Logistics assignment Essay

Logistics assignment

Logistics is commonly used to refer to the management of business operations such as acquisition, transportation and delivery of goods along the supply chain.

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Steve Agg suggests that logistics is visible by being invisible.  He gives an example of when there were furl blockades in the year 2000 - Logistics assignment Essay introduction. There were queues as the pumps resulted in empty supermarket shelves and fuel ranks.  Until then ‘just in time’ delivery was merely an industry buzzard

Just in time delivery enables retailers to charge lower prices to consumers as they don’t need to finance expensive inventory but only works if nothing goes wrong which expect  planning skilled logisticians, mostly it doesn’t when the fuel blockades reduced  suppliers for a trickle and with little reserves  stocks in the supply chain, the consequences became all too apparent.

He goes ahead to say that the success of any economy relies heavily upon efficient logistic and transport professionals. At the present there is a chronic shortage of people with the required supply-chain skills and expertise.  Many people have not considered a career in logistics because the industry has not worked hard enough to champion the importance of logistics to society and the positive aspects and opportunities that are available for those who chose it as a professional career.  It is not perceived as a first choice career option by many yet it is a profession that involves high levels of continual professional development and the learning of managerial and life skills that will benefit people throughout their careers.

I do agree with Steve Agg’s stands on logistics and its importance. The area of logistic employs many people even though it is taken for granted and it is responsible for the growth of many economies.  The Midas Manchester investment Agency in UK is such an example with its high-quality infrastructure, a large and highly skilled labour force, and very competitive operating costs. Manchester is a world class location for companies who supply products and services to manufacturers and retailers.  The strength o f the sector in Greater Manchester is shown in the fact that it consists of around 2600 companies and its worth over $2.54b per annum.  Traditional sector strengths include distribution centres, cargo handling/storage and road haulage.  The growth in the importance of technology has more recently led to a rise in the number of companies offering a fulfilment and supply chain hardware/software solutions. The company serves as a link to many centres.  It is just 20 minutes by rail or road from the city centre.  Its growth is 11% and this show importance of logistics. (Harrington, Warf, 1995)

Effective logistics requires managing trade off, between various costs subjects to achieving target customer service levels.  Specifically retailers and their supplier face many different cost trade off and issues when making assortment decisions.  Research on the logistics of assortment in the retail supply chain is sparse.  This is surprising given that research on grocery retailers has found that as many as 39% of consumers do not find at least one item they are looking for in a typical shopping trip. Since supermarket sales are about $351 billion per year in the United States, the magnitude of this situation is large. When coupled with the fact that average consumers shops three or four different grocery stores per week, it is easy to see retailers who manage the logistics issues resulting from their assortment well have an opportunity to take share from their competitors and increase their sales.(Robert, Frits, 1996)

Morash, Droge and Victory (1996) classified logistics capabilities as either supply chain oriented or demand chain oriented.  Within that framework, the capability of managing the logistics of retail assortment would be classified as demand chain oriented. Among the logistics capabilities they analyzed in their empirical study, demand chain oriented logistics capabilities had the greatest impact on firm profitability.  Managing the trade offs between inventory and assortment within a constrained space, taking into account the effects of sales, is a logistics capability that is needed in the retail supply chain.

The department for Transport (DFT) has highlighted a need to better understand the role of transport in business location decisions in order to inform people.  It has been long recognized that transport costs makes a relatively small proportion (usually 5-7%) of total costs, although this varies by industry. (Diamond, Spencer, 1989).

The evidence generally suggested that transport is a necessary but not sufficient condition for influencing business location, especially, in developed countries where transport infrastructure is generally ubiquitous.  Other factors such as access to skilled labour, market changes and tax structure are generally more significant.  However congestion imposes great costs upon businesses and increased use of ‘just in time’ and other logistic approaches give increasing prominence to factors such as reliability of transport systems.  In addition transport is often seen as an area where government can exert significant direct influence.  While most forms of transport are available across most of the UK, not all are reliable (The availability of airports, and more importantly the number and destination of flights from them, varies considerably and while roads may be many, they quality and levels of congestion very greatly. (Larson, Kulichtsky, 1999)

Freight logistics has been an important factor in the development of European growth and competitiveness.  Logistics plays a key role in ensuring the efficient functioning of the EU economy and accounts for about 13% of Gross Domestic Product in the EU when the whole activity is considered.  At the same time, an average logistics costs (transportation and warehousing) represent 10% to 15% of the final cost of finished products in Europe.  Its economic impact is enormous. Given the expected growth rates in freight transport around 50% between 2000 and 2020 the future role of logistics will be even more important to achieve an efficient, sustainable, accessible and safe transport system

The shipping company can help in showing how logistics are taken for granted.  The shipping department of a company is very often the focus of any successful company.  Shipping handles sensitive merchandise and is responsible for the valuable equipment and finished goods that are often worth almost as much as the company itself.  In United State, there still exists a comic stereotype in television and movies about lowly shipping clerks rising through the ranks of management to become a chief executive office or some other important executive. The stereotype is not really too far from the truth in many instances.

Logistics in the 21st century touches every aspect of the company’s daily operations and has grown into a business speciality of its own.  It is essential for the company’s competitive strategy and survival.  This is an important point that too often gets lost in the shuffle to overlook seemingly small but critical details.

Logistic is very well understood by customers- one of the problems that is constantly faced by a divisional export manager is trying to convince foreign distributors that his manufacturer is capable of delivering goods consistently.  Potential customers can cite examples of other distributors in nearby markets who had prior bad experiences with his client and then ask pointed questions about what changes had been made to solve these problems. (Elmuti et al, 1998)

Logistics is also well understood by analysts. This is especially problematic for new start-ups in the dot com world.  The paradigm does not shift when you produce services. One still has to gather intellectual capital that might reside in faraway places and then develop a consensus across cultural, racial and national borders. Granted the internet makes this task easier now, but it does not eliminate I t as a risk factor in assessing the viability of business plan. (Graham, 2000)

Logistics is not well perceived as a career choice. This not a real problem for large multinational firms who can afford to pay for top talent.  However, small companies have fewer options.  Globalization continues to explode while the US economy is in a tight labour market.  This makes it very difficult for smaller companies with fewer resources to pursue top talent with a solid background in global business because there are too many other very competitive offers out there. (Graham, 2000)

Logistics has been named a suspect in many corporate downsizing within the past 15 years.  We are now seeing the effects of corporate re-engineering done in the 1980’s and the picture being painted is very break.  The current wave of mergers and acquisitions is being driven by the brain drain of the junk bond era.  Some skilled logistics practitioners are rightly upset above how they are being portrayed in the media. (Christopher, 1998)

Logistics cuts both ways.  If one is highly trained in the inner workings of a corporation, then one has the capacity for looting and other negative behaviour.  Logistics plays on a global stage. For too many multinational firms, the logistics department has become like an armed mire field with traps every where you might step.  When academics and others finally do have time to really discuss the impact of transfer pricing, it should surprise nobody that they will look within two departments; accounting and logistics.  In the end, it is these two groups of people more than any others who know where the corporate skeletons are hanging. (Akkkermans, Aken, 1992)

Logistics is not only about strategic planning and resource management, but it is also about how companies go about their day and what impact this has on the rest of us. As a business speciality, the explosion of globalism has complicated the practice of logistics.  In the days of mostly domestic companies, shipping departments in most companies were run by an experienced shipping clerk that basically had few skills because too few people adequately understand how to get things done.  Except for top executives, especially in family owned companies, nobody wanted to have any direct involvement with this department. Logistics is a business function that is largely ignored and mostly misunderstood because it is not very appealing.  Smaller companies newly entering global business are beginning to recognize the importance of logistics but many top executives still have a hands-off approach. (Business Asia, 1999)

Companies are today facing increasing levels of competitive pressure and difficulty with regard to maintaining and improving profitability.  Management of these companies are being forced to seek and implement innovative strategies with which to advance their company’s competitive advantages as well as their profitability. (Stock et al, 2001)

These circumstances and the increasingly complex nature of logistics operations are causing companies such as those in the manufacturing sector, to focus on their core competencies, while others provide for example, some or many of their logistics activities.

Companies are also increasingly coming to realize the importance and the role of logistics in their organizations and therefore the need for specialist input there in. Improved and efficient logistics will make a country’s products more attractive from a cost and customers service point of new in the global village. Further more, the impact of logistics on a country’s land, labour and capital resources, gross national product, rate of inflation, interest rates, productivity, energy costs and availability; as well as employment and standards of living is also key to the increased focus o n logistics and supply chain management in many companies and countries. (Worthington, 1998)

Logistics is one of the major expenditures for businesses, thereby affecting and being affected by other economic activities.  This is well demonstrated by the following figures for the US quoted by Stock and Lambert (2001). In 1999, US industries spent an estimated $554 billion on freight transportation.  More than $332 billion on warehousing, storage, and inventory carrying costs and more than $40 billion to administer, communicate and manage the logistics process.; the total expenditure on logistics therefore amounting to over $900 billion.  In 2001, US business logistics system costs totalled $970 billion equivalent of 10% of the US gross domestic product measured in nominal dollars.  Worldwide, companies spent about $3 trillion on logistics.

Logistics outsourcing is also a big business. In 2000, third party logistics service providers generated $66.4 billion revenue in the US, up from $46 billion in 1999.  Logistics is also a huge consumer of land, labour and capital, particularly in industrialised countries where investment in logistics facilities run into many billions. As a significant component of gross domestic product (GPP) in the US 10.5% in 1996, logistics affects the rate of inflation, interest rates, productivity, energy costs and availability and other aspects of the economy.

Logistics also plays a key role in the economy in that it supports the movement and flow of many economic transactions.  It is an important activity with regard to the facilitation of the sale practically all goods and services.  In order to identify with this role of logistics, consider the facts that if goods do not arrive on time, customers cannot buy them.  If goods do not arrive in the correct place or condition, no sale can be made.  All economic activity throughout the supply chain would suffer if the logistics function failed to fulfil this role.  The logistics management function therefore plays an important role in a country’s export effort. (Business Asia, 1999)

Logistics management is usually accompanied by the investment of large amounts in mechanisation often to reduce labour requirements.

The factors underlying the recognition of the importance of logistics management include the following:

(i)                 significant opportunities presented by e-commerce potential

(ii)               Advances in technological and quantitative techniques.

(iii)             Recognition of the role of logistics in a company’s customer service programme.

(iv)             Erosion of companies profits because of their failure to examine functional areas where cost savings might be realized.

(v)               Development of the systems approach and total cost analysis concept.

(vi)             Profit leverage resulting from increased logistic efficiency.

(vii)           Recognition of the role of logistics in creating competitive advantage in the market place, particularly in the face of domestic and foreign competition, saturated markets, government regulation.

(viii)         Consolidation of companies thus increasing the importance of sound logistics practices and continued strategic planning as companies are re-organized and product lines are combined.

(ix)             Markets and logistic policies and practices of suppliers of consumer products being driven by the large retailers.

(x)               Customer requirements for value-added services continuing to drive costs up.

(xi)             Distributors stocking less with respect to industrial products and depending more on their suppliers’ stocks than in past.

(xii)           Increasing interest in third party providers that handle all or part of a company’s logistics functions, particularly with increased penetration into major trade areas.

(xiii)         Customer service activities continuing to be centralized and consolidated

(xiv)         Increased focus on computer technology and distribution software.

Logistics efficiencies provide competitive advantage for companies that successfully implement innovative strategies to better manage their logistics requirements for example are better equipped to increase their competitive advantage and corporate profitability and to become market leaders. (Lynch, 2001)

Logistics and the management thereof, therefore, play a key impact on the daily lives of people as well as the economic state and development of countries.  Consumers of manufactured products and other goods, worldwide, are dependent on logistics and the various activities involved there in ensuring that the products and services they require are available when, where and how they want them. From the issues discussed above, it is clear that logistics cannot and should not be taken for granted.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reference:

Bridget McCrea, (2005). Leading the Way; This Trailblazer in the Field of High-Tech Logistics is Drawing Lots of Attention. Black Enterprise, Vol 35

Business Asia, (1999). Warning; Don’t snob logistics. Vol 17, December 13

Christopher, M. (1998). Logistics and Supply Chain Management. Strategies for reducing cost and Improving Service. 2nd ed. London Prentice Hall

Elmuti et al. (1998). Outsourcing to gain competitive Advantage in Industrial Management.

Henk, A., Aken. (1992). Process Related Problems in Operations Strategy. Internal Studies of        Management and Organization, Vol 22

J, Harrinton, Barney, W. (1995).Industrial Location: Principles, Practice and Policy; Routledge

Jack et al (2001). From Raw Materials to Consumers: Supply Chain Management and Organization. Vol 22.

Jeffrey P. Graham. (2000). Logistics; Vital to Every Business. Gateway Newsletter at Trade Compass.

Kent Greenfield. (1960). Command Decisions; US Government Printing Office.

Larson, P., Kulichitsky, J.D. (1999). Logistics Improvement Programs; The dynamics between people and performance. International Journal of Physical Distribution and Logistics Management.

Lieb, R., Randall, H. (1996). A comparison of the use of third party logistics service by large American manufactures. Journal of Business Logistics.

Lynch, C.F. (2001). Logistics Outsourcing. A management guide. Oak Brook, Illinois: Council of Logistics Management.

Maltz, A.B. (1994). The relative importance of cost and quality in the outsourcing of warehousing. Journal of Business Logistics.

Paula, Worthington. (1998). The Increasing Importance of Retailers’ Inventories.

Peter et al. (1994). Logistics Alliances. The European Experience. The Mc Kinskey Quarterly

Rabinovitch, E., Windler, R. (1993). Outsourcing of Integrated Logistic functions. An examination of industry practices. International Journal of Physical Distribution and Logistics Management.

Robert, O., Paasschen. (1996). One size Doesn’t Fit All. The Mc Kinskey Quarterly

Stock, J.R., Lambert, D.M. (2001). Strategic Logistic Management. McGraw. Hill International, 4th Ed, New York.

 

 

 

 

 

 

 

 

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