As a shipper, my company is thinking about creating a smaller logistics group. What are the pros and cons of outsourcing some of the services we have traditionally done in-house? (Bill Kinzeler)

Questions

We have seen the outsourcing of logistics services take a variety of forms and we think that the pros and cons depend on how the relationship with the third-party provider is structured and managed.

Some organizations have looked at the service provider as a commodity that they can bid out at certain intervals, while others view their service provider as a strategic partner. In all cases, keeping enough expertise, industry, and institutional knowledge in-house to understand the workings of your supply chain is desirable. In the first scenario, you may be able to drive down costs but will likely get what you pay for. With a partnership arrangement, you may pay a little more than the commodity model but will likely benefit from a more collaborative effort that could ultimately lower your overall cost basis.