Should You Outsource Transport Logistics?

FARGO, ND - APRIL 01:  Truck driver Dale Rolag...

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When a company is looking to save money on order fulfillment, one of the first things they might consider is whether it is cost effective to continue providing in house transport logistics or look into the possibility of outsourcing those functions. There are several considerations a company wants to review before making a final decision.

 One of the most important considerations is the cost comparison between maintaining in house transport logistics compared to hiring an outsourcing company to handle all of the supply chain management functions. The other consideration is the age of your company; if you are just starting in business, you may not have the operating budget to support hiring an entire staff of logistics employees.

Before you make a final decision you want to review the budget and make comparisons. If you are currently operating an internal logistics area including transport logistics, you need to first obtain some quotes from outsourcing firms so you will have some numbers with which to work. Compare what you are currently paying your employees in both hours and benefits; also look at the things you pay for those services such as insurance, utilities, maintenance of equipment and purchase of supplies to keep the area running smoothly.

As you are reviewing your current expenditures for transport logistics, you also want to keep in mind that outsourcing will allow you to eliminate some other operational expenditures (especially if you are currently paying for in house fulfillment services) such as insurance on vehicles, gasoline to keep the vehicles running, maintenance and repair costs, financing costs of the fleet operation, operational costs of a warehouse and shipping and receiving area. All of these factors also add to the costs of maintaining an in house transport logistics area.

New companies probably have an easier time making the decision to outsource transport logistics functions because they haven’t yet built the following of customers and thus the income that older companies may have. In addition, eliminating the concerns about operating a warehouse and fleet of trucks may allow a new company to operate on less capital than would be possible otherwise. For an older company that is looking to save money on operating costs, there may be other considerations such as having to terminate employees who work within the transport logistics areas. It is not a decision that should be made lightly but rather one that management needs to review carefully.