The environment of logistics has changed greatly because of global integration and the gradual shortening of lifecycles of products. For that reason a brief overview of what are, perhaps, the most significant of these factors in the business environment like increasing globalization, mergers and acquisitions, downsizing, new IT systems etc. In this paper, contemporary logistics strategy and evolution of emerging strategies like SCM and Cycle time reduction will be explained. Implementation issues and other challenges like reaping the benefits of IT, choosing a trade-off between complementary strategies; integration issues etc.
This paper will mostly discuss the logistics strategy which the companies are adopting to succeed in the emerging markets like India, China etc. Emerging markets are becoming hot destinations for carrying out business mainly because of access to low cost labors and material. However at the same time how the firm mitigates the risk associated with doing business in foreign territory and how it manages the associated cost of transportation will also be discussed. Logistics Strategy and its importance. When a company creates a logistics strategy it is defining the service levels at which its logistics organization is at its most cost effective.
Logistics Strategies for Entering New Markets
Because supply chains are constantly changing and evolving, a company may develop a number of logistics strategies for specific product lines, specific countries or specific customers. The supply chain constantly changes and that will affect any logistics organization. To adapt to the flexibility of the supply chain, companies should develop and implement a formal logistics strategy.
This will allow a company to identify the impact of imminent changes and make organizational or functional changes to ensure service levels are not reduced. Parameters Involved in Developing a Logistic Strategy. A company can start to develop a logistics strategy by looking at four distinct levels of their logistics organization.
The plan for implementation will include development or configuration of an information system, introduction of new policies and procedures and the development of a change management plan. When examining the four levels of logistics organization, all components of the operation should be examined to ascertain whether any potential cost benefits can be achieved. Would a partnership with a third party logistics company improve service levels? If the data is inaccurate then the decisions that are made will be in error. A successfully implemented logistics strategy is important for companies who are dedicated to keeping service levels at the highest levels possible despite changes that occur in the supply chain.
Since s, the environment of logistics has changed greatly because of global integration and the gradual shortening of lifecycles of products. The mode of production in enterprises has changed from the traditional mass production mode led by products into the mass customization production mode to facilitate increasing global market competition. Srinivasa pointed out three main reasons of such revolution. In the past, logistics was recognized as a distinct function with the rise of mass production systems.
Since s, the Japanese philosophy of distributed manufacturing and lean manufacturing has become the key technique which is widely adopted around the world. Consequently, the logistics operation is forced to change in order to fit such new Japanese manufacturing strategy. As a whole, logistics has become an extremely complicated process in which expert knowledge is required.
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Business environment as a whole is becoming extremely volatile. As product life cycle becomes shorter, manufacturers can no longer push their products down the supply chain easily. On the contrary, it is the consumer who pulls the products along this supply chain. Price and quality are no longer sufficient to thrive in this market. As speed to market and flexibility of the supply chain become the winning criteria, logistics management has grown much more complex in order to satisfy these conditions simultaneously.
As enterprises expand their markets beyond national boundaries, the need for more sophisticated services like multi-modal transport and international trade rules compliance increases. Hence, redesign of logistics operation is essential in order to achieve greater efficiency and effectiveness on these issues.
Operations Management of Logistics and Supply Chain: Issues and Directions
These issues revealed the complexity of logistics management in that traditional logistics operation which includes large quantity of stock storage and distribution cannot fulfill the real time, flexibility logistics service demand among the supply chain parties. Moreover, since logistics network has became more complex, it takes time to make critically decision in resource allocation and work task arrangement accurately.
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In the current dynamic scenario where business landscape has changed a lot and more and more business are becoming customer centric firms have realized that to remain competitive they need to consider logistics as a part of their strategy and not just another function. Companies have gained significant advantages over their competitors by focusing and crafting a logistics strategy which suits their requirement. However, there is no fixed Logistics strategy solution in place for any type of industry.
It depends on and varies from the type of goods, nature of industry, the market it serves etc. There has to be a logistics strategy in place that clearly delineates when an item should be inventoried. What are the economical, service and other considerations your company needs to consider before taking these steps? Hub and Spoke -Are there economical cost of goods advantages to sourcing products into a centralized distribution center that subsequently distributes to regional facilities or branches through a hub and spoke distribution network?
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Inbound Logistics -Are there opportunities to reduce your landed cost of goods through improved inbound logistics strategy including load consolidation, reduced handling, backhauls, etc.? Outbound Logistics-Are there opportunities to reduce your outbound transportation costs through improved private fleet routing? Through improved carrier rate shopping, through load consolidation opportunities, etc.?
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Facility Consolidation-Is your company operating too many distribution centers that are underutilized? What are the economical benefits and service impacts of closing one or more of your distribution points? Inventory reduction-Is your company carrying the right assortment and inventory levels to achieve service level objectives? To minimize inventory assets, to minimize storage and handling costs?
Are there internal supply chain policies that hinder cost-effective operations?
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Global Logistics-Are there opportunities to improve global logistics to reduce inventory levels in the supply chain? To reduce order cycle times? To reduce supplier lead times? To reduce logistics costs? With these questions in mind we proceed to see what have been few emerging and successful strategies and what the challenges in implementing them are. Given the expanding complexities of global operations, information about logistics costs and capabilities is crucial to evaluating whether and how to leverage emerging markets as a means for increasing profit margin.
Globally, there has been a trend to source from or manufacture in low-cost jurisdictions and emerging markets. This trend, however, is often offset by increased logistics costs and delivery times, along with a growing number of complexities that need to be managed. Senior management has begun to realize that lowering unit procurement costs does not translate directly to lower per-unit total landed costs — the total costs associated with importing goods or parts from distant emerging market locations.
The complexities of managing logistics in emerging market locations ultimately add to the total landed costs of the associated goods. Therefore, the process of redesigning supply chain operations to establish logistics management capabilities in emerging markets is a fundamental dimension of a long-term business strategy. Components of this strategy should include a focus on end-to-end integrated operations design and sound process discipline.
To leverage opportunities in emerging markets, companies must transition or expand from managing logistics in a limited number of local geographies to managing them in emerging market geographies worldwide — in a very efficient, agile manner that supports the responsiveness and flexibility associated with an On Demand Business.
Companies can leverage specific approaches to transforming their global logistics capabilities and better support the business goals of lower cost sourcing or fulfillment by taking advantage of emerging market jurisdictions.
Logistics Strategies for Entering New Markets | SpringerLink
Global supply chain management — a rapidly changing environment Because of competitive pressures in the global marketplace, companies are rapidly migrating to low-cost sources of labor and materials, which are typically located in countries that also represent emerging market opportunities. If you are adopting global sourcing practices, you may not yet have the foreign trade experience necessary to manage regulatory compliance and related global supply chain management complexities. For example, multiple, autonomous business units within an organization can contribute to a fragmented logistics process as well as create missed opportunities for leveraging economies-of-scale.
Individual business units may also lack the necessary economies-of-scale needed to establish a competitive foothold and gain sufficient influence in emerging markets. Balancing inbound and outbound supply chain logistics requires a comprehensive strategy that incorporates all the key functions of a supply chain to accelerate or expand sourcing from emerging markets. This horizontally integrated approach also helps you make strategic decisions regarding partnerships, shipping and other factors, to help ensure that savings from global sourcing are not eroded by increased logistics costs. Even more significantly, such a strategy can enable you to go beyond sourcing to position your organization to leverage your logistics capabilities to sell and distribute products within those emerging markets.
Challenges to leveraging emerging markets in supply chain cost management As you expand your geographic reach of global sourcing into emerging markets, you will likely encounter a growing number of supply chain and logistics challenges, many of which directly or indirectly contribute to a large portion of total landed costs. Each issue can be grouped into one of two categories: tangible or intangible.
Tangible challenges of working in emerging markets include obvious things such as the limited physical infrastructure of roads, bridges, harbors and airports. Other limiting items include the communications infrastructure needed to support the necessary IT connectivity.
As constraints due to infrastructure bottlenecks represent a clear challenge, government agencies are more aptly able to focus on these items because the benefit for improvement extends beyond just the business sector. Enhancements to physical infrastructure help the greater population of the emerging marketplace and contribute to modernizing an entire region or industry.