90% of Fortune 500 companies can’t be wrong.


That’s the estimated percentage of America’s largest companies who outsource their logistics and supply chain functions, according to research from Armstrong & Associates, Inc.

$63 billion

As it stands, the 2023 global logistics outsourcing market was valued at around $63 billion dollars. It’s only expected to grow, reaching $79 billion by 2028.

Given all the benefits of logistics outsourcing, its increasing popularity is no surprise. Outsourcing allows an organization to scale fast, increase efficiencies, and access cutting-edge expertise, among many other benefits.


In this article, we’ll show you exactly what it means to outsource your logistics—and exactly how it can benefit your business. We’ll also offer you examples so you can begin to imagine what outsourcing might look like within your operation. Finally, we’ll also show you the drawbacks so you can avoid these pitfalls and position your logistics operations for success.

What Is Logistics Outsourcing?

Logistics outsourcing occurs when an organization chooses to use an external company to handle their logistics and/or supply chain operations. The logistics company is a third party to the transaction, so the companies that handle the outsourcing are often known as 3PLs or 3rd party logistics providers.

What Are the Logistics Services Most Frequently Outsourced?

According to data from Statista, domestic transportation and warehousing are the most commonly outsourced services by those who use 3PL providers. Other commonly outsourced services include customs brokerage, international transportation, and freight forwarding.


Most Frequently Outsourced Services by 3PL Users Worldwide

Service Percentage of Respondents Outsourcing
Domestic transportation 67.5%
Warehousing 63.5%
Customs brokerage 46.0%
International transportation 44.5%
Freight forwarding 44.5%



Many 3PL providers offer a full range of services that go beyond these popular ones. Companies can outsource a number of their logistics and supply chain operations to a 3PL, including:


  • Receiving goods or supplies
  • Short-term or long-term storage

Fulfillment Services
Picking and packing orders

Shipping & Distribution

Arranging shipping to move items to their final destination through a variety of carriers

Additional services, such as:

  • Coordinating reverse logistics, including returns and recycling
  • Instituting an inventory management system to ensure there’s enough stock on hand to fulfill orders and to track items through their lifecycles
  • Delivering transportation management services to uncover new efficiencies and reduce expenses
  • Offering customer support to assist with shipping problems, process returns, and other customer inquiries as needed

What’s an Example of Logistics Outsourcing?

Retail Operations

First, let’s take a look at how a retail business might benefit from outsourcing their logistics. Imagine a company with a distribution center in California and several storefronts in Hawaii.

If you were handling the logistics to keep these stores stocked, you’d have to:

  • Use your own truck or hire an over-the-road carrier to pick up your inventory at your distribution center.
  • Arrange for a steamship line to load that inventory on a boat to Honolulu, the main distribution point for much of the island’s inbound cargo.
  • Use your Oahu fleet or find a trucking company to pick up the shipment at the port in Honolulu, and then deliver it to your warehouse.
  • Ask your team on Oahu to deconsolidate the shipment and separate out each store’s inventory.
  • Assign your truck or hire another trucking company to drop the appropriate inventory at your Oahu stores, and then drop the rest of the shipments at the port for distribution to neighbor islands.

Or, you could outsource the entire operation. Your team could still pull the correct inventory at your distribution center and prepare documentation showing where everything needed to go, and a 3PL could take care of it all from there.


Of course, there are also options in between. You could outsource everything from the ocean freight forward. Or, you could just outsource the trucking in Hawaii. It all depends on your current capacities—and your desire to coordinate your own logistics.


Let’s take a look at another example.


Direct-to-Consumer Operations

Imagine you operate a website that sells widgets directly to your customers. You could:

  • Order widgets from your supplier, and arrange for them to be shipped to you.
  • Have your warehouse team receive, unpack, label, and shelve them in your warehouse.
  • Hire a fulfillment team that picks and packs widgets as orders come in from your online storefront.
  • Arrange for shipping with a small parcel carrier, like the USPS, FedEx, or UPS.
  • Manage all returns in house, including customer service, receiving, and evaluating returns for reuse, recycling, or disposal.

You could also outsource this entire cycle to a 3PL provider. Rather than delivering the widgets to your warehouse, you could have them delivered to your 3PL’s warehouse. Then, they would handle all of the warehousing, storage, picking, packing, shipping, and reverse logistics.


Again, as with the above example, there are also in-between solutions. Maybe you choose to keep the reverse logistics in house, but outsource everything else. At the end of the day, it comes down to what’s best for your operation.


What Is the Primary Reason for Outsourcing Logistics?

Companies that outsource their logistics do so for a number of reasons. Primary among them include a reluctance to make large investments in their own logistics resources (warehouse, staff, fleet, etc.), a desire to access cutting-edge expertise without hiring in-house staff, and the ability to scale easily as the business grows.

The beauty of outsourcing your logistics is that, no matter your original intention, you’ll still get access to the full range of benefits.

What Are the Benefits of Logistics Outsourcing?

Companies that outsource their logistics and supply chain functions enjoy a number of different benefits, including:

What Are the Disadvantages of Outsourcing Your Logistics?

Although the benefits to outsourcing your logistics are significant, there’s always another side to the story. Outsourcing does have a few drawbacks, including:

However, at the end of the day, you may end up paying a bit more to outsource your logistics than if you had an efficient and effective operation in house.


There’s a tipping point at which it makes sense to build an in-house logistics team that leverages in-house resources. At that juncture, it might actually be cheaper to make those capital investments in things like warehouse space and delivery trucks.


If you’re already outsourcing, stay on top of those expenses and run a cost-benefit analysis on the alternative, in-house scenario. By keeping a close eye on the math, you’ll know when it’s time to make a move.


Making the Right Choice for Your Organization


As you’ve seen, outsourcing your logistics and/or supply chain operations comes with plenty of upsides. Ultimately, you’ll have to make your own decision about whether to outsource—and how much to outsource. By understanding the potential benefits as well as the drawbacks, you’ll have the foundation you need to make the right choice for your organization.


Looking for a long-term logistics partner? We’ve been helping our customers uncover new efficiencies and streamline their operations since 1991, and we’d be happy to help you! Schedule a complimentary consultation with one of our supply chain experts today.



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