Drivers and Enablers of Global Logistics - Literature review Example

DRIVERS AND ENABLERS OF GLOBAL LOGISTICS By Name Course Instructor Institution City/State Date Table of Contents DRIVERS AND ENABLERS OF GLOBAL LOGISTICS 1 Table of Contents 2 Introduction 3 Literature Review 4 Drivers 4 Enablers 5 Benefits and Challenges 6 Conclusion 7 References 8 Drivers and Enablers of Global Logistics Introduction Globalisation has in the last three decades brought about a tremendous impact on the business world. Globalisation has facilitated market access and made borders more transparent, and in consequence, both business and government have been compelled to improve their competitiveness. This has led to the creation of strategies and infrastructure required to gain from the accelerated growth of global business (Masteika & Cepinskis, 2010, p.856). Nearly all processes of the economy that are taking place in the countries’ market are influenced in one way or another by the occurrence of globalization, and logistics has not been an exception. As mentioned by Masteika and Cepinskis (2010, p.856), the logistics process has turned out to be an area of rapid development and scores of organizations have started realising its effect on profitability of the supply chain. Most companies are outsourcing their services in the attempt to cut costs as well as improve productivity through concentrating on core competencies. While the management continues experiencing drastic changes and with the multiplication and rise in standards of products, Chen and Chang (2008, p.137) posit that the customers’ demands for products of higher quality have increased progressively. The global logistics management development is in line with this trend. By means of the Internet, the customers can now access information promptly, and this trend has made companies focus on their relationships with customers. In this case, this literature review report analyses the drivers and enablers of global logistics. Literature Review Drivers Globalization according to Akram et al. (2011, p.291) is a process where different world economies are integrated together in terms of government people, as well as companies of different nations. On the other hand, Irani and Noruzi (2011, p.216) assert that industrial emergence of markets for global production as well as extensive access to diverse foreign products for companies and consumers have tremendously increased due to process of globalization. Advancement in transportation as well as communication technology, together with the ideology of free-market ideology, has offered capital, goods and services extraordinary mobility (Irani & Noruzi, 2011, p.217). Considering that the logistics sector relies on the international trade flows as well as global economic environment, Doll et al. (2014, p.2) posit that the global market is still affected by the enduring impact of global economic crisis considering the process of recovery has been very slow. Generally, Southeast Asia and North America seem to be fascinating logistics’ markets, especially with regard to the contract logistics. Doll et al. (2014, p.2) indicate that emerging markets provide growth rates that are above the average for the logistics industry. Basically, intraregional trade has turned out to be very important in Asia, and this, in the combination of the high GDP growth rates has transformed the region making it an important global market. Logistics as observed by Chia et al. (2001, p.344) has been changed rapidly due to the growing business globalization as well as changing technology. Changes in expectations of the consumers or geographical location incessantly change the markets’ nature. Chia et al. (2001, p.344) indicate that advanced technologies facilitate techniques of changing the flow of raw materials and finished products. In consequence, the demand for logistics services supporting goods delivery may as well change. The economical arrangement of storage and transportation is key a driver when planning a logistics strategy. In the mid-20th century, the logistics function was not just to reduce total costs of distribution as well as maximize profits, but also to realize the needed service performance levels. Currently, the aim concentrates on the maximization of manufacturing flexibility both outside as well as inside the company towards customization. According to Chia et al. (2001, p.344), this connotes that logistics is currently directed towards issues of the supply chain. A number of drivers as mentioned by Chia et al. (2001, p.344) are reshaping logistics operations: logistics innovation, low-cost communications, the markets’ globalization, removal of foreign investment and trade barriers, attaining economies of scale, and declining unit costs of transportation. The above-mentioned factors are inclined to increase global trade as well as the international production specialization. This connotes that logistics between countries and continents do not essentially increase with the world economy growth, but rather diversify and grow with certain demands of the diverse global markets. Enablers The above discusses drivers can be enabled by managing the growing costs of logistics considering that logistics costs currently represent a larger quota of sales. Actually, almost ten per cent of sales revenues as said by Taylor (2006, p.3) are taken by logistics for the majority of companies; therefore, costs of logistics have started eroding scores of economic benefits of global sourcing. Such costs as stated by Taylor (2006, p.3) are driven by both external and internal factors. This transition has compelled logistics distribution centres as well as networks to integrate variables and loads that were not intended. Another enabler of global logistics operations is lean manufacturing considering that the lean approach enables firms to move toward a product flow that is based on demand. Imperatively, lean manufacturing has motivated global businesses to concentrate on lowering inventory and reducing waste (Taylor, 2006, p.4). Besides that, operating as an On-Demand business is another enabler for global logistics operations bearing in mind that many companies have changed their business model so as to support On Demand Business operations. In this case, On Demand Business has been defined by Taylor (2006, p.5) as an organization whose business processes are able to respond swiftly to any external threat, .market opportunity or customer demand. So as to become competitive in the present epoch of On Demand Business, Taylor (2006, p.5) suggests that companies must respond to the changing conditions of the market and make sure they understand the variables within their cost structure. Supply chain management is another enabler of global logistics operation, and since logistics have an enormous impact on supply chain management, Taylor (2006, p.6) posits that information on global logistics is currently crucial for supporting decisions made at the enterprise, which includes demand planning and forecasting. Therefore, for a company to make effective decisions, line-of-business executives as well as managers, must comprehend optimized logistics costs. Benefits and Challenges The economic globalisation promoted by the reduction in trade barriers as well as the declining costs of communication, transport and co-ordination costs, has transformed the production processes structure and in consequence, has increased strongly the rate of trade. Maggi and Mariotti (2011, p.1) posits that this has led to increased exchange flows, impacting the logistics operations, particularly transport. Logistics operations play a crucial part in linking diverse export and import markets as well as production systems the components that are vertically disaggregated, which have spread across the globe. Even though the supply chain logistics principles are still applicable in the global market, the shortcomings are magnified significantly with the risks increasing tremendously. As the majority of companies try to exploit global marketing and sourcing, Maggi and Mariotti (2011, p.1) stresses that companies should understand the infrastructure changes and challenges in the global environment. In global logistics operations challenges arises from lost sales and high inventories as firms try to match demand and supply in the long supply chain and the disconnection between domestic transportation operations as well as inbound international movements (Supply Chain Digest, 2007, p.5). Therefore, to leverage emerging markets opportunities, Wedan (2006, p.3) suggests that companies have to change or expand to emerging market geographies across the globe in a manner that is agile supporting the flexibility as well as responsiveness related to the On Demand Business. Conclusion In conclusion, the literature review report has analysed the drivers and enablers of global logistics. As indicated in the report, providers of global logistics are experiencing the challenge of making decisions that are strategically correct. Owing to challenges attributed to global logistics operations, it has been suggested that companies should adopt On-Demand Business framework so as to be able to access growth markets as well as high-margin business operations in an environment that progressively commoditized. Without a doubt, companies may leverage certain approaches in the attempt to change their global logistics competencies as well as exploiting emerging market jurisdictions so as to achieve lower cost sourcing. References Akram, M., Faheem, M.A., Dost, M.K.B. & Abdullah, I., 2011. Globalization and its Impacts on the World Economic Development. International Journal of Business and Social Science, vol. 2, no. 23, pp.291-97. Chen, T. & Chang, C.-H., 2008. Strategy for Global Logistics Management – Based on the Study of Bicycle Manufacturing by Fiege Goth Logistics Services Ltd. The Journal of Human Resource and Adult Learning, vol. 4, no. 1, pp.136-48. Chia, K.-C., Feng, C.-M. & Chang, C.-J., 2001. The Effects Of Global Logistics Strategies On International Freight Transportation Demand. Journal of the Eastem Asia Societv for Transportation Studies, vol. 4, no. 4, pp.343 -358. Doll, A., Friebel, D., Rückriegel, M. & Schwarzmüller, C., 2014. Global Logistics Markets. White Paper. Munich: Roland Berger Strategy Consultants GmbH Barclays Germany. Irani, F.N.H.A. & Noruzi, M.R., 2011. Globalization and Challenges; What are the globalization's contemporary issues? International Journal of Humanities and Social Science, vol. 1, no. 6, pp.216 - 218. Maggi, E. & Mariotti, I., 2011. Globalisation And The Rise Of Logistics Fdi. The Case Of Italy. Working Paper. Milan: Nova Science Publishers, Inc. Università degli Studi del Molise. Masteika, I. & Cepinskis, J., 2010. The Effect Of Global Logistics Trends On 3pl: Case Lithuania Market. In 6th International Scientific Conference. Vilnius, Lithuania, 2010. Supply Chain Digest, 2007. The 10 Keys to Global Logistics Excellence. Supply Chain Thought Leadership Series. Alpharetta, GA. Taylor, C., 2006. Five reasons why global logistics is moving from the basement to the boardroom — and five steps to transformation. White Paper. Somers, NY: IBM Global Consulting Services IBM Global Consulting Services. Wedan, Q., 2006. Transforming global logistics for strategic advantage in emerging markets. White Paper. New York: IBM Global Business Services. Read More