Finnish small- and medium-sized manufacturing and trading companies appear to outsource their logistics operations to roughly the same extent as in most developed countries. Both domestic and international transportation, freight forwarding and reverse logistics are widely outsourced: about 80 per cent of companies outsource most of their transportation-related activities. The largest individual component of logistics costs is, in fact, transportation, the implication being that these companies have outsourced the biggest cost-generating item of their logistics operations.
Other logistics operations were less widely outsourced in our sample. Especially, most of the logistics operations related to materials and information exchange are still carried out in-house. However, it seems that the extent of outsourcing of these functions will increase in the future. The companies included in the sample estimated that every logistics operation covered in the study would be outsourced to a greater extent within the next five years. The strongest increase was expected in materials management and value-added services, as well as in IT-related operations.
In international terms, the level of warehousing-related outsourcing would seem to be on a significantly lower level than in other high-income countries. For example, [25] Langley et al. (2005) report some 20-30 per cent higher levels of outsourcing of the respective logistics operations. However, the majority of companies in that study had a turnover of US$ 1 bn, whereas this study was limited to small- and medium-sized companies. In fact, the SME perspective on logistics outsourcing seems to have been almost totally ignored in logistics research thus far.
An attempt was made to identify the relationship between the outsourcing of logistics operations and the company context. It seems that companies, especially in manufacturing, that regard logistics as a more significant part of their business than their counterparts tend to have outsourced at least part of their logistics operations. The same conclusion can be made about efforts to monitor these operations. Thus, companies that place more emphasis on the monitoring of their logistics operations would also seem to be more likely to have outsourced at least some of them. It should be noted that the research design used in this article was not intended to reveal causality. Thus, we cannot claim that the context is the cause. It may well be the other way round: companies that engage in outsourcing do more monitoring and place more emphasis on logistics.
We also studied the linkage between logistics outsourcing, the level of logistics costs, and financial performance of the firms. We considered the relationship between logistics outsourcing and costs in a variety of ways. We analysed logistics costs as whole and as individual components, and conducted separate analyses among the manufacturing and trading industries. Although we found no statistically significant connection between outsourcing and logistics costs, the outsourcing of information processing and materials management-related services indicated a systematic tendency where the levels of total logistics costs as well as the levels of the individual logistics cost factors were lower among companies outsourcing heavily or not at all and higher for moderate outsourcers. This finding applies to both industries studied. According to these results, the relationship between outsourcing and the level of logistics costs is not as straightforward as often assumed.
It should be noted that the logistics cost levels of companies with and without outsourced logistics operations are not necessarily completely comparable. After all, the evaluations were based on self-reported estimates. Companies that have outsourced extensively are likely to be more aware of the actual costs because they are buying the service from outside. The findings concerning the relationship between logistics outsourcing and the company context, especially with regard to monitoring, would support this. In fact, companies that tend to outsource logistics operations also seem to put more effort into monitoring their logistics. Thus, the same companies may also be more aware of their costs and logistics performance than those that put less effort into performance monitoring. It is also possible that, although cost cutting is a common motive, other motives are dominant, and eventually prevail. The motives and their relationship to company performance are logical paths for further research.
We also examined a set of indicators of logistics performance, including the perfect order fulfilment and a number of indicators related to cash-to-cash cycle time and their relationship with logistics outsourcing. No statistically significant differences with regard to logistics outsourcing emerged, and in contrast to costs, the descriptive statistics did not reveal any observable tendencies on different levels of outsourcing.
An interesting - and a somewhat surprising - observation was that there seemed to be no loss in logistics performance due to outsourcing. In other words, logistics was being handled equally efficiently in the surveyed companies regardless of whether it had remained in-house or been outsourced. This finding suggests that the fit between the company context and its outsourcing decision might be more important a performance driver than outsourcing per se. This fit is one potential avenue for future research.
The final part of this article concerned the linkage between logistics outsourcing and financial performance. Intuitively, this link would seem to stretch furthest from the starting point, logistics outsourcing. Not surprisingly, given the findings on logistics costs and performance, no statistically significant relationships could be found.
In sum, although the potential gains from outsourcing are many, there seems to be no direct conclusive relationship between logistics outsourcing and logistics costs, and even less of a relationship with logistics performance. Outsourcing and its potential and real benefits are perhaps more of a company-level question: the objectives are many and the gains are diverse.
In general, logistics functions have been outsourced ever more and this trend is likely to continue. However, the global economic downturn in 2008-2010 has almost certainly slowed down the pace, as many manufacturing and trading companies have had to cope with more urgent issues, and outsourcing plans may have been put to hold at least temporarily. With an improving economic outlook, these plans may be revived quickly. As noted by [26] Langley and Capgemini (2010) the downturn has made it very clear that companies of all types need to take whatever steps are possible to reduce cost and enhance service. The authors also maintain that the concept of collaboration of people, process, and technologies can help significantly in achieving these objectives.
This article sends a message to companies planning to outsource their logistics operations: they should not expect any automatic advantages, and should thoroughly analyse the company-specific characteristics that might benefit from, or in some cases be harmed by the outsourcing decision. The more the companies are engaged in outsourcing, the more they monitor as well as collaborate internally and externally, or vice versa.