Logistics Outsourcing: Does it make s...

Logistics Outsourcing: Does it make sense for everyone?

Posted in the Logistics Forum


Manchester Township, NJ

#1 Jun 16, 2010
Excerpt from ChemLogix Chemical Transportation and Logistics Bloghttp://blog.chemlogix.com/ 2010/06/logistics-outsourcing- does-it-make-sense-for-everyon e/
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 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 5-10,000 shipments per year will often Outsource the full logistics function to a 3rd party provider (3PL). 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 size, 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.
An especially useful area of Outsourcing for companies of all sizes can be Freight Procurement. Outsource providers bring: 1) purchasing power, 2) market expertise, and 3) systems and tools that a single shipper cannot hope to match. 3PLs have staff that is constantly in the market both for themselves and for their Freight Procurement customers. This allows them to see changing trends in price and capacity across regions. This valuable knowledge is coupled with the use of automated tools that create competition for the shipper and often allow carriers to see how their Bids are stacking up. This ensures the best matching of carrier capacities/strategies with the needs/strategies of the shippers. These Outsource Procurement engagements often start with a Benchmarking exercise that highlights the potential of having an automated bid done in conjunction with the Outsource partner.
The logistics process with the most hassles, Freight Audit & Payment, is also often Outsourced to save internal staff resources. Especially coupled with a Transportation Management System the process can be automated and exceptions, the bane of the process, significantly reduced.
For processes/functions/expertise that makes sense to keep in-house for medium and especially large shippers there is still an Outsource decision to make…..where do we get the support systems needed by our staff for procurement, for shipment execution (Transportation Management Systems (TMS)), for global trade management, etc. Some 3PLs, such as ChemLogix, use these systems as well as sell and implement them with larger shippers. The very good news here is that the seller/implementer is fully vested in ensuring a good product that is well maintained.
As with many questions in Logistics, the answer to “Should we Outsource?” comes down to “it depends”. But I think you will find that in most cases the decision will not be to Outsource or not, but rather, what functions, processes, and modes does it make sense to Outsource.
Tim Howard

Lancaster, PA

#2 Jun 26, 2010
Some similar info in this blog from time to time...

jazzy jones

Jaipur, India

#3 Jul 9, 2012
yes logistics can be outsourced by giving work to mediAtors which has the cheap labourers in other country. therefore doing outsourcing is a good option for developing the cheap logistics industry.

Since: Jul 12

Location hidden

#4 Jul 11, 2012
Logistics business can be outsourced and is beneficial for those companies who do not involve in continuous transportation of goods and can be used by small companies as they do not have investments to start there own logistics business. This has other benefits such as risk minimization,whenever the scenario is not suitable you can unsubscribe from the services and by outsourcing you save money by not buying all the equipments that are required and getting the cheap and expert labor to work for you.


#5 Jul 24, 2012
The increased competition in the global economy. manufacturing have made companies to outsource their logistics functions.The companies who wants to decrease their warehouses, vehicles, excess inventories and labor costs can outsource their logistics and can focus on their core business.

Since: Jul 12

Location hidden

#6 Aug 13, 2012
outsourcing has also provided an opportunity to the companies to focus on other activities of their business and help it grow.

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