I was recently reminded (in a different context) of the story of the three blind men and the elephant, and it occurs to me how well it describes the attempt to analyze a complex company’s logistics. While the term “core competency” can relatively easily be ascribed (or not) to many business functions, logistics is one animal that often defies simple categorization, and often straddles a grey zone in many organizations. There needs to be some understanding of the trees to better understand the forest (to mix metaphors).

While in some ways the movement of goods seems to be a commodity type function, unlike many other types of business functions that are commonly outsourced, logistics is often integrally tied to other processes that are mission critical, such as availability of inbound materials for manufacturing. Customer satisfaction can directly depend on logistics performance in customer deliveries – not a routine process in every organization. It may be clear for some organizations to say that logistics is – or is not – relied upon for competitive advantage, but for many organizations many of the checklist items fall into the grey zone.

Cost is another consideration that is not always easily quantified, as the projections and promises of alternative strategies are not so clearly predictable.

I think the biggest challenge in the outsource/insource analysis is for organizations that experience constant change in their transportation needs and requirements. Market conditions are always changing for shippers, customers and carriers. Corporations experience mergers, acquisitions, and divestitures. There are new products and sources, phase-outs and shut-downs. Shipping lanes and requirements are not static and there are changing business processes, relationships, and evolving information technologies. The more change that can be expected, the less it seems to make sense to invest heavily in an insourced infrastructure. Outsourcing provides flexibility and an operational cost structure that is one good way to hedge against change. Unknown change is arguably impossible to quantify.

In the ongoing debate of outsource vs. insource it seems that many can be dogmatic in asserting that one strategy is generally advantageous over the other, when in fact each company is its own kind of elephant. The CEO needs to not only get the feedback of the three blind men, but he must also it feel for himself to help him assimilate all the clues and synthesize an understanding.