Executive Briefings

Does Logistics Outsourcing Make Sense for Everyone?

Each company must look to its strengths to answer this question for itself. But the answer is likely to be yes...to some extent.

Two questions that help to begin to frame the answer are: 1) what expertise and capabilities should we have in-house based on our size and the criticality for each logistics function? And 2) what really are our strengths today for each function and each mode, and are any gaps best filled by outsourcing?

Smaller companies with less than 5,000 to 10,000 shipments per year will often outsource the full logistics function to a third-party provider. It simply is not cost efficient to have experts across all functions like procurement, execution, payment, regulatory compliance, etc., and across all modes from truck to rail to ocean. For medium-sized and even large shippers the answer often comes down to looking at its operation mode by mode. Some very large domestic shippers who only do several thousand international shipments per year recognize that the complexities of those shipments require an understanding of markets, processes, regulations, etc., that is better handled by experts who do that for many shippers. Companies that may have large packaged truck operations but smaller bulk truck needs, or vice versa, will often carve out that mode for outsource experts to manage. The same is true across all truck, rail, and intermodal operations.

Freight payment is an especially useful area of outsourcing for companies of all sizes.

Source: ChemLogix

Each company must look to its strengths to answer this question for itself. But the answer is likely to be yes...to some extent.

Two questions that help to begin to frame the answer are: 1) what expertise and capabilities should we have in-house based on our size and the criticality for each logistics function? And 2) what really are our strengths today for each function and each mode, and are any gaps best filled by outsourcing?

Smaller companies with less than 5,000 to 10,000 shipments per year will often outsource the full logistics function to a third-party provider. It simply is not cost efficient to have experts across all functions like procurement, execution, payment, regulatory compliance, etc., and across all modes from truck to rail to ocean. For medium-sized and even large shippers the answer often comes down to looking at its operation mode by mode. Some very large domestic shippers who only do several thousand international shipments per year recognize that the complexities of those shipments require an understanding of markets, processes, regulations, etc., that is better handled by experts who do that for many shippers. Companies that may have large packaged truck operations but smaller bulk truck needs, or vice versa, will often carve out that mode for outsource experts to manage. The same is true across all truck, rail, and intermodal operations.

Freight payment is an especially useful area of outsourcing for companies of all sizes.

Source: ChemLogix