DOES REGULATION MODERATE OPERATIONS COST AND OPERATIONAL PERFORMANCE RELATIONSHIP AMONGST THIRD PARTY PORT-CENTRIC LOGISTICS FIRMS IN KENYA?

Abstract

This research paper explored the moderated relationship between operations cost
management and operational performance of third-party port-centric logistics (3PL)
firms in Kenya by looking at the concept from its original proponents in Toyota
Production system to the current applications in services. The study tested the
conceptual model of the relationship between the two variables and was guided by the
specific objective which was to determine the regulated relationship between cost as a
lean practice and operational performance of third-party port-centric logistic firms in
Kenya. Port-centric logistics services providers are highly regulated firms and therefore
it was critical to find out the effect the regulatory framework has on the operational
performance of these firms. The relationship between lean cost and operational
performance has been tested in numerous contexts as well as other studies. A survey
design based on stratified sampling with a disproportionate approach consisting of 164
firms (15% of the population) was used in data collection data. This comprised of 164
firms which were served with questionnaires targeting the sampled 164 third-party
port-centric logistics firms. Response rate for this study was 75.6% (124 firms). Data
analysis was carried out using moderated multiple regression (MMR) analysis where
relationship between the variables was computed. Test of internal consistency, validity
test, reliability and normality test, were conducted, all indicating appropriateness of
data. The strength of the regression model was found to be 53.6% (adjusted R2) which
was considered good enough, appreciating the fact that operational performance is also
affected by other factors outside the model. The null hypothesis (H0) was tested and the
results indicated that there was statistically significant evidence that operations cost
management greatly influenced operational performance. Moderation results pointed to
a strong statistically significant [F (1, 119) = 71.474, p = 0.000] moderation effect of
regulation on the relationship between operations cost management and operational
performance of third-party port-centric logistics firms in Kenya with R2 change of 1.71
at p=0.000. The findings immensely provide information and knowledge that will play a
critical role in research agenda in the area of lean and operational performance,

particularly in service management. This study provides critical information,
knowledge, foundation and an elevation from where a research agenda and policy
discussions can be referenced. The study recommends policy formulation that will
support measures to boost operations and administrative cost amongst 3PL firms’
continuous growth in terms of the firms’ fundamentals and of micro and macroeconomics.

This will help in creating 3PL firms that are efficient, effective and with
superior operational performance, first to the benefit of the customers (importers and
exporters), and to the entire national economy and eastern Africa at large. The study
recommends that 3PL firms, although negatively affected by regulatory framework,
take it upon themselves to device smart cost interventions that will lead to efficiency
operation strategies that will enable them compete and emerge victorious in operational
performance and excel in the competitive battle.
Keywords: Lean, Cost Management, Regulation, Third party logistics service providers,
Operational performance