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The Concept and Nature of Outsourcing Logistics

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To many firms, logistics outsourcing is a means of reorganizing their distribution networks thus increasing their competitive advantages. In the last several years, there has been a dramatic growth of logistics outsourcing by use of a third party logistics (3PL) provider for all or part of an organization’ s logistics operations (Regan & Wang, 1). Sometimes, an organization decides on outsourcing when it is hard to handle all aspects of the business. In addition, another reason for outsourcing logistics is that there are a few processes limited for a short time and are therefore not practical to hire experts for a short period (Mehta, 1).

However, in most cases, it is difficult handling the high demand of every department within an organization especially the call center services and sales services. Additionally, many of the cases are temporary and it is not ideal for the company to appoint an in-house department to manage this work. It is the duty of the outsourced company to accomplish the necessary actions once they have received the duties (Inso. A decade ago, the third party logistics was just surfacing in many parts of the world.

However, as the rate of the service grew, there was a difference in many parts of the globe on the rate of growth across tasks and the reasons for this growth. For instance, in Europe, the main use of third-party logistics was for both international transport and distribution of products in foreign markets. About two-thirds of the European distribution centers mainly used by manufacturers from America, Japan, Korea, and Taiwan currently use the third party logistics providers. In the US, for example, the recent trend is for firms to concentrate on their core business competencies so as to form a sustainable competitive advantage.

Since this requires outsourcing support activities, it becomes a growing opportunity for 3PLs (Regan & Wang, 1). The present business environment has made the growth of outsourcing logistics more prevalent. In this regard, there has been the development of a number of different outsourcing business models.    

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