Outsourcing and Contract Logistics

Abstract

As stated by numerous authors, the field of logistics outsourcing services is growing day by day in modern day business environment. In this context, the industry is able to create various forms of business models which made it easier for companies to outsource their logistics function in order to save time and cost and attain unique comparative advantage. One can restrict the scope of outsourcing logistics to simpler tasks in the form of storage and transportation.

In today's market context, the outsourcing of complicated business functions related to logistics. Contact logistics, is an arena that projects high growth rate for the companies in modern day business enviroment. This is a model which is often linked with organizations focusing mainly on their core strengths, but the related studies show the existence of other reasons as well.

In order to understand why organizations around the world are going toward logistical outsourcing, this research paper would try to assess the perceived benefits and drawbacks of contract logistics while discussing in detail the perspectives of both clients and their service providers. The literature review on the existing study material has been conducted in order to showcase the advantages of modern day contract logistics outsourcing, its limitation and the concern both parties have in terms of making it part of their long term strategic vision.

Key Words: Outsourcing, logistics service performance, levels of logistics activities, Contractual agreements, customer satisfaction, logistical provider, impact of logistics outsourcingcapacity improvement,labour considerations, Logistics concerns and risks.

Introduction

To survive in the current business environment which is characterized by its unpredictability and globalization of organizations, corporations need to come up with creative strategies and out of the box thinking in order to perform their activities effectively and efficiently. These forms of pressure have forced these organizations to readjust the potential of their everyday business functions to include not only those activities in which the latter is already competent, and thus establishing a need to outsource those activities which are not the essential part of their core business (kersten, 2007).

The objective of traditional outsourcing is majorly the lessening of cost for short term, however in today's business environment the attention has moved toward the long term strategic collaboration. This kind of change has led to the creation of a new outsourcing model in line with the changing business dynamics.

In logistic industry, and more specifically warehousing and shipping have experienced outsourcing in their own terms to reduce costs and gain competitive advantage among their competitors (kersten, 2007). The emerging strategically focused logistics outsourcing model for business known as logistics, is stand on a long term contractual accord between a manufacturer and its logistical provider, which covers different services (kersten, 2007).

Outsourcing is a form of practice in which organizations try to reduce their cost by transforming some portion of their work to outside suppliers instead of doing it on their own (kersten, 2007). For instance, companies in developed countries are outsourcing their customer services to call center companies based in ...