Logistics: To insource or outsource?

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Credit: Getty Images Shippers expect to spend more on outsourcing supply chain and logistics in the coming years as the functions grow in complexity. But how do organizations decide which operations to outsource and which to keep in-house, and what are some of the risks underlying those decisions? At this point, outsourcing of logistics services has become mainstream, as evidenced by the $213.5 billion U.S. 3PL market, according to Armstrong & Associates estimates . In an October 2019 study from Gartner, 85% of respondents said they expected to boost their logistics outsourcing budget by 5% for 2020, on top of a similar increase in 2019. "The question no longer is whether to outsource, but what and how much to outsource," Courtney Rogerson, senior principal analyst with the Gartner Supply Chain Practice and one of the authors of the study, told Supply Chain Dive. "Evaluating different outsourcing strategies has become a priority for logistics leaders." More than half the respondent companies currently outsource managed transportation services, domestic transportation brokerage and warehousing, fulfillment and contract logistics services. In the survey, 35% said they currently use a 4PL and 42% said they are considering using one in the future. The expected increase in outsourcing reflects the growing complexity of logistics due to emerging technologies, increasing customer expectations and the ongoing quest to do more with less spend. It may be less expensive to outsource fulfillment to gear up for a new e-commerce channel rather than investing in personnel, warehouse space and picking and packing technology. A vendor may have lower staffing overhead for low-skill jobs as well. The reason for rising investment in outsourcing? It seems to work. About 70% of the survey respondents agreed that logistics outsourcing to vendors helps them meet functional, end-to-end supply chain and business objectives. Strategic vision […]