Operating the Transport Function Internally –A Viable Option?

Abstract

At one point or another, insourcing and outsourcing of transport services becomes a dilemma that companies must deal with in order to stay competitive. It is very common for companies to outsource functions of the supply chain that do not qualify as their ‘core competency.’ The motivation behind this case study is to provide justification in allowing companies to understand that, although a function may be cheaper to operate internally, theory and experience may prove otherwise. I have been asked by Company X to act as a consultant in creating a tool that can be used to accumulate the costs involved in operating the transport function of the supply chain internally. In order for the company to stay competitive from insourcing, the outcome, (including cost), must be a positive reflection and also gain value. If determining organic costs of the operation will give the company a perspective on total costs, Company X will determine if they will bring the outsourced function in-­‐house, or keep it as an outsourcing function, but use the results from the model as negotiation material. There are three expected contributions connected to this case study: proposed model, case study, result of applying the model and testing the model, based on empirical material. After extracting material from industry best practices, interviews with transportation professionals, as well as government sources, the results prove that operating internally will reduce initial costs. However, when aspects like experience and training are taken into consideration, the results may prove otherwise. From a theoretical and experimental perspective, using an external party proves to be the best option.