The importance of outsourcing often depends on company size.
For small and even mid-sized companies,it is essential to allocate resources properly as they usually face financial constraints and lack of a team of diverse experts. High initial investment, with high fixed cost component, is never a good start. If such companies decide to set up their own warehouse and take control of logistics, then it’s highly possible that they will run out of cash even before starting operations. Warehousing and inventory storage facilities are not one-time expenses; they keep on requiring cash injections for continuous operations. In addition, for optimal results they require expert management. Here comes in the benefit of contracting to a third party for logistics outsourcing: It cuts fixed costs of setting up own warehouse and cost of hiring logistics experts. However, like all business practices, this too has faced critique. Critics fear that a company may start over-relying on the third party. No doubt, outsourcing asks for letting go of some control but it is often a fair trade-off. The company outsourcing logistic activities may lose direct control over the logistics activities but it does gain cost advantage and business focus.