SUNConferences, 27th Annual Conference of the SA Institute for Industrial Engineering

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Distribution Insource or Outsource? The 5 key points to keep in mind
Selby Dyamond

Date: 2016-10-28 09:00 AM – 10:00 AM
Last modified: 2016-09-19

Abstract


South Africa has entered tough economic times and companies will need to consider how costs can be cut without decreasing service levels. Logistics transport will be a primary focus for a company seeking to reduce its operational cost and consequently will have to weigh up the cost and benefits of insource versus outsource distribution.

Five key points (derived from an investigation study conducted for a pharmaceutical distribution company) were identified when considering to insource distribution. The investigation revolved around determining the expected savings when insourcing all deliveries. However, the findings of the study indicated that it will be unfeasible to insource all deliveries, largely due to the high variability in demand.

Thus, when considering to insource distribution, the key considerations will be able to assist in deciding what volume/type of goods will be best to insource. It should also be kept in mind that the most cost effective solution may not be either insourcing or outsourcing distribution, but in using a hybrid model where only certain facets of the business are insourced.  The ideal balance of insource versus outsourcing of delivery volumes could lead to a potential saving of between 8% and 15% on transport cost.


Keywords


Insource distribution, Insource versus Outsource Distribution, Insourcing considerations, Supply Chain, Third-Party Logistics Provider