In a world where the economy has become unstable and unpredictable, companies are always on the lookout for the most effective method that will keep their businesses competitive and stay ahead of others. One viable business strategy that has become a growing trend of today is outsourcing. In fact, statistics show that 80% of the Fortune 500 companies have outsourced at least one function of their business operations to a third party service provider. Outsourcing logistics functions, specifically, has turned out to be one of the best methods for many companies who are looking to reduce cost but still maintain or exceed their level of production and customer service.

Logistics operations encompass a wide variety of operations, from integration of information, inventory, and transportation to packaging, warehousing and distribution of goods and services. For most companies, outsourcing their logistics functions means they can better perform and focus more on their core business operations.  Many companies also find outsourcing logistics the best and most effective method to reduce labor costs and assets, decrease the number of their warehouse and vehicles, as well as their excess inventories.

Along with the increase in the number of companies deciding to outsource their logistics operations is the increase in the demand for third party logistics firms (3PLs). Aside from warehousing and distribution, many of today’s 3PL companies also offer services such as inbound and outbound freight, as well as freight consolidation. Some firms even offer extra-added services like telemarketing, packaging and repackaging and product returns.

There are many 3PL providers available today and they are generally categorized into three groups: asset based, management based and the integrated providers. They may differ in the types of service they offer, but all are known to offer the same benefits and economic advantages.

Outsourcing logistics to 3PL providers is proven to reduce the company’s cost of operations and eliminate infrastructure investments. The method also guarantees better cash flow and access to all other resources that may not be available in-house. Moreover, it’s not only the company that benefits from outsourcing the logistics to a 3PL company, but also the customers. A 3PL company can deliver an improved customer service at a shorter shipment time and can also guarantee reduced delivered costs for their customers.

When choosing a 3PL company, there are two important elements that should be checked and requested from the firm: the request for information or RFI and the request for quotation or RFQ. Both of these should be as detailed as possible and should discuss all the aspects of outsourcing the different logistics operations, from the logistics tasks that need to be performed to the level of performance that is required from the 3PL company.

The demand for 3PL providers has increased dramatically through the years mainly because of their ability to provide a number of advantages not just to the company that they provide service for but also to their customers. Meanwhile, outsourcing logistics functions and operations to these firms has become the best alternative for many companies to reduce their operational costs and assets. Doing this technique guarantees better and more efficient business operations, as well as improved customer service and relationships.