COSTING A FREIGHT FORWARDER'S OUTSOURCING DECISION

Abstract

Any international Freight Forwarder in Thailand faces tough competition.  Airfreight is needed for some goods.  The cost is high, but can be offset by low inventory cost.  FF Company, the focus firm, provides airfreight services to manufacturers.  To keep prices competitive, FF’s total airfreight operation cost has to be contained.  This research examined whether to outsource part of its airfreight operation or retain it in-house.  The total cost of ownership (TCO) concept is used to evaluate this decision.  Service quality had to be maintained, outsourced or not.  Three TCO models, one for insourcing and two for outsourcing, compared costs per kilogram, service quality, and pros and cons.  The finding were that the operation should be retained in-house, not outsourced.