More outsourcing. (Technology).

NEW YORK -- More companies are seeking to move their warehouses out of house, recent market research shows.

"When a company outsources warehousing, it removes a major cost center burden, enabling it to focus on what it does," says Joel Hoiland of the International Warehouse Logistics Association, the trade group for outsourced warehouse logistics providers.

"The cost of warehousing in-house is expensive," Hoiland says. "You need to factor in many things. It's often more economical to do it outside."

A relatively new trend, third-party warehousing has become a big business over the past decade with industry experts estimating that spending on outsourced warehousing is growing by 23% a year, reaching $20 billion in 2000.

Experts say the proliferation of third-party warehousing companies and the sophisticated technology they use has helped make companies comfortable with outsourcing these services.

"With companies downsizing and focusing on return on assets, they are pulling back to their core competencies," notes logistics consultant Cliff Lynch. "Because there's not much profit in warehousing, a retailer gets more profit focusing on its key businesses--such as selling groceries."

According to a recent University of Tennessee study, 63% of Fortune 500 companies outsource logistics services, including warehousing and transportation. Sixty-eight percent of retailers outsource logistics services, the study found.

Industry experts and consultants note that warehouse outsourcing lets companies reduce their labor costs and increase their flexibility.

"Outsourced warehousing gives you the flexibility to move a warehouse without internal human resources or real estate issues," comments Bob Silverman of Gore and Associates, a consulting firm specializing in the logistics of material handling. "It's easier to close or relocate an outsourced warehouse."