Challenges and benefits of outsourcing freight services for your business

Today, outsourcing logistics and freight services is a widely accepted phenomenon by businesses across several industries. The outsourcing of freight services might not be an easy task. However, research shows that outsourcing transport yields excellent results. A large part of business costs and supply chain for a variety of businesses is associated with freight forwarding; thus, the outsourcing strategy requires careful analysis and insight.

The need to focus more on the core business objective or the core-competency is the major driving factor why many businesses outsource freight to third party logistic providers. Let’s consider a company whose core competency lies in the manufacturing of a product. Even if this business manufactures excellent products, it is bound to hit rock bottom if it is not able to ensure the timely supply of its products. Hence, a variety of businesses across various industries rely on third-party logistics (3PLs) for the timely supply of their products.

Benefits and objectives of outsourcing 


Logistics is more than transportation.

There is more to logistics and freight than just loading a truck with goods and transporting it to a location. Logistics require a good understanding of the freight market to ensure the swift movement of goods at a minimum cost. Enhancement of performance and reduction in cost is not possible without a firm grip on existing technologies and innovations of the freight market.  

Access to the Latest Technology

As access to the best available technology requires huge investment and expertise, it is highly unlikely that a manufacturing business will have access to it. Logistic service providers, therefore, are considered to be the one-stop solution to the latest technology and innovation. Most businesses do not have data for the tasks involved in transportation, and as a result, they do not have the direct insight which is needed to improve. The data and management systems that Logistic service providers (LSPs) use help businesses take vital business decisions which help reduce overall business costs. The usage of data management systems by LSPs allows them to create custom reports and carry out an analysis which helps businesses make informed decisions and cut costs in the long run.


A company that manages its transportation faces a variety of challenges and hassles related to the utilization of vehicles and staffing. Majority of the businesses that insist on maintaining their freight and people associated with freight operations underutilize their assets. Additionally, as demand fluctuates, these businesses are not able to foresee these fluctuations and are not able to plan accordingly, which further increases operational costs. One of the most important benefits of outsourcing transportation is that LSPs provide flexibility and can cater to your scheduled as well as special on-demand transportation needs.

Challenges associated with outsourcing freight services

Less control

Businesses that outsource their freight services might have little or no control how their Logistic Service Provider operates. One possible solution to the loss of power can be careful negotiations, and setting up KPIs that measure success.

Reputational risks

A logistics service provider may face environmental failures or may practice poor employment tactics. In whatever way your LSP fails, it can have severe consequences for your business and its reputation. Risks associated with the outsourcing of freight services are not only reputational, but you will also be vulnerable to financial and operational risks.


It is highly likely that there are different ways in which a business that is outsourcing its freight services and the logistics service provider operates. This can result in serious relationship conflicts. Therefore, immense patience and understanding is required to develop a fruitful and lasting working relationship. 


Before a business engages and outsources its freight operations to a logistics service provider, it is recommended to set up clear KPIs. It is essential to understand what you want as a business and communicate it to your logistics service provider. Clearly outlined goals, expectations, and responsibilities will help avoid any future conflict. 

An efficient logistics service provider will handle your business as its own, will always take responsibility and show accountability. Setting up of major KPIs is a good start which you and your logistics service provider can agree to measure at regular or specific intervals. Major KPIs can include:

  1. Monitoring of error-free invoices and goods delivered
  2. The percentage of deliveries that were late
  3. Claims per month
  4. Vehicle availability and how often the vehicle is not available

It is quite possible to outsource your freight to a well-known logistics service provider and reap the benefits that stem from focusing all your attention on your core business. By focusing on your core business, you can use your comparative advantage and technical expertise to refine your core product and capture increased market share, which will, in turn, boost your business revenue.

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