Logistics the road to competitiveness

Peter Barbut

Ports can be built and developed. At the same time one has to be very clear in the thought process of the service advantages and be educated in what logistics and supply chain management is all about.

This article is written to give insight to this most important services sector in today's globalization of the markets.

The word 'Logistics' originally, evolved from the Greek word - 'Logisticos' meaning planned movement of materials.

It was used mainly in military parlance referring to the massive exercise for planning and mobilizing of resources'. Men, weapons, materials from food to medicines etc from various parts of the world to the battle fields.

But Logistics today has emerged as the road-map to commercial competitiveness.

True to Peter Drucker's word, the internationally acclaimed pundit in management theory says the last great frontier for managements to conquer is logistics and the practice of efficiently managed Supply Chain systems.

It has become the sharpest strategic weapon in any companies armour to win the commercial war in the modern world.

The management of logistics has been in existence for a very long time and practiced within one's organization or outsourced to professional companies mostly in the developed economies as a focused and specialized area.

In the modern day situation it has also been identified as one of the strongest-links that needs to be super efficient in the total supply chain delivery process from sourcing, manufacturing and delivery to the end user (Customer).

It involves transport, warehousing, inventory control, packaging in all forms of value addition to the consumer and on-time deliver within a well secured and guaranteed service.

In the future we will also be able to know how logistics will come to be evolved for delivering people and goods for space stations, conducting space programs.

Traditionally, in most of countries, in the period from 70's to 90's managed their aspects of procurement and distribution on their own, mostly as independent functions.

Establishing and managing an efficient distribution networks which is not their core business becomes increasingly complex as the number of products to be procured and distributed and the geographical spread of the network increases with the advent of new markets.

From being a military tool, it has today imbibed by the business empires to effectively manage their production and distribution requirements.

A contemporary definition of logistics explains it as the process of planning, implementing and controlling efficient and cost effective flow of materials and information from point of origin to point of consumption for the purpose of conforming to your customers delivery requirements.

Today, 10 to 15 percent of a company turnover is spent on logistics, depending on the nature of product and distribution pattern adopted.

Realization of the difference it can make to profitability has led to a paradigm shift from traditional business approach, having exhausted all options in the areas of product differentiation, pricing, quality, promotional strategies and advertising warfare, large corporations, medium and small enterprises are now increasingly turning to 'Integrated Logistics Systems' to counter their competition in the market place.

The integrated logistics systems carries the entire spectrum from procurement to storage and distribution to optimize all aspects of supply chain management and reap the benefits of:-

- Faster reach to market ensuring product availability on shop shelves.
- Lesser order cycle time
- Reduction on inventory levels
- Reduction in operating costs
- Improved asset productivity

Most of the largest multinational and regional companies, today has seriously viewed and implemented in outsourcing logistics as an very important strategic measure in their companies, not only a means to reduce costs in the short-term but has to be seen in its proper prospective as a long-term strategic management tool.

Today to quote as a example to the aforesaid, the most important factor that has contributed to the success of the US retailing giant the WalMart Stores' would be a noteworthy factor where the companies total supply chain operations has been outsourced in partnership with global logistics players, which has enabled to focus 100 percent on their core business of retailing products.

There are three very important factors that today has benefited companies by contracting /outsourcing their non-core functions, which are elaborated below as overall impetus to managements.