Mediating Role of Outsourcing on The Relationship Between Lean Manufacturing Practices and Profitability

Profitability of manufacturing firms is a key component determining their performance in an intensive dynamic manufacturing industry. Mergers, takeovers and collaborations are on the increase because of collapsing firms attributed to declining profits. Whereas strategic efforts have been made through collaborative research involving industry stakeholders and scholars, strategies directly influencing profitability have been discovered. However, profit decline still persists. Accordingly, restless researchers are still struggling to find amicable strategies to ensure the profitability of manufacturing firms. It is on this notch that this paper weighs in by considering the mediating role of outsourcing on lean manufacturing practices and profitability. Whereas previous scholars have used these factors directly to determine their impact on firms’ profitability, less attention was paid to the mediation effect. Hence, this paper contributes by bridging the gap. A sample of 82 manufacturing firms in Uganda was involved based on a cross-sectional research design to determine this interactive relationship. Additionally, widely used Sobel tests in the Med-Graph Excel programme following Baron and Kenny’s mediation approach were adopted to test the mediation effect. The findings proved that outsourcing significantly mediated the relationship between lean manufacturing practices and the profitability of manufacturing firms (Sobel Z-value = 2.562, p = 0.010).