Important of logistic management in global environment
The report gives an overview of logistics and supply chain management. There is a description of the importance of logistic management in the global environment. The report also does an analysis on logistic management that involves transportation management, warehousing, supply chain and inventory management. Further, discussion on the application of logistic theories and the challenges also finds a mention in the report.
Logistics used as competitive weapon for securing and maintaining customer loyalty. Therefore, logistics management is of utmost importance that will help the companies to not only be increasingly flexible and responsive, but also ensure customer commitment (Rushton, Croucher and Baker 2014). Moreover, this will also enable companies work closely with the providers and suppliers, be aware of their results, embrace technology and in maintaining and developing a strategic direction. Thus, logistics put forward the real frontiers for opportunity that any organization might expect for improving their corporate efficiency.
Technological advancements and globalization has made the market a highly competitive place that makes the role of logistic management crucial. Thus, increasing number of companies is looking for logistic management for providing value to the customers. Moreover, since the buyers prefer sellers with good logistics service so increasing number of companies are using logistics for differentiating them from their competitors.
The initial step in the achievement of significant improvement in both customer service and cost involves a thorough review of systems, practices and logistics policies, the core areas of low performance levels. However, customer service performance requires accurate measurement and the results compared to the want of the customers to what the competitors provide (Waters and Rinsler 2014). On the other hand, the evaluation of the cost for transportation and warehousing done based on competitiveness and the impact they have on customer service performance. In this regards, inventory planning and management can act as key elements in meeting the service goals and cost and therefore structured for the assurance of low cost and good service.
Thus, it is important for critically reviewing the logistics practices, policies and systems for determining the role of the management for achieving acceptable levels of cost and greater customer satisfaction (Myerson 2012). Achieving excellent logistics determines the achievement of competitive capability and is increasingly becoming difficult for the companies for catching up with the best logistics competitors.
Continuous improvement taking place as a part of the logistics is a criteria for an organization for becoming leading edge (Singh and Singh 2012). Thus, for achieving continuous improvement a company must implement certain supporting concepts that include:
- Benchmarking and best practice
- Analyzing and outsourcing that will add extra value to the company
- Empowering the employees
- Incorporating strategies for expanding the knowledge asset base of the company
- Incorporating an incentive based policy for innovation
However, to achieve success on a long-term basis, continuous improvement acts as a basis for differentiation that helps the company in achieving a sustainable competitive advantage (Kumar et.al 2013). Thus, successful companies efficiently and effectively respond faster than competitors do globally.
Another important aspect of logistic management involves performance measurement that helps the companies in benchmarking. Thus, benchmarking and measuring operations not only enable a company in the effective management of a supply chain but also enhance its effectiveness and remove any kind of operational constraints (Liu et. al 2013). Operational improvements and productivity benefits achieved through the implementation of high-end measuring system that analyses performance. Performance measurement and success is crucial for determination of progress towards achieving the strategy. Therefore, an important measurement of the performance of supply chain determines the level of satisfaction of the end user of the company.
Analysis and Logistic Management
Thus, companies implementing technologies, systems and methods for better management of their logistics activities known as the leading edge companies (Bowersox 2013). Logistic management therefore, possesses the potential for assisting an organization in achieving not only cost productivity advantage but also value advantage. For effective logistic management a leading edge company will ensure the following:
- Using logical competency for maintaining and gaining competitive superiority
- Adding value to their services and products and thereby supporting this goal through a cost effective system of logistics.
- Leveraging the assets through formation of strategic alliances with the service providers who helps the companies in achievement of the status of preferred provider amongst key customers
However, Globalization acts driving force for bringing in the change, which has the potential of raising the standards of living, and driving the economies in a forward direction(Mak, Lumbers, and Eves 2012.). The effect also affects customers positively who benefits through increase in choice, low price, improved services and the creation of new opportunities and jobs. Thus, with the impact of globalization, it is important for the companies in adopting a perspective that will not only help them in the identification of the competitors, opportunities and new products.
Thus, the globalization impact is also increasing the complexity of logistics task exponentially through the influence of factors that includes increased product range, shorter life cycle of products, and number of market/supply channels and growth of the marketplace. However, the primary objective in the management of global logistics system involves meeting the service levels of the customers at a lowest cost (9). Moreover, the different aspects of logistics needs to be coordinated and thus the companies needs careful observation at not only saving the additional cost but also opportunities whenever they plan to make any adjustments in the logistic system.
Logistics is the process associated with the flow of goods, services and information offered to the customers and the suppliers from the point of origin. The process begins from raw material supply and ends in the sale of final goods (Rushton, Croucher and Baker 2014). Analysis of logistics plays a vital role as a part of the corporate strategy in most organizations. Moreover, analysis and logistics management have encouraged firms in reformulating the corporative strategies and thereby understanding their objectives.
Transportation management plays a very important role in the delivery of goods to the suppliers to the consumers (Myerson 2012). Thus, everybody as well as everything who are involved in the product or material delivery becomes a part of by supply chain management that includes transportation logistics management. Thus, Transportation management involves four key processes that involve:
- Decision-making and Planning: Transport logistics management will always define the efficient transportation schemes as per given parameters that might possess a higher or lower importance as per user policy. This might involve shorter lead-time, transport cost and ensure fewer stops
- Execution of Transportation: Transportation logistics management will enable the proper execution of transportation plan that involves carrier dispatch and carrier acceptance rate.
- Following up Transportation: Transportation logistics management enables in following any kind of administrative or physical operation that involves transpiration.
- Ensures Measurement: Transportation logistics management helps in measuring the function of transport by using key performance indicators
Warehousing also known as warehouse management forms a part of the logistics management system (Dekker et al 2013). The process involves inbound functions that help in the preparation of items for storage. Outbound functions that pack and ship orders consolidate and service and economic benefits to the business and the customers are part of warehousing.
However, the benefits of warehousing are as follows:
- Acts as Central Location: A warehouse acts as a central location for receiving storage and distribution of products.
- Ensures Value Adding Operation: Warehousing helps in operations like order assembling, order consolidation, cross docking and product mixing that adds value to the overall logistics system
- Ensures Economic Benefits: Warehousing helps in providing economies of scale with the help of storage capacity, central location and efficient operation
- Ensures Service Benefits: Warehousing is also a part of the contingency plan that helps in ensuring that outbound orders totally filled on time
Supply chain described as a system of resources, information, activities, people and organizations that is responsible for moving a service or product from the supplier to the customers. However, supply chain activities involve transformation of raw materials, components and natural resources into a complete product and ensure the delivery to the end customers (Mishra, Kumar and Chan 2012). A sophisticated supply chain however involves used products that re-enters the supply chain at any given point whose residual value can be recycled.
Transportation Management
Thus, a typical supply chain refers to the biological, ecological and political regulation of natural resources followed by raw material extraction by human beings. Supply Chain also has several production links before movement into various layers of facilities for storage that is of an ever-decreasing size and belongs to a remote location before finally reaching the customers.
Therefore, most of the exchanges encountered in the supply chain are amongst different companies that focus on maximizing their revenue with the possessed sphere of knowledge with little interest in existing players of the supply chain.
Inventory management refers to supervising the non-capitalized assets and stock items. This is also a component of the supply chain management that helps in supervising flow of products from the manufacturers to warehouses and finally to the sales point (Prajogo and Olhager 2012). Thus, the primary function of the inventory management involves keeping detailed record for each returned or new product that leaves or enters the warehouse or sales point.
Inventory control referred to the area of the inventory management concerned with reducing the total cost of inventory to minimum level while maintaining the ability of provide g the customers with the required products in a timely fashion. Some countries use both the terms as synonymous.
However, the functions of inventory management involve:
- Ensuring scheduling and shop loading becomes more efficient
- Narrowing the gap between the stock replacement and sales
- Ensuring accuracy for better management of inventory
- Determining the exact status of the material and dollar burden of inventories
- Reducing the cost of inventory obsolescence
- Ensuring true responsibility of the real needs of the customers
Logistics refers to the art of management of supply chain and the science that deals with management and control of flow of information goods and resources between origin point and contact point thereby ensuring meeting of the requirements of the customers. The process also leads to integration of transportation, information, inventory, warehousing, packaging and material handling (Allison 2012). Therefore, the process of logistics at any level involves four steps that are acquisition, sustainment, distribution and disposition.
Acquisition refers to the procurement of equipment, weapons, ordnance, facilities and commodities like clothing, food, repair parts and fuel, and repair parts. Distribution however refers the ways through which the logistic support reaches the commander in operation. However, disposition refers to the consumption or the return as well as disposal of equipment, supplies and weapons. On the other hand, sustainment refers to the provision of necessary resources for supporting the operations until the mission is accomplished.
In recent times, logistics finds application in various fields like military, medical, business and production. In military logistics, the logistics officer is responsible for managing when and how to reallocate the resources to the required places (Satyanarayana and Yogendran 2013). However, military science put forward that the maintenance of the supply chain of a military group along with disruption of those of the enemies is one of the vital elements of military strategy because armed forces without transportation or resources is totally defenseless. Medical logistics deals with mainly the logistics of medical and surgical supplies, pharmaceuticals, medical devices and equipments. They also involve products that are required for supporting nurses, doctors and other dental and health care providers. On the other hand, business logistics refers to having the right item in the perfect quantity and time at the right time, place and perfect pricing. Business logistics involves inventory management, purchasing, transportation and warehousing. Logistics also finds application in production that ensures that every machines and workstation fed with the perfect quality product in the right quantity and time.
Warehousing
Logistics however helps in performance of functions that are not only strategic but also tactical and operational. The strategic functions involve strategic optimization of network that involves location, size of warehouse, facilities and distribution centers. They also ensure strategic partnership with customers, distributors and suppliers (Chen and Sayed 2012). The strategic function also helps in product design and coordination, information technology infrastructure and at the same time helps in the alignment of the strategy of the organization with the supply strategy. On the other hand, the tactical functions involve sourcing the contacts and purchase decisions. They also influence production decision related to location, scheduling, contracting and planning. These functions also involve inventory decisions and implementing the strategy for transformation (Audy et.al 2012). The tactical functions also involve payments related to milestones and at the same time helps in benchmarking all operations. However, the operational decisions involves distribution planning and daily production, scheduling of production for each of the facilities for manufacturing, demand forecasting and planning, sourcing the planning, inbound and outbound operations, order promising and production operations.
Measurement of logistics done through Logistic Regression: This is a model used for the prediction of probability of event occurrence. The model makes use of various predictor variables that is either numeric or in categories (Lee et.al 2012). The model is extensively used in social science, medical and marketing applications for predicting the propensity of the customers in either purchasing the product or ceasing the subscription.
Challenges in logistic management is faced by all sizes of companies since effective planning, control and management of the storage and movement of services and goods are extended over international boundaries which includes suppliers of raw materials and the customers (Fernie and Sparks 2014). Thus, these factors pose as a major challenge in the logistics management of a company.
Moreover, the continuous process of urbanization is another challenge faced by logistics management. This is because the wealth development in Asia and Latin America has resulted in a major shift from nomadic life to urban life. Increasing number cities with more than ten million inhabitants emerged and required not only different modes of transport but also logistics system. This has led to an increased interdependency among urban planning and supply chain management and design. Moreover, there have been political conflicts and natural disasters that have indirectly affected logistics management. Further, there has been a rapid change in consumer behavior with the advancement of e-commerce that had a considerable impact on forward and reverse logistics and supply chain. Therefore, meeting with constant pressure on quick delivery achieved through maintenance of a proper functioning of the logistics network of an organization.
However, the technological innovations however address some of the challenges. Technology incorporated the design of new and lightweight biomaterials, dematerialization of product and miniaturization not only helps in reducing the footprint ecologically but also reduces the cost. Further, technologies like micro-machining and 3D printing also ensured mass customization thereby impacting profound logistic like stimulation of the local for local production thereby resulting in the reduction of anticipation stocks as they enable production at required time and place.
Supply Chain
In spite of the above factors there are challenges faced by the logistics management of a company. These, the challenges are as follows:
Longer supply chain has more risk exposure and disruption potentially. For instance, here the example of global manufacturers Toyota and Sony can be mentioned which faced disruptions in supply because of several earthquakes in Japan. Therefore, plan for supply chain should be in a manner that helps the company in mitigating the possible risk. Therefore, in order to manage the risk of supply chain it is important for the companies to assess and identify the potential issues (Zegordi and Davarzani 2012). Moreover, the company must also consider clearance in scenarios and thereby gain transparency in the operation of the suppliers through the assessment of financial stability. Thus, this enables a company in facing an unknown risk in the supply chain.
Variability is a key challenge in logistics management as there is always a variation in what the company expects and what actually happens. Moreover, there is planned production deviation, transit and supply that increases variation within a single supply chain. Instead of investing on buffer inventories for covering those gaps, companies should closely examine their supply chain capabilities that will enable them in determining the competencies (Wisner, Tan, and Leong 2014). Thus, for instance, if the infrastructure of a company is inadequate then the company must implement a multipurpose distribution network that will help in incorporating physical warehouses and transportation which will allow flexibility and responsiveness in environments of high variability.
Maintenance of a good supply chain visibility becomes impossible when there is involvement of multiple carriers, providers of third party logistics and modes used for transportation of goods. According to a survey, most companies lack material visibility and information across the bases of supply (Tse and Tan 2012). Thus, this poor visibility results in delay of shipments, disruptions of supply chain and losses of revenue of the company. However, for reducing the challenges of logistic management related to visibility companies are making use of collaborative process like demand planning and data sharing between various departments and business partners. Moreover, they are also turning to software platforms for information sharing and data collection. These companies are also working effectively on their logistics experts for identification of the gaps before they turn into major problems.
Moreover, when a company plans to go global then distance, complexity and new risk added to the logistics equation. Thus, companies must undertake necessary measures for taking care of situations that might pose challenges to the logistics management.
Conclusion:
The report ends by throwing a light on the challenges of logistics management. There is also discussion about the application of various theories of logistics. The report also focuses on the analysis and logistics management through discussion of transportation logistics management, warehousing, supply chain and inventory management. There is also discussion on the importance of logistic management in global environment.
References
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