What is insourcing in logistics?
It’s new. It’s cutting edge. Everybody’s doing it.
Insourcing sounds like it could mean a few different things, so what exactly is it?
In the logistics industry, insourcing refers to bringing on additional labor from a third-party logistics company (3pl) to help in various in-house logistics tasks. This makes it easier for businesses to focus on their core competency while handing off the logistics to a 3pl company. As a value added service, insourcing helps to increase productivity while keeping business costs down.
What’s the difference between insourcing and outsourcing?
Simply put, insourcing is another word for in-house outsourcing. So, what exactly does that mean? They are essentially the same – using an outside team to achieve internal tasks.
The main difference is job functionality.
Logistics outsourcing typically refers to tasks that can be done remotely (outside of the customer facility) such as fulfillment, picking, packing, shipping, IT solutions, value added services, packaging, etc.
Logistics insourcing refers to tasks that cannot be done remotely or require the services to be performed within the customer facility.
What logistics tasks can I insource?
Insourcing is a value-added service that refers to logistics personnel working onsite at a customer facility. This allows logistics experts to add value by working on tasks they have experience doing.
Any logistics task ranging from mid to entry-level job descriptions can be insourced. Here are a few examples:
- Material Handling
- Loading and Unloading
- Pick and Pack
- Order Filling
- And other value added services
What are the advantages of insourcing as a value added service?
- Allows business to be agile and flexible by not needing to rely on HR resources to fill positions
- Long run cost savings by avoiding added employee benefits such as stock options, medical benefit increases, legacy employee demands, etc.
- Easy access to quality, qualified, and specialized labor
- Scale up or down quickly depending on need
There are many advantages to insourcing if done right. As a value added service, insourcing does require an upfront cost of integrating the insourced workforce. However, you’ll likely save costs over time due to reducing in-house labor spending.
How does insourcing save money?
3pl providers specialize in logistics. It’s what we do best. Once key performance indicators (KPIs) and standard operating procedures (SOPs) are set up between the customer and 3pl, there’s no denying how much more efficient logistics experts are working with team members they trust to get the job done right.
The value added service performance level is unmatched. This increase in efficiency can allow businesses to have faster and more productive supply chains. But most importantly, the customer can focus on their core competencies of research, design, engineering, production, and SALES!
It also prevents involving human resources. On your end, there’s no hiring, firing, promoting, laying off, or benefits. All those responsibilities fall on the 3pl provider. So, how can this provide cost savings?
- Reduced head count can lead to reduced company expenses (if your company is public, every head can affect stock price, earnings, and revenue)
- Legacy employees prevented from being replaced or fired
- Legacy employees have higher salaries but not necessarily more advanced skillset
- Insurance savings. Logistics company will provide insurance, workers compensation, and benefits
How does insourcing affect your customers?
Insourcing as a value added service helps you better adapt for your customers.
When working with a 3pl provider, a business is in close communication to make sure shipments are where they need to be and when they need to be there. You can benefit from insourced staff at your office or warehouse through seamless communication of the insourced staff and 3pl provider. No more going back and forth with different people at either company, saving you a headache and your customers’ time.
Need a boost in your shipment and receiving time?
- Insourcing brings highly qualified staff right to you so your customers receive their shipments on time.
Having trouble training your team?
- Insourcing conveniently supplies already trained teammates that are ready to start on day one.
Your customers will thank you for the time you save them…as they say, time is money!
Is insourcing right for you?
It’s tough to predict the future. As a value added service, insourcing allows your business to reduce many types of risk and increase efficiency. It can be beneficial to hire a 3pl company to do insourcing work that makes sense.
If you’re overwhelmed with hiring and training a team and/or the costs associated, while needing vetted workers with proven talent, it may be the way to go. Your HR department will thank you for freeing up its resources.