Logistics outsourcing

Logistics outsourcing is the process of outsourcing certain resources to external logistics service providers. In many cases, this process can improve the cost structure, but it also carries risks for your own company.

Logistics outsourcing belongs in expert hands

As the market environment changes, more and more companies are selectively outsourcing logistics functions to focus on their core business. The key to successful logistics outsourcing is to find a service provider that is both competent and cost-effective. For this reason, forward-thinking companies conduct a logistics tender. The aim of this approach is, on the one hand, to focus the company’s energy on its own strengths. On the other hand, all outsourced logistics functions should be in safe, competent hands.

High cost savings, low dependencies

Logistics outsourcing should not only aim to save as much money as possible, but also to increase your own flexibility and quality through the outsourcing process. In order to achieve these goals in practice, a detailed definition of the services to be provided by the service provider is required when drawing up the logistics tender. The complexity of such an outsourcing project is high, and at the same time the issue must be treated with great sensitivity and confidentiality from day one, as certain parts of the company’s own staff are affected by the outsourcing. The risk of errors in planning and implementation should not be underestimated.

In addition, there is always the risk of giving up room for manoeuvre and ending up in a cost trap in the medium term. The dependency on logistics service providers is increasing and they will strengthen their position by trying to make themselves indispensable and, in the worst case, by exploiting their position. For this reason, a number of companies are insourcing logistics services that have already been outsourced. In addition to reducing dependencies, the focus is often on improving their own performance.

Benefits of logistics outsourcing

• Increase flexibility in your own business
• Reduce logistics costs
• Restructuring of your own logistics is limited
• More efficient use of staff, space, equipment and IT
• Seasonal capacity utilisation is optimised as overruns are paid for by the service provider
• Economies of scale and synergy potential by combining external business with the service provider
• Reduction in own overheads
• Avoidance of investments in many areas (personnel, buildings, IT,…)
• Consolidation of existing warehouses and reduction of external storage capacity
• More efficient logistics processes and logistics IT compared to own processes that have grown over time
• Benefit from the logistics expertise of the service provider
• More favourable tariff systems for outsourced areas than e.g. own IG Metall or ver.di tariffs
• Better infrastructure and capacity utilisation
• Cost reduction through more efficient processes and experience in warehousing and security technology
• Variability of fixed costs that are too high if your own logistics are designed for seasonal peaks
• Reduction of capital tied up in fixed assets, e.g. property, equipment, IT
• Increased cost transparency and quality and improved delivery service levels through logistics outsourcing
• The value added per square metre is higher for production or the core business than for logistics activities.
• Planned expansion can take place in freed-up logistics space, optimising future capital commitment
• Rapid response to customer needs
• Focus on core business such as trading or manufacturing

Range of logistics services

What aspects does ORGAPLAN Logistik GmbH take into account when your company carries out a tender for logistics outsourcing?

• Detailed assessment of current status/status quo
• Define and review scope for logistics outsourcing
• Preparation of detailed tender documents
• Longlist: competent pre-selection of suitable providers
• Execute tender, send out documents and support bidders
• Review, compare and evaluate proposals
• Shortlist: final recommendation of one or more preferred bids
• Conduct negotiations and award discussions
• Implementation support during the implementation phase
• Subsequent target/actual comparison, performance review

Local proximity: Typical outsourcing decisions in manufacturing are often driven by very different cost levels of production factors in European and non-European countries. In logistics, the standards are different because it is difficult to move logistics to another economic area. Therefore, a logistics service provider with its value-added functions must operate relatively close to the outsourcing company in order to remain profitable.

Personnel cost drivers: Due to differences in collective bargaining agreements, labour costs in logistics are significantly lower than in many other sectors.

Logistics outsourcing in practice:

Questions to ask before and during a logistics tender:

• Has a preliminary study been carried out to assess the expected savings from logistics outsourcing?
• How was the pool of bidders defined, and are the bidders competent and do they have the necessary capacity?
• Is there a secret favourite or an in-house service provider with existing contracts prior to the tender?
• Description of the task: Does the tender document contain all the information the bidder needs to prepare a bid?
• On-site appointments: Bidders should be given the opportunity to visit the site.
• Time schedule: Is the timeframe for submission of bids adequate to ensure that meaningful bids are received?
• Contractual framework: Obtain non-disclosure agreements from the group of bidders, including possible third parties such as subcontractors.
• Price sheets, costing sheets and questionnaires are used to prepare the comparison of bidders, speeding up the subsequent evaluation and ensuring transparency from the outset.

Tender phase of logistics outsourcing: Answering technical questions

During the tender preparation phase, you need to support the group of suppliers or logistics service providers with further information options. This may include setting up a ‘hotline’ or appointing a technically experienced contact person for different subject areas. You should also set up information sessions and FAQ lists so that enough information is available to prepare a qualified quotation.

It is not uncommon for quotes to be missing price components. This is our experience, because sometimes they are deliberately omitted or summarised in an unacceptable way. Despite clear specifications during the preparation phase, this cannot be completely avoided. For a clear and meaningful comparison of quotes, you need to clean up these differences, and that is what we do. We call this process proposal standardisation.

Benefit from a structured approach: ORGAPLAN Logistik GmbH has extensive experience in carrying out logistics tenders.