Executive Briefings

Here's Why Companies Aren't Outsourcing to 3PLs

Of 102 respondents surveyed recently by ARC Advisory Group, 23 percent said they were currently not working with a 3PL. The sample size is not big enough to draw statistically-significant conclusions, but the data is informative nonetheless. The reasons companies aren't outsourcing their logistics operations to 3PLs boil down into two high-level categories:

• Companies believe that they can do a better job than 3PLs in terms of cost, quality and service
• Companies have not explored the outsourcing option

The latter point accounts for almost half of the "Other" responses, which includes "We have yet to investigate," "We haven't reviewed the option," and "We haven't spent the time to investigate 3PL benefits."

This finding represents both an opportunity and a threat to the 3PL industry. In many cases, if companies explore the outsourcing option, and if 3PLs can present them with a compelling and differentiated value proposition, they may decide to outsource. However, the fact that some existing 3PL customers are re-evaluating their outsourcing decision and opting to bring their logistics operations back in-house should be an area of concern for 3PLs. 

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Of 102 respondents surveyed recently by ARC Advisory Group, 23 percent said they were currently not working with a 3PL. The sample size is not big enough to draw statistically-significant conclusions, but the data is informative nonetheless. The reasons companies aren't outsourcing their logistics operations to 3PLs boil down into two high-level categories:

• Companies believe that they can do a better job than 3PLs in terms of cost, quality and service
• Companies have not explored the outsourcing option

The latter point accounts for almost half of the "Other" responses, which includes "We have yet to investigate," "We haven't reviewed the option," and "We haven't spent the time to investigate 3PL benefits."

This finding represents both an opportunity and a threat to the 3PL industry. In many cases, if companies explore the outsourcing option, and if 3PLs can present them with a compelling and differentiated value proposition, they may decide to outsource. However, the fact that some existing 3PL customers are re-evaluating their outsourcing decision and opting to bring their logistics operations back in-house should be an area of concern for 3PLs. 

Read Full Article