The outsourcing of logistics operations (transport, warehousing, packaging, etc.) has grown exponentially over the last two decades.
Context and challenges
The result is a logistics services market with a range of services that are now well-defined and known to potential users. Nonetheless, companies' outsourcing strategies differ greatly and contradictory practices may be in place within the same business sector.
Make-or-buy decisions involve the consideration of multiple factors that are hard to reconcile. In fact, building a cross-functional business strategy is a complex exercise that requires specific methodologies.
Arguments for making:
- Mastery of the skills and know-how, if the activity is strategic
- Coordination and integration of logistics into other business processes (Supply Chain, Commerce, Production, etc.)
- Product knowledge
- Costs related to the potential outsourcing of the activity:
- The cost of migrating and interfacing with the service provider (physical, IT and organizational)
- The service provider’s margin
- Social risks, if outsourcing
…must be weighed up against arguments for buying:
- Focus on the core business line
- Flexibility in case of growth or shrinkage
- Transformation of fixed costs into variable costs
- Economies of scale and use of synergies with other activities
- Professionalism and cost driver benefits (in particular, wage-related)
- Service provider's information technology
How can Argon Consulting help you?
- Developing a make-or-buy strategy for logistics operations:
- Benchmarking internal costs against logistics service market prices
- Identifying return on investment for the internal solution (cost variance vs capital employed)
- Analyzing the strategic appeal of logistics operations
- Analyzing the need for flexibility and consequences of the impact of internal or external solutions
- Defining the strategy implementation plan
- Implementing the outsourcing strategy:
- Formalizing the specifications of the activities to be outsourced
- Selecting the panel of potential service providers
- Managing the invitation to tender
- Comparing bids, negotiating and decision-making
- Implementing procurement processes and managing service providers