Solutions / Reading time: ~ 5 Min.

Logistics Outsourcing: Who Benefits?

Why spend the time and effort to organize every business process yourself when an external service provider can do it better and more efficiently? In fast-paced and challenging times, strategies such as logistics outsourcing are becoming more relevant for many companies. What do you need to consider when outsourcing logistics, and what are the pros and cons? Get an overview here.

How Outsourcing Is Used in Logistics

The situation is quite similar in many industries: companies need to adapt more quickly to market changes, optimize their supply chains, and reduce costs. One solution that is often on the table is the outsourcing of logistics. This means that a company outsources logistics tasks or even entire processes to an external service provider. By outsourcing these processes, the company can focus on its core competencies while benefiting from the expertise of the logistics service provider.

From 2PL to 5PL

A service provider’s responsibilities may include sourcing, warehousing, intralogistics, inventory management, packaging, shipping, transportation, and returns management. Various logistics models, from 2PL to 5PL, allow the scope of the service to be tailored to the company’s needs. From simply outsourcing the transportation tasks with second party logistics to the complex and still relatively new concept of fifth party logistics, which offers consulting and services that go beyond logistics, such as big data and the like. 

Logistics Outsourcing Services: Study on the Potential

Various studies show that companies can achieve average cost savings of 15 to 20 percent by outsourcing logistics processes. The potential is particularly high in the classic processes of transportation, transshipment, and warehousing, as the Miebach 2023 study indicates. Several factors contribute to the potential for optimization and savings, including the reduction of fixed costs, supply chain optimization, and access to specialized expertise and advanced technology.

Turning Fixed Costs into Variable Costs

According to the consulting firm McKinsey, the outsourcing of logistics processes leads to significant cost savings since companies convert fixed costs into variable costs and only pay for services. This allows for more efficient use of resources and better adaptability to market fluctuations. Outsourcing initiatives have therefore been common practice for many years, particularly in the area of distribution logistics and associated processes.

Outsourcing Logistics Advantages You Should Know

Companies can benefit from outsourcing logistics processes in many ways – not only in terms of cost, but also in terms of efficiency and speed throughout the supply chain. Here is an overview of the four key advantages:

One of the main benefits of logistics outsourcing is the potential cost reduction. Businesses can turn fixed costs into variable costs. This means that they only pay for the services actually provided and do not have to invest heavily in infrastructure and technology.

Logistics service providers possess specialized knowledge and cutting-edge technologies often too costly for a single company. Outsourcing allows a company to access these resources without having to commit to an investment of its own – a decisive advantage when it comes to maximizing the potential of digitization and process automation for its own logistics.

Outsourcing empowers companies to respond more quickly to market changes and scale their logistics capacities. This is of particular benefit during seasonal peaks, when additional resources are needed at short notice, for example to cope with order peaks.

Specialized logistics service providers can provide higher quality services because of their experience and established processes. This improves customer satisfaction and can positively impact a company’s competitiveness.

Disadvantages of Logistics Outsourcing

However, outsourcing can also present challenges and disadvantages alongside benefits. These factors must be considered early in the planning process:

A commonly mentioned disadvantage of logistics outsourcing is potential loss of control over outsourced processes. Companies must rely on the service provider to perform tasks consistent with agreed-upon standards and timeframes. This is why it is important to define clear key performance indicators (KPIs) from the outset and to keep track of the outsourced logistics processes by measuring them on an ongoing basis.

Dependence on external service providers can be risky, especially if there are problems in collaboration or if the service provider experiences financial difficulties. For this reason, great care must be taken in selecting capable and financially strong outsourcing partners.

When logistics processes are outsourced, sensitive data is passed on to the service provider. This requires comprehensive security measures and contracts to ensure that this data is protected from the very beginning.

Symbiosis Synergies: Logistics Outsourcing Examples

Various studies and practical examples have shown that the advantages of well-planned logistics outsourcing far outweigh the disadvantages. The German Logistics Association (Bundesvereinigung Logistik e.V.), for example, reports on a study conducted together with the German newspaper DVZ in which 500 logistics experts took part: 80 percent of them reported measurable economic success through outsourcing projects, and 85 percent also achieved significant cost reductions.

Objectives Have Changed

Another finding of the study: the primary motive for logistics outsourcing has changed significantly over the years. Whereas a few years ago the focus was on cost reduction, today it is increasingly on the exploitation of synergies – a sign of a profound structural change in logistics.

Trend toward Longer-Term Collaboration

The study also reveals that companies are tending to enter into longer-term contractual relationships. This trend creates a solid foundation for closer collaboration and a trusted partnership between clients and service providers. Such symbiotic relationships increase mutual understanding and efficiency, ultimately resulting in greater value for both parties.

KPIs: Critical to Successful Logistics Outsourcing

Especially when it comes to logistics outsourcing, KPIs are crucial for effective collaboration between a company and its logistics service provider. Important logistics KPIs such as delivery accuracy or delivery time ensure clear planning, enable joint analyses, and drive continuous improvement for both partners.

Ensure Measurable Quality

KPIs and prognoses are closely linked. If the client anticipates the volume of orders, the logistics provider can adjust its personnel capacity accordingly. This ensures that KPIs can be met even when volumes fluctuate.

In logistics, warehouse KPIs increase customer satisfaction and help ensure the success of the outsourcing process. They provide a measurable basis on which performance can be evaluated and optimized, thus leading to improved service quality and efficiency.

Logistics Outsourcing: Checklist

1. Requirement Analysis

  • Determine your company’s exact needs and objectives.
  • Identify the logistics processes to be outsourced.

2. Choice of Service Provider

  • Conduct thorough research and compare different providers. Pay special attention to the financial solidity of the service provider.
  • Check the service provider’s experience and references.

3. Contract Design

  • Define clear KPIs and service level agreements (SLAs).
  • Ensure that all data protection and security requirements are specified in the contract.

4. Implementation

  • Plan the transfer of logistics processes carefully.
  • Training and detailed onboarding of all parties involved is essential.

5. Monitoring and Control

  • Establish regular reporting and monitoring mechanisms.
  • Conduct periodic audits to evaluate the service provider’s performance.

Additional Benefit: Get Advice on Logistics Outsourcing

Companies looking to outsource logistics processes should get comprehensive advice. Consulting on logistics outsourcing can help develop customized solutions and avoid potential pitfalls. Consultancies analyze specific requirements and offer tailor-made strategies.


Logistics Outsourcing Pays Off

Logistics outsourcing offers many benefits to companies, including cost savings, access to expertise and technology, and flexibility. This applies to established players who want to use their own resources more efficiently, as well as start-ups that simply cannot afford their own logistics capacity.

For companies that want to outsource logistics processes and improve their delivery quality, it is advisable to carry out a comprehensive requirements analysis and seek support from experienced consultants. With the right approach, the benefits of logistics outsourcing can be maximized, and the risks minimized.

DHL Group and DHL Freight can advise you on outsourcing your logistics operations and actively support you as a 2PL or 3PL service provider.

You Want to Learn More about this Topic?

The authors of our article will be happy to answer your questions. Just send us a message using the contact form and we will go deeper into the topic together.

Related articles