There are several benefits that organizations could gain on availing the services offered by a logistic service provider. Deepen (2007, p 21) has identified that the major benefit of logistics is the reduction of costs that it offers to organizations. The logistic service providers are more efficient than a manufacturer.
The appropriate utilization of resources by them results in lesser production cost for the organization. Another major benefit that could be gained by an organization in availing the services of a logistics service provider is that the increase in flexibility (Salvendy, 2001). They help the organizations in becoming more responsive as the requirements of the customers or market alters, since logistic service providers offer organization with a knowhow of available resources.
Lesser costs of production is also gained through scale economies and scope resulting from huge volumes of equal or similar logistics services which the logistic service providers generate and through higher utilization ratio of the properties employed. Furthermore logistics service providers can balance distinct demand patterns better than an individual manufacturing organization by diversifying the portfolios of customers and lowering down labor costs.
Another benefit of logistics is that it impacts the cost position of an organization directly due to reduced requirement for capital investments. It helps organizations save costly expenditures on information technology. Besides logistics outsourcing also helps in the decrease of unnecessary investments in workforce which proves valuable specifically in countries with tightly regulated and inflexible labor markets.
Thus logistic service providers help organizations in managing their supply chain at an affordable cost.
- Deepan J M (2007), Logistics outsourcing relationships: measurements, antecedents, and effects of logistics outsourcing performance, Physica Verlag, Germany, p 21-22.
- Salvendy G (2001), Handbook of industrial engineering: technology and operations management, John Wiley & Sons, USA, p 264-265