when a vendor managed inventory relationship exists between firms upstream in the supply chain. This study sought to address this gap in the literature.; Five literature streams provided a theoretical base for the proposed models and hypotheses of this study: channel structure; value chain theory; corporate and logistics strategy; logistics and outsourcing to third party providers; and functional shiftability and vendor managed inventory.; The study was conducted using a survey mailed to 640 logistics professionals in a cross section of non-retailing companies. A total of 122 usable surveys were returned. A variety of statistical techniques were used to assess the relationships and differences between the variables in the study's model. Those techniques included descriptive statistics, regression, discriminant and factor analysis.; Significant relationships were found between the proposed variables and the logistics outsourcing decision. Companies that considered service requirements, customer influence, and a turbulent market environment to be important to the logistics decisions tended to outsource more functions. Significant differences between the responses for VMI and non-VMI companies were also found. Overall, support for the proposed model was found.; While this study is subject to limitations that are common to mail surveys and cross-industry studies, the research results are valuable to researchers and practitioners seeking to improve the understanding and practice of logistics management.