Chapter 16: Logistics Out-Sourcing

Every organization has to make the decision of whether to perform each of the activities that it requires itself or to pay another organization to carry out these activities on its behalf. "Out-sourcing" refers to the strategic decision to contract out one or more activities required by the organization to a third-party specialist.

When an activity is carried out by an organization itself it is usually referred to as being performed "in-house," while those activities that have been out-sourced and are carried out on behalf of the organization by a specialist provider are usually referred to as "third-party" services. This chapter examines logistics out-sourcing and addresses several key issues, including: the types of activities out-sourced, recent trends in the rate of out-sourcing, the potential advantages and disadvantages of out-sourcing, and how logistics decision-making and globalization are affecting out-sourcing strategies. Before focusing attention on logistics out-sourcing, the decision to contract out particular activities and the trend in this strategy is discussed in general.