A cost comparison between an outsourced and in-house storage solution

Examensarbete för masterexamen
Master Thesis
Supply chain management (MPSCM), MSc
Alickovic, Denis
Behrman, Jesper
It has become a survival factor to have a constantly evolving business in order to handle today’s changing markets. The distributor role in the supply chain has evolved, leading to more pressure on cutting both costs and lead times. The usage of third party logistics providers has increased during the last decade. Companies outsource parts or entire activities to meet customer demands as well as to be able to focus on the company’s own core competence. Focus Nordic have an established partnership with a third party logistics provider that handles parts of the warehouse operations, in order to cope with current space issues at the central warehouse. Even though Focus Nordic outsource some of the storage to an external partner there are still other issues connected to the lack of space, for instance lack of picking locations, congestions, picking routes etc. Focus Nordic has considered the possibility of expanding the central warehouse to increase the capacity, thus enabling to store all goods at the central warehouse, excluding the external third party logistics provider from the structure. The purpose of this master thesis was to provide the company with a data foundation, comparing the current outsourced cost structure with a future in-house one. In addition to the cost comparison the study aims towards identifying areas of improvement within the current warehousing activities that could be further investigated during a potential expansion. To be able to investigate and reach the objectives of the study both quantitative and qualitative data have been gathered using a triangulation approach. This further means that multiple sources of information have been used in order to increase the reliability and validity of the study. The theoretical and empirical findings were combined in order to conduct the analysis and provide the company with answers to the main objectives. The results show that the total cost in a future structure would be decreased with an expansion of the required capacity of 600 m2. The main differences in the new structure is that all cost categories related to the partnership would be decreased or cease to exist, except for the storage rent that would increase. An in-house solution would also require some initial material investments during the first period for new pallet locations. The second part of the analysis showed that ergonomics, goods reception, storage assignments and picking routes were all identified as clear areas of improvements that could be combined with an expansion in order to develop the future structure. However, to successfully improve these areas more than 600 m2 would be needed, that would require further investments.
Transport , Övrig industriell teknik och ekonomi , Transport , Other industrial engineering and economics
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Teknik / material