Receive a daily price for your shipment request quickly and easily! Enter your shipment information in our online form and select the desired date of your order. You will then receive a price quote from us immediately and can convert your inquiry into an order without much effort.
Logistics outsourcing is becoming more and more important in industry and trade. While the degree of outsourcing in the transport sector is more than 50 percent and almost 100 percent in the CEP sector, the share of outsourcing in contract logistics is only 30 percent. Why is that?
We are very familiar with both transportation services and contract logistics. In this article, we will examine the opportunities and risks of contract logistics outsourcing and discuss some of the most well-known theses around the pros and cons of outsourcing.
Cost Savings
Thesis: Outsourcing logistics processes can lead to significant cost savings. Companies reduce their fixed costs because investments in logistics centers, means of transport and personnel are no longer necessary. In addition, they benefit from the scaling effects of specialized service providers.
Due to wage increases, collective bargaining and minimum wages, the labor cost advantages of the logistics industry over trade and industry have decreased in recent years. Advantages that are based only on this wage factor are no longer relevant. However, reductions in fixed costs are important. Necessary production factors in logistics, such as IT, real estate, warehouse technology and automation, are expensive, and investments are correspondingly high. Being able to conserve their own resources in this area is a real advantage of outsourcing for industry and trade.
Focus on Key Competences
Thesis: Companies can concentrate more on their core competences instead of dealing with logistical challenges. This promotes innovation and improves competitiveness.
This depends very much on the industry. Logistics has long since become a core competence in some areas of industry and trade, and in some cases its importance is significant enough to make a company's success largely dependent on it.
Example 1: E-commerce companies set themselves apart from their competitors based on their logistics capabilities, including delivery options, speed, quality and returns policy. If the logistics are not state of the art, consumers will immediately shop on another platform.
Example 2: Industrial companies depend on meticulous and punctual delivery of production supplies. If performance is lacking here, it can lead to standstills and delayed delivery.
Access to Expert Knowledge and Modern Technology
Thesis: Logistics service providers have specialized know-how that companies often lack. They also use the latest technologies, such as tracking systems, automation and optimized route planning, which increases efficiency and transparency.
Logistics expertise in industry and trade is now at a similarly high level to that of logistics service providers. Numerous experts from the logistics industry now work in strategy, planning and operational departments and are constantly optimizing logistics. Only highly specialized contract logistics service providers that consistently work on innovations and technological progress as well as implement and further develop the results in suitable use cases can offer customers significant advantages.
Flexibility and Adaptability
Thesis: An external logistics service provider enables companies to flexibly adapt their logistics processes to changing market demands. This is particularly advantageous during seasonal peak periods, when a company is growing, or when market conditions change.
A major – if not the most important – advantage of outsourcing today is that markets are subject to continuous change. Buyer behavior, competition, innovations, but also geopolitical and political influences are forcing industry and trade to permanently adapt their logistics strategies, supply chains, locations or dimensions. Specialized logistics service providers have the necessary data and transparency to proactively identify such changes, also in the future with the use of AI, and to proactively suggest and implement adjustments.
Specialized contract logistics providers can scale the use of resources so flexibly during seasonal peak times or in the event of unforeseen demand, such as product promotions or launches, that employees can be added or removed within hours. They manage to set up their employee structure in advance so that they can react with maximum flexibility at any time.
Continuous Improvement of Service Quality
Thesis: Professional logistics solutions shorten transit times and increase customer satisfaction. Logistics service providers offer optimized warehousing, faster deliveries and a high degree of reliability.
Yes and no. The aim of professional logistics solutions is always to optimize delivery capacity, delivery speed and customer service. Specialized service providers support this with their experience, multi-client capability and scalability so that these goals can be achieved faster.
Example: Specialized contract logistics service providers can invest in efficient warehouse and picking systems as part of multi-client processing, which shorten access to goods and processing times. This results in later CUT-OFF times and shorter delivery times.
On the other hand, there are some significant deficits in the continuous improvement of service quality among contract logistics service providers. Only truly specialized providers have integrated CIP (Continuous Improvement Process) methods and a corresponding CIP organization in such a way that they achieve real improvements for their customers in the form of quality increases, service improvements or higher cost efficiency. The logistics industry still has some catching up to do here, especially compared to the automotive industry, where CIP has been an integral part of day-to-day business for many years.
Risk Minimization
Thesis: External service providers bear the risk of supply chain disruptions, freight damage or warehouse bottlenecks. This significantly reduces the operational risk for companies.
In principle, such disruptions and deficiencies can be minimized by industry and trade through appropriate resilience measures, selection of partners and forward-looking capacity planning. If this is not achieved, significant consequences for delivery capability and customer satisfaction must be expected.
It does not matter whether a logistics service provider is involved or not. Specialized contract logistics providers also offer risk minimization as part of contingency plans by preparing for potential risks and measures to avoid them. In this respect, working with a logistics provider of this kind can help to minimize risk.
Expansion and Scaleability
Thesis: For companies that want to operate globally, an experienced logistics service provider enables easier entry into new markets. They benefit from established networks, customs knowledge, international experience and multiplication.
For internationally active or internationally oriented industrial and trading companies, a partnership with a contract logistics provider that is also active worldwide can be advantageous. Such a provider can help minimize development and start-up costs as well as risks, such as with IT implementations or special process knowledge.
This helps to accelerate and secure international expansion. However, this selection of a specialized contract logistics provider, the “global set-up”, requires that the logistics provider also conclusively demonstrates how it will manage the multiplication.
Simply being available at an international trading center is not a guarantee for a successful multiplication. Only when tools, methods and organization can be applied to transfer the available know-how and expertise, will there be a return.
Conclusion Outsourcing Contract Logistics
Contract logistics outsourcing is not always a guarantee for quality and cost optimization. However, it does offer a range of advantages that an industrial or retail company that handles its own logistics would not otherwise be able to achieve.
But: industrial and retail companies must check carefully whether and to what extent the contract logistics provider is specialized enough and has the necessary tools, methods and references to be able to sufficiently maintain the advantages.
If these evaluations are a serious part of the tendering/selection process for specialized contract logistics providers for industrial and retail companies, the advantages outweigh the disadvantages and outsourcing should be pursued.
