We use cookies in order to be able to offer you a better online experience. By using our website, you agree that we may place cookies on your device. Data Protection Declaration hide hint

Outsourcing — who dares, wins

Why do companies outsource their logistics?

Outsourcing has become part of everyday business and brings many positive benefits. Manufacturers can focus on their strengths while professionals from other sectors contribute their expertise, which leads to standardisation, cost advantages, and improvement in quality. In particular, logistics provides a series of opportunities.

Companies who undertake the logistical handling of the flow of goods on their own often see an increase in the complexity of their business model. The companies will hand over the logistical tasks to professional external partners once they realise they could lose the effectiveness of their core competencies, and also when they realise that their resources and management supervision are not optimally spread out.

In the food logistics sector, this professional logistics partner is the Nagel-Group. The core competency of the Nagel-Group lies in organising increasingly complex flow of goods between manufacturers, suppliers, and retailers. Using competencies acquired in the food logistics sector over the past decades, all supply chain requirements are fulfilled from a single source in all temperature ranges.

Through outsourcing, companies can reduce the disproportionate effort at their end. Photo: © stanciuc / stock.adobe.com

Economic and environmental benefits

Through outsourcing, companies can reduce the disproportionate effort at their end and save financial resources. Fixed costs thus become variable costs. The company does not have to make long-term investments in its logistics capabilities, for instance, the need for warehouses or vehicles can be completely eliminated. Thanks to the know-how and long-standing experience of the logistics partner, a company can also increase the quality of its logistics processes through its continued collaboration with the logistics partner. This leads to reduced costs and an increase in quality.

In addition to improvements in economic terms, outsourcing logistics also has positive aspects in terms of sustainability. For instance, groupage transport is much more environmentally friendly than individual shipment of goods as the total number of trips is significantly reduced. External logistics companies are a lot more flexible in their daily operations. They can often handle an unplanned increase in the volume of orders or a special order without needing to make additional trips.

Unfounded uncertainty

However, the first hurdle for companies who are considering outsourcing is to overcome their own internal uncertainty. Small and medium sized companies in particular are often afraid of potentially losing control over their own supply chain.

Outsourcing can also be worthwhile for small and medium-sized companies who would need to acquire their own drivers, trucks, and comprehensive know-how, which they would have to continually develop in order to meet the legal requirements. Successful logistics is more than simply dispatching consignments; entry controls, quality assurance, warehousing, minimum stock management and returns management also play a crucial role. Business start-ups in particular have to obtain this knowledge, normally with great effort, if they plan to handle the logistical processes on their own. This can lead to unexpected difficulties, especially during the company's start-up phase.

The partner is the decisive factor

"Having experience in the industry is an advantage. Ultimately, the recommendation is to be fair when it comes to topics such as price and terms and conditions. Cheap options almost never lead to favourable results," says Stephan Fricke, CEO and Head of the Advisory Board at the Deutschen Outsourcing Verbandes e.V. (German Outsourcing Association) and the Deutschen Process Automation Verbandes (Robotic Process Automation & AI - RPA/AI).

According to Stephan Fricke, the process of decision making goes through several steps: first, an analysis of the internal costs for all logistics processes is carried out and the requirements made by the customers are defined. Following this performance check, the most important goals, claims, internal competence, and responsibilities are formulated. "It is also advisable to subject your own organisation and areas concerned to a rigorous assessment and look into optimisation potentials," says Fricke. This is followed by the most important step: creating a list of requirements for the service provider and screening potential partners.

In addition to the price and the quality offered by the logistics company, there are other factors that should be considered — such as experience and business network. Stephan Fricke advises, "Customers should always ask for references and verify these." It pays off to choose a partner with whom you can work together on an equal footing. The customer also benefits if the service provider has an extensive network like the Nagel-Group. Thus, the customer can establish new business relationships and partnerships and realise benefits that extend well beyond outsourcing.

Stephan Fricke has worked for international technological research organisations, global service providers, and software companies. Today he focuses on building opportunities for cooperation within the German market for IT and Business Process Outsourcing services and Robotoc Process Automation services.

Two success factors

All in all, through targeted outsourcing of their logistics processes, the companies can generate added value. However, two factors are decisive for such an outsourcing to be successful: firstly, the company who decides to outsource has to establish an effective forward planning. This should provide the logistics partner with a detailed overview of the company’s requirements and carefully weigh the costs and benefits. Thus, the company becomes an active partner and designer of the outsourcing process.

Secondly, the chosen logistics partner must possess a high level of expertise, which is reflected not only in the internal logistical processes but also in the interaction with the end customer. After all, the service provider becomes the face of the company when delivering the product. Only when a logistics company satisfies these two requirements can a cooperation be successful in the long term.

Recommended by the editors