BENEFITS AND PROBLEMS OF OUTSOURCING PRODUCT DISTRIBUTION FUNCTION AT HEINEKEN BREWERIES S.C

Abstract

The overall objective of the study is to identify the benefits and problems of outsourcing product distribution function at Heineken Breweries Share Company. The research problem is, even though the company has gained several benefits out of outsourcing there are also problems and challenges that comes from outsourcing the service to distributors. The research is a descriptive study applying quantitative research approach in which data was collected from respondents through questionnaire and interview. By stratifying the population into two groups; distributors and staffs at the sales department, the researcher used judgmental sampling technique. The researcher used descriptive statistics for the data analysis. The findings of the study shows that the company has benefited out of outsourcing in terms of reducing overhead and operational costs, improving quality of service delivery to the customer, focusing on other core functions, helping the company cover wider sales territory than before and gaining more time to managers to help them focus on strategic issues. Despite all these benefits the company has also faced some problems from outsourcing the function to distributors. The major problems are distributor’s lack of skilled and qualified manpower to manage their business, loss of full control over outsourced function, distributor’s reluctance to buy all brands, distributor’s reluctance to pay credit for crates and kegs and finally distributor’s unattractive remuneration and its impact on their sales force motivation. On the contrary the study have revealed that, selecting the right vendor (distributor), cultural concern and cost of searching vendor are not major problem to the company. In conclusion with regards to whether outsourcing advantages outweigh the disadvantages, the study findings reveal that despite the problems, the company is benefited out of outsourcing product distribution function to distributors.