European Logistics and the supply chain industry are constantly changing due to the globalization, the fluctuations of customer needs and other factors.
In the meantime, a number of companies from the European logistics network are choosing to bring back in-house the services and activities which were previously outsourced.
Here is why the outsourcing is being brought back in-house by a list of logistics companies
Even though finding a reliable outsourcing service can be a painstaking process, many companies from the European network of transportation are looking towards bringing these competencies back and insourcing them. The reasons for this tendency which is becoming evident among more forwarders throughout Europe include:
- The expectations of cost savings are not met
One of the main reasons why any of the companies from the freight forwarders network chooses to outsource a particular service is saving money. But over time, they may come to realize that the cost reductions fail to happen, or that the price has increased and is no longer economically efficient. The cost may fail to cover the expectations due to added costs for the partner selection, the time and the resources needed to hand over the operation, and the cost of redundancy payouts.
- The level of the service provided is not as expected
Unfortunately, it is common that the services provided by the outsourced partner do not meet the requirements and the expectations of the companies from the international freight forwarders network.
- Customer complaints and pressure
Like in any other industry, the customer plays the leading role in the implementation of the contractual relations. Naturally, there are cases when a customer is not satisfied with the international freight forwarding, the storage and distribution or by other distribution or transportation services being provided via an outsourced partner.
- Public relations and politics
There are cases when the forwarders throughout Europe are forced to give up outsourcing due to political pressure or public relations issues. The current trade wars between the world’s leading industries are one great example for this type of pressure, especially the embargo on Chinese products in the US which has caused a number of logistics companies to withdraw from their outsourcing partnerships in China.
- Other forces in the outsourcing market
Other reasons such as wage inflations have caused a number of freight forwarders to give up outsourcing their services such as providing specialized transport, refrigeration transport, forwarding of hazardous goods or oversized cargo, and to bring them back in-house.
- Problems in the outsourcing relationship
Just like in any other business or personal relationships, a fall-out between the partners can happen for one reason or another. In these cases, some companies from the international freight forwarders association start looking for new partners, but others choose to bring these services in-house instead.
- Concerns about provider security
Occasionally, in logistics especially, a client company’s management may feel it has no option but to bring outsourced work back in-house because of security problems within the provider’s operation.
- Other reasons
There are many cases when incompatibility between the integrated IT systems for logistics management and for distribution of the freight forwarders and the outsourced partner can become the reason for the separation between partners. In others – security concerns are the primary reason.
Whatever the reason why many companies from IFA are giving up outsourcing some or all of their services and bringing them back home, they need to take advantage of this experience and use this as an opportunity to enhance their performance and strengthen their business strategies.