Insourcing or Outsourcing the Supply Chain: Why Inventory Management Is Better Kept In-House

In this episode of Rozmowy Logistyków, Adam Sobolewski talks with Agata Skrzyszowska, responsible for logistics at Ofi, about choosing between insourcing and outsourcing supply chain management. They discuss whether outsourcing always pays off, and what problems a team operating out of, say, India can run into.

WHY EVEN MID-SIZED COMPANIES NOW OUTSOURCE MORE THAN JUST PHYSICAL LOGISTICS

The trend of recent years goes beyond classic warehousing and transport outsourcing — more and more companies are also outsourcing demand planning and inventory management. Decathlon is testing full operational and management outsourcing of its e-commerce channel in Germany, and Orlen has handed stocking of its gas-station convenience stores to ID Logistics, which manages inventory down to the level of a single store, not just running a central warehouse. The argument for this sounds rational: why build your own team of experts when you can quickly access a partner who'll do it better — and on a PowerPoint slide, everything looks tidy, fewer people on payroll, variable costs instead of fixed.

THE DIFFERENCE BETWEEN OUTSOURCING EXECUTION AND OUTSOURCING MANAGEMENT

A key distinction: handing physical execution (transport, warehouse, even customer service) to a partner who understands the business specifics is one league — demand planning, delivery prioritization, and synchronization with production are a completely different one, because these decisions directly affect sales, margin, and cash flow. A McKinsey study found a drop in supply chain flexibility at companies that outsourced these functions — because an external team works strictly by procedure (SOP), without a feel for the organization's rhythm.

CONCRETE EXAMPLES: WHEN A PARTNER DOESN'T FEEL THE BUSINESS

A real case: a partner managing demand planning didn't account for large marketing campaigns or local holidays, despite having correct data, forecasts, and a working system — the result: full warehouses where there was no sales, and shortages right at peak season. A second case: a partner responsible for purchasing decisions didn't react to signals of rising prices for one ingredient in Europe, because they were based outside the continent and simply didn't sense the shift in the local market — the cost: several hundred thousand euros. The common thread in both cases: a lack of flexibility, a delayed reaction, and diverging priorities, even though all the shared KPIs were formally met.

WHY LOOKING ONLY AT OPERATING COSTS IS A TRAP

The biggest mistake organizations make when evaluating outsourcing's profitability is looking only at what's visible in a spreadsheet: fewer headcount, an external cost 15% lower, SLAs met. What's hard to quantify, but actually costs the most: the team's time spent firefighting, sales lost to mistakes, and team morale. Equally important, and often left out of the calculation, is the cost of eventually reverting to insourcing — not just hiring people, but training, system rollouts, and the time needed for the process to run as smoothly locally as it once did. Deciding to move a function built over decades outside the organization can mean a years-long process to rebuild it, if the company decides to bring it back.

HOW TO CONVINCE THE BOARD TO GO BACK TO INSOURCING

In a raw-materials business (prices and availability shifting dynamically, further influenced by politics), the key argument for regaining control was the need to make decisions in real time — outsourcing slowed the reaction enough that the situation regularly "got hot." Effective arguments to the board combined specific numbers (how much specific failures cost) with a qualitative story about a time the outsourcing decision failed — a board often needs one vivid story to understand that control over a process is an investment, not a cost. An industry comparison also helps (e.g. Supply Chain Insights Institute data from listed companies' reports) showing how a company's inventory cycle evolved relative to competitors after outsourcing — the cost of capital frozen in growing inventory can far exceed the cost of keeping a team that previously managed it more effectively.

A REAL SUPPLY CHAIN SHOWS ITS VALUE IN A CRISIS, NOT IN CALM WATERS

A closing thought: if a supply chain only works when everything goes according to plan, it isn't a supply chain, it's a stage set. Its real value shows up in chaos — when a container doesn't arrive, a system goes down, and the customer gets angry — that's when it becomes clear whether the team and partners know what to do, or just have nice dashboards. Regardless of whether a given function is insourced or outsourced, what matters most is mutual trust and the certainty that at the critical moment — and in logistics, those happen every day — the people on the other side can improvise sensibly under pressure.