Logistics service providers help a business corporation to achieve two goals: to reduce operating cost and to increase revenue. As the service provider organizes the required logistics assets, the investment in owning the logistic assets on the part of customer is reduced. This in turn allows the firm to invest in more productive activities and get more returns on the remaining assets and enhance the return on stockholders’ investment. The alliance with the service provider will free the company’s manpower for more productive work and to concentrate on core competency areas to get more returns. The firm gains more knowledge because of acquaintance with and exposure to the best available practices and technologies used by service providers. With these value propositions, the decision on logistics outsourcing can be justified.
Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.