Outsourcing is the process of outsourcing tasks, processes or entire corporate divisions to external service providers or dedicated subsidiaries. The outsourced tasks are usually not part of the company’s core competencies. By specializing, the service provider can handle and offer the processes more efficiently and cost-effectively. Indirectly, this also leads to an improvement in quality within the outsourcing company and this improves its own position on the market in the long term.

Outsourcing in logistics

Outsourcing has a special significance in logistics. This is because logistics tasks in particular are handed over by companies, from SMEs to large corporations, to specialized third-party providers. The storage and transportation of goods can be offered by logistics service providers more cost-effectively and reliably thanks to specialization and available services.

Logistics companies and freight forwarders themselves use outsourcing for common other secondary functions such as IT, accounting, human resources or customer service.

Logistics service providers handle warehousing and transportation for individual clients. Specialization, know-how and economies of scale, especially when transporting general cargo as consolidated loads, are the arguments why these tasks are not handled by the companies themselves.

Forms of outsourcing

Outsourcing can first be classified spatially.

Internal outsourcing.
Handing over tasks or processes to internal subsidiaries belonging to the corporate group.

Outsourcing of tasks or processes to external service providers in Germany.

Handing over the tasks or processes to external service providers in neighboring, nearby countries (nearshoring) or overseas (offshoring).

In addition, outsourcing can also be divided into the main sub-forms as follows.

Business Process Outsourcing (BPO)
Entire business processes are handed over to the external service provider. A common outsourcing practice is the outsourcing of accounting and payroll.

Knowledge Process Outsourcing.
The knowledge to perform certain tasks is insufficient or not available to the company, so it makes more economic sense to outsource this to an external service provider with the appropriate expertise instead of holding or procuring the knowledge internally.

In outtasking, only a very specific task is outsourced, which can be processed autonomously by the external service provider. However, the main process as a whole remains with the company and continues to be controlled internally.

Application Service Providing (ASP)
Application Service Providing (ASP) means the outsourcing of a complete IT application. The service provider makes the software available on an external data center. The company then accesses the IT of the service provider via remote technology.

Reasons for outsourcing

The decision to outsource tasks, processes or company divisions should always be well planned and well thought through in order to make a sound assessment of the economic benefits. The general reasons why a company decides to outsource can be summarized as follows:

Cost reduction: Due to the specialization of the service provider and the mostly usable economies of scale, the outsourced service can be offered more cost-effectively, so that this is directly reflected in the cost structure of the company.

Increased efficiency: Since tasks and processes are eliminated internally, resources are freed up, there are fewer frictional losses and the company’s own employees can concentrate on core activities and competencies.

Increased quality: External providers specialize in the outsourcing service in question and can therefore usually deliver it more reliably and to a higher quality than the outsourcing company could handle internally itself.

Risk diversification: Through outsourcing, the company remains flexible even in the event of fluctuations in the market, economic downturns or critical business situations.