Reasons for Outsourcing Are Nearly Universal; Reasons for Choosing LSPs Are Not So Universal

“Lower costs” and “increased flexibility” continue to be the top reasons why companies outsource.

A report, Selecting a Logistics Service Provider: It’s Not One Size Fits All, examines responses from more than 100 retailers, consumer products companies and warehousing/distribution companies. In this insightful report, we learn how LSPs (Logistics Service Providers) are functioning in areas such as automation, distribution centers (DCs), and transportation.

We also learn how LSPs are perceived. Do certain types of service providers have niches? Will one LSP work better than another for particular functions?

Results from the Tompkins Supply Chain Consortium survey found that for most companies, “increased service” and “capital investment” are key drivers of outsourcing. And interestingly, smaller companies indicated that “improved service” is one of the main reasons they outsource.

Additional results from the report include:

• Nearly half of the respondents outsource transportation operations.
• Approximately 63% do not use a transportation sourcing solution.
• More than half of the companies surveyed use some type of internal audit to monitor invoices.
• Nearly three-fourths of respondents outsource at least part of their DC operations.

Still, the LSP industry is becoming more specialized. Supply chain and procurement professionals are identifying and partnering with the best LSPs, as well as determining if those vendors can execute at an acceptably high level. 

What are your main reasons for outsourcing? I believe an important reason to outsource is because it allows you to focus more of your energy on your company’s core competencies while others handle what is their core competency. Do you have thoughts on this?

And how do the results in this report compare to your experiences with LSPs?

Jim