Internal or external logistics? How to choose?

Internal or external logistics: most companies are faced with this dilemma at one time or another. It is a fundamental choice for the company. It will be decisive for a number of elements, such as the customer experience or the human and material resources that the company needs.

Discover the prerequisites, advantages and disadvantages of each of these two options in this article .

What is the difference between internal and external logistics?

Internal logistics refers to all physical and information flows within a company. The internalisation of logistics thus implies the management of the various activities related to logistics, namely :

• The purchase or production The purchase or production of goods;
• Internal transport of products;
• Inventory managementThis is usually done with the help of management software such as the WMS logistics ;
• And Warehouse managementincluding various operations from order picking to dispatch of the goods.

The company can choose to outsource all or part of its logistics. In the case ofexternal logistics, the different operations above are fully or partially entrusted to logistics service providers. The choice of outsourcing generally occurs when the company has reached a certain activity threshold. Either the company can no longer cope with the amount of work represented by its logistics, or it has the means to outsource it to relieve its workload.

Internal logistics in detail

Intralogistics, or internal logistics, is themanagement of the entire logistics process within a company. This strategy has its advantages, but also some disadvantages.

The advantages of internal logistics

A company that has chosen to internalise its logistics can benefit from significant advantages. Internalising your logistics is an effective way of having logistics adapted to your activity and of offering services that reflect your company’s image. This allows you to :

• Optimise control of the various aspects of your logisticsOptimise control of the various aspects of your logistics, such as delivery times, after-sales service, and product packaging;
• Keep stock on handKeep stock on hand, thus reducing the delivery time to the customer;
• Keeping stock on hand, thus reducing the delivery time to the customer; Controlling the costs of logisticsKeeping stock on hand, thus reducing the delivery time to the customer; Controlling the costs of logistics, for example by choosing delivery contracts, raw materials, etc.

Internal logistics can also have a positive effect on the company’sfinances. This is the case when the company has its own premises, and is therefore not subject to renting out its workspace.

Disadvantages of in-house logistics

While the internalisation of logistics has significant advantages, some disadvantagesshould be noted . This strategy requires :

• Sufficient space to accommodate both the equipment needed for its activity and its stock of goods;
• Financial resources to fit out the premises and acquire equipment;
• Human resources for the smooth running of the logistics chain.

It is therefore necessary to weigh up these disadvantages against the advantages mentioned above in order to know whether you should choose to internalise your logistics or whether it is preferable to entrust your logistics to external service providers.

External logistics in detail

Some companies choose to delegate their logistics operations, either fully or partially. This is because, external logistics also offers benefits to the company, as well as disadvantages.

The advantages of external logistics

Outsourcinglogistics to one or more external service providers is a solution for companies whose activity has grown beyond the company’s capacity. In this case, another company takes care of stock management, order preparation or the dispatch of goods. This strategy has various advantages, such as

• The possibility of concentrating on its core business Reducing the time spent on stock management or administration for HR departments due to the reduction in the number of staff within the company;
• Take advantage of the expertise of an external service provider to improve the quality of its services;
• Avoiding the need for changes to be made within the company in the event of a change.

As with internal logistics, external logistics can be a financial advantage for the company, depending on the case. It is not necessary to buy or rent a warehouse to carry out its activity. The financial investment is also lower in terms of specific equipment or machinery. Finally, the external service provider generally benefits from advantageous rates, particularly for the transport of goods, from which the company can benefit .

The disadvantages of external logistics

Despite all these advantages, it should not be forgotten that external logistics also has several disadvantages. Choosing this strategy can mean :

• A risk of losing control of its logistics flows A risk of losing control of logistics flows due to the fact that the various operations are entrusted to external service providers;
• A risk for the company’s imageA risk to the company’s image and reputation if the service provider offers services of lower quality than those usually offered by the company;
• Risks to the company’s autonomyRisks to the company’s autonomy, for example in the event that the service provider interrupts its activity;
• An additional burden if the resources gathered appear to be greater than the products transported.

Before choosing outsourcing, you should therefore define your objectives and see if they arecompatible with this organisation. If you are reluctant to entrust your operations to external service providers and lose control of your logistics, it is better to keep your internal logistics.

Being able to concentrate on your core business with external logistics, or choosing to have better control of all your logistics flows with internal logistics: these two options must be thought through to ensure that the chosen strategy best meets your objectives.

Feel free to download our guide to increasing the efficiency of your employees in your warehouses with the 5S approach.