Traditional Logistics vs Supply Chain Management
Discuss about the Global Business Logistics for Finance and Customer Service.
Logistics are considered as those activities which occurred within the boundaries of the single organization, and supply chain considered as the network of companies that work in coordinate manner and together for the purpose of delivering any particular product to the market. Traditional logistics mainly focus on the activities related to the procurement, distribution, maintenance, and inventory management. On the other side, all these traditional logistics are acknowledged by the supply chain management and also include some other activities such as marketing, new product development, finance, and customer service (Omelchenko, 2003).
This assignment discusses the challenges related to the logistics in context of transportation and warehousing in Australia. Structure of this essay includes the analyses of the immerging key challenges in global business logistics in terms of the warehousing and transportation. All these issues related to the logistics must be defined in the critical manner. This report further reflects the critical understanding the managerial implications of emerging logistics innovation and technological developments. Lastly, this paper states the brief conclusion which highlights the important facts of the case.
In the present context of global economics, logistics play most important role in facilitating trade and, by extension, and also ensures the success of the business operations. There are number of challenges which occurred in the streamline logistics management, and understanding of these challenges is very important.
In present global world, transport and logistics industry face number of challenges, and some of these challenges are familiar in nature but other challenges are result of the modern technological developments. These other challenges which are developed because of the modern technological changes are difficult to understand and resolve Cooper, 1993).
For the purpose of practicing the effective and cost efficient logistic management, an organization must ensure the foundation for a responsive, economical, and also the transportation network. With all these efficiencies, a business entity can ensure the implementation of the major strategic changes in context of reducing the cost and increase in the customer service levels. All these changes are done without disrupting the whole supply chain.
It must be noted that, responsive transportation network initiates with the end-to-end visibility. This concept of the visibility allowed the business organizations to centralize the product operations at the low cost areas without affecting the levels of the services provided to the customers, and this happens because any uncertainty in the network is monitored and managed in appropriate manner for the purpose of keeping the inventory levels as low as possible (Eskigun, et. al. 2005).
Importance of Logistics in Global Business
The transportation network of economical nature, actually begins with the changes made in the attitude, and be dealing with the challenges in effective manner. Generally, business organizations conduct their operations with the traditional view and transportation is the necessary evil- an unavoidable source related to the cost and risk. Following are the transportation and logistics challenges faced by the organizations in Australia are stated below:
Fuel costs: The biggest cost contributing in context of the cutting transportation cost issue is the prices of fuel. Higher prices of the fuel usually increase the cost of the transportation for the business organizations, by pushing up the surcharges of the fuel. Increase in the prices of the fuel is the reflection of the rising surcharges included in the freight rates, and this affects the revenue and earnings of the truckers and also increases the cost of transportation for the organizations (FPO, 2017).
Price fluctuation of the fuel in the market has constant effect on the industry of logistics. Sudden increase in the fuel prices can have a delayed and stripping effect on the companies of the freight management, and the sudden fall in the price can result in the short-term improvements in the profit, and the flow of competition in the market for the purpose of providing the consumers with the lowest price.
Because of the continuous flexibility in the price of the crude oil, logistic companies are forced to restructure their strategies and operations for the purpose of ensuring the continued profit, and also to avoid any potential setbacks. These adverse effects on the logistics industry and increase in the freight transportation cost forced number of companies to start keeping more inventories on hand for reducing the amount of transportation necessary. Larger bulk shipments are more effective in terms of cost as compared to the frequent smaller shipments. This would provide benefit to the shippers and also the receivers but it cause negative effect on the logistic industry. Lack of quantity in the shipment also increase the number of empty miles covered by the carrier, and in case more stops is made the carrier in the given route then more profitable the trip (Crainic, 2000; Arvis, Marteau & Raballand, 2010).
Another challenge faced by the logistic industry in terms of fuel cost is the rapid changes occurred in the cost and price volatility. Usually, fuel surcharges are calculated by the logistic companies on the basis of the fuel prices of the last week, and whenever, cost related to the fuel rises rapidly there is difference between the fuel price and fuel surcharge rate. This difference between the amount cause huge impact on the earnings of the trucking company. However, in case prices of fuel decreases then also there is huge difference between the amount, and trucking companies made large amount of profit. It must be noted, this challenge is considers as the permanent part of the logistic industry, and it also make the competition among the logistic companies prominent. Each and every company wants to have the lowest rates, but still they need large amount of profit (Yang, 2013).
Transportation and Warehousing Challenges in Australia
Digitalization: There are number of figures and data which are handled by the logistic managers on daily basis, and they are also responsible for smooth discharge of the operations. They are responsible for number of things such as safety of their staff and fleet, fleet loading, cross checking of the route maps, sanctioning fuel bills, etc. When this work is performed by the logistic managers, it is very time consuming and boring task, and there are high chances of the errors and confusion. There are number of companies which have significant number of staff for the purpose of handling the manual data, and also for capturing and exchanging the activities such as Track & Trace, gathering freight bill invoice information, managing customs forms, or securing proofs of delivery (PODs). It must be noted that all these activities are concentrated to resources, and includes high chances of errors and also tend to reduce the billing and cash collection.
It is necessary for the organizations to invest in the automated solutions for the purpose of entering the data, bills related to the fuel, loading and unloading ledgers, etc. All these updating help the organizations in managing their operations in better manner and also allowed the logistic managers of the company to contribute their time in more important functions. Digitalization of manual workings also helps the companies in reducing their cost which occurred on the maintenance of staff in context of the handling of information (World Economic Foorum, 2016).
As stated, manual handling of the work takes lot of time and efforts of the employees and it already increase the amount of the operations conducted by the organization. It is necessary for the organization to ensure digitalization in their functions, because it not only save times and efforts of the organization but also saves the cost of the organization. Reduction in operations cost help the management in getting the competitive advantage over its competitors.
Digital fitness is considered as big challenge for this sector, which presently covers number of customers in this context. It is believed by number of experts that digitalization not only deal with the challenge of information handling but also help the organization in getting the competitive advantage over its competitors. It must be noted, this strategy of digitalization for the purpose of resolving the issue of information handling add more values to the services of the customers in all the functions of the operational process (AIIM, 2016).
Fuel Costs
Organization working in this sector can adopt partial or full automation in context of information handling and in other processes. Now, digitalization of the processes becomes important for the organizations not only to deal with the challenges but also for ensuring their long term survival in the industry. Organizations face the issues of extraordinary changes as digitalization is increasing, and expectations of the customers are changing in this context. New technologies are ensuring the more efficiency and also enhanced cooperative models related to the operations, and they also changing the things in the market in which they are accepted. This sector is also shaking by the new entrants, as they have more skill and experience in digitalization (Stock & Douglas, 2001).
Pressure to meet government and industry regulations: Presently, immense regulations are imposed by the government on the logistic industry of transport, and these regulations are very strict in context of the environment because this industry causes adverse effect on the environment. Compliance with these regulations is considered as big challenge for the organizations. The sustainable operating practices and also the changes occurred to the regulations in context of chain of responsibility already influence the decision taken by the industries.
This is considered as the increasing pressure for the purpose of reducing the gas emissions and also manages the environmental compliance parameters in more effective manner. It also increase the demand related to the employ sustainable business practices, and also include the use of digital technology. It must be noted that, new technologies and innovations occurred in the concepts are developed, so that organizations implement it for addressing the different issues related to the environment such as vehicle emissions, energy consumption, fuel efficiency and stream-lining operations with the help of automation (Lamming & Hampson, 1997). Alternative fuels and electric vehicles are used by number of organizations in their every-day operations. All these things are considered as the big challenge for the organizations because it required number of changes in strategies and operations of the organizations. It also impose cost burden on the organizations because companies required making changes in all the traditional approaches and other systems of the operation process, and this is the costly affair. All these things ultimately affect the consumers, as organizations pass the cost burden on the consumers (Roth, Klarmann & Franczyk, 2013).
This can be understood through example, Tesla motors currently make announcement in context of the electric truck development, and this truck is known as the Tesla-semi. They further states that truck provides the considerable decrease in the cost of cargo transport by decreasing the consumption of fuel and it also decease the CO2 emissions.
Digitalization
All these changes in the regulations and government policies impose strong challenges on the companies in context of the environmental, social and governance (ESG) performance. These new performance criteria require the organizations to adopt the new approaches in terms of the development of the workforce and performance standards set by the company. This cause flow of effect on the workforce relations, safety, and productivity, and impose obligations on the organization in lieu of human resource capital.
Sustainability related to the supply chain extends beyond the environmental compliance, as it also include the sustainability related to the workforce. Companies also focus on modernize their operations with the help of make savings on resources and by increasing the productivity performance for the purpose of ensuring the sustainability (AIS, 2018).
All these regulations impose legal and fiduciary obligations on the organization to ensure the protection of environment, and in case organization fails to do this then it will face legal consequences.
A shortage of qualified drivers: Instead of the massive investments required in ports, airports, roads, trucks, ships and airplanes, the logistics industry is still considered as the business of the people. Shortage occurred in the skilled employees required to provide the services, and because of this it has disastrous effect on the company’s efficiency and profitability. It must be noted that, issue related to the driver shortages not only affects the transport but it also cause adverse impact on the warehousing labor.
There are number of factors such as retirement, barriers to entry, poor working conditions, low wages and a lack of interest in the profession by young people, etc. Although very few statistics are present in context of provide back up to this declaration (Powell, 2001).
Shortage of labor is the serious issues for the logistic industry, as organizations need to hire the drivers on high price in comparison of the fair value. It can be end by paying high amount to the drivers, and companies are always under fear of the retention.
Lack of qualified drivers also imposes the risk on the companies in context of loss off goods and services, and also risk of the lives of other peoples.
All these things cause negative impacts on the companies taking these services also, as price of the services are increased by the logistic companies because of the labor shortage faced by the industry. It must be noted that, such issue result in the higher wages for the drivers and ultimately rates for the shippers will also increase. All these cost burdens are transferred by the shippers on the receivers.
Pressure to Meet Government and Industry Regulations
Some other ways are also there through which issue related to the driver’s shortage can affect the organizations:
- Organizations fail to provide the service qualities to its customers because hired employees work for long working hours for the purpose of compensating the lack of co-workers in the organizations.
- Organizations focus on filling posts with the help of temping agencies, and this will be considered as costly affair for the organizations, and high turnover also reduce productivity level of the organization.
- Demand of the qualified drivers is increased and this results in the high charges of the training companies for the purpose of providing trained professionals to the organizations.
Above, stated challenges impose adverse effects on both logistic industry and on organizations which are taking services from these logistic services. It is necessary for these organizations to understand these issues effectively and make strategies for resolving the same. For resolving these issues, organizations required to make changes in their strategies and also in their operations systems (TI, n.d.).
Conclusion:
After considering the facts of this paper, it can be said that logistic industry and customers of the companies operated in this industry related to the transport and warehousing face number of challenges in this industry. Logistics play most important role in facilitating trade and, by extension, and also ensures the success of the business operations. There are number of challenges which occurred in the streamline logistics management, and understanding of these challenges is very important. Transport and logistics industry face number of challenges, and some of these challenges are familiar in nature but other challenges are result of the modern technological developments. By practicing the effective and cost efficient logistic management, an organization must ensure the foundation for a responsive, economical, and also the transportation network.
References:
AIIM, (2016). 6 Key Transportation and Logistics Challenges Facing all Companies. Available at: https://cdn2.hubspot.net/hubfs/332414/AIIM_Blog/abbyy-tip%20sheet%201-6%20key%20transportation%20and%20logistics%20challenges.pdf. Accessed on 30th July 2018.
AIS, (2018). Transport and logistics industry: 2018 key findings discussion paper. Available at: https://www.australianindustrystandards.org.au/wp-content/uploads/2018/02/TLI-Key-Findings-Paper2018V5Web.pdf. Accessed on 30th July 2018.
Arvis J. Marteau J. Raballand G. (2010). The Cost of Being Landlocked: Logistics, Costs, and Supply Chain Reliability. The World Bank International Trade Department.
Cooper, J. (1993). Logistics Strategies for Global Businesses. International Journal of Physical Distribution & Logistics Management, Volume 23(4), pp.12-23.
Crainic, T.G. (2000). “Service network design in freight transportation”, European Journal of Operational Research, Volume 122(2), 272-288.
Eskigun, E. Uzsoy, R. et. al. (2005). Outbound supply chain network design with mode selection, lead times and capacitated vehicle distribution centers”, European Journal of Operational Research, Volume 165(1), 182- 206.
FPO, D. (2017). Top 8 Logistics Challenges Facing the Industry. Available at: https://www.logisticsmgmt.com/article/top_8_logistics_challenges_facing_the_industry. Accessed on 30th July 2018.
Lamming, R. & Hampson, J. (1997). The environment as a supply chain management issue. The British Journal of Management, volume 7(1).
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Omelchenko V.Y. (2003). Materials Management in microeconomics transition. Weber.
Powell, D. (2001). Governments and industry working together to implement modern logistics. Transport and Communications Bulletin for Asia and the Pacific journal, vol. 70.
Roth, M. Klarmann, A. & Franczyk, B. (2013). Future Logistics – Challenges, Requirements and Solutions for Logistics Networks. International Journal of Mechanical, Aerospace, Industrial, Mechatronic and Manufacturing Engineering, Vol. 7 (10).
Stock, R. & Douglas, L. (2001). Strategic Logistics Management McGraw-Hill, Irwin.
Labour shortages in the global logistics industry. Available at: https://www.ti-insight.com/wp-content/uploads/2017/11/GSCi-exclusive-content-9_Driver-shortages.pdf?utm_medium=email&utm_campaign=GSCi%20update%2013&utm_content=GSCi%20update%2013+CID_f8a2ee07a3aa636c0ed43e4ba1675e3c&utm_source=Campaign%20Monitor&utm_term=Driver%20shortages. Accessed on 30th July 2018.
World Economic Forum, (2016). Digital Transformation of Industries Logistics Industry. Available at: https://reports.weforum.org/digital-transformation/wp-content/blogs.dir/94/mp/files/pages/files/dti-logistics-industry-white-paper.pdf. Accessed on 30th July 2018.
Yang, X. (2013). A Review of Distribution Related Problems in Logistics and Supply Chain Research. International Journal of Supply Chain management, Volume 2(4).
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