Vested Outsourcing of Logistics: 3 Major Benefits

The term “vested outsourcing” comes from the work of Karl Monradt and Kate Visatek who are from the University of Tennessee. What began life as a routine research project turned into a series of books aimed at helping businesses understand a truly hybrid approach to outsourcing their entire business, not just the logistics section.

Here are a few key points to note from the approach to outsourcing the pair defined:
• The business model shifts from buy/sell model with an emphasis on transactions to focusing on outcomes in the form of results
• Going beyond the idea of strategic suppliers to working on crafting intricately collaborative agreements
• Win-win economic solutions creating value

3 Major Benefits of the Vested Outsourcing of Logistics

1. Sharing both revenue and risk creates a win-win situation
Logistics service providers usually focus on how to best apply their available capabilities, processes and technologies in order to add value to the operation who want to outsource to them as a logistics services provider. The logistics provider makes a commitment to bring down costs, eradicate or reduce errors and waste plus improving the level of service and size of market share, taking the weight of risk from their business client.

In return, the business that is outsourcing to the logistics company permits them to earn a little extra profit in return for the incremental value they can add, and this usually goes over and above what they would be able to earn in a usual business agreement in their service area. The commitment from the logistics provider or other outsource company is that they will maintain a certain level of service.

2. Focusing on the results you can set out to achieve and not on tactics
As logistics providers and their customers are engaging in a the vested outsourcing of their business models, benefits are realized by increasing the chances of achieving objectives and goals, due to the fact that all parties are pulling in the same direction through collaboration. Since this is clear from the outset, there is much more chance of getting a whole lot done.

3. Honest Collaboration brings a Paradigmatic Shift
In the old days, outsourcing companies asked, “what’s in it for us,” but now, they look at it in terms of what’s in it for us and our customers. How can we help them to make money so we can make money?

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This blog post is based off of an article from Cerasis, a 3PL with a focus on technology and managed transportation services.