Even though total supply chain costs may be reduced by global sourcing, typically, transportation and logistics costs have been rising as a percentage of the cost-of-goods sold (COGS). Show
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February 3, 2014 · By JDA Software The modern business landscape is marked by increasing levels of global sourcing – particularly from low-cost countries. While many companies across a variety of industries achieve cost savings through this sourcing strategy, the benefits are often offset by complexities associated with global logistics management. Even though total supply chain costs may be reduced by global sourcing, typically, transportation and logistics costs have been rising as a percentage of the cost-of-goods sold (COGS). This has occurred as a result of rising fuel prices, the intrinsic costs of long-distance flow of goods and transportation capacity imbalances – both for domestic transportation in regions like North America, and for international ocean and air freight from countries like China. Logistics as a Strategic Business Function The global flow of goods requires multiple handoffs – including various carriers, customs and port authorities, and consolidators. And these hand-offs increase the probability of unexpected events. Growing import volumes, particularly from Asia, combined with important security concerns, have led to severe port congestion in North America and Europe. Impact of Sourcing Strategy  As shown above, the percentage of total landed cost that is attributable to supply chain can go from less than 3-5 percent in a local sourcing environment to as much as 35 percent in a global sourcing environment. As companies conduct business in more countries, and as countries continuously change their regulatory and customs-clearance processes, delays occur during document compliance assessment and processing. Leading companies are leveraging several strategies to respond to the complexity of global logistics management in an effort to reduce transportation costs and improve service levels while still focusing on the “buy anywhere, sell everywhere” business model. As a result, logistics is becoming a more strategic business function at companies where it has not traditionally been a core competency. Here are some key best practices for managing global logistics: 1. Evaluate and determine the right global logistics operating model They’re asking themselves: Is it strategic to develop in-house competencies related to logistics network design, logistics sourcing and management, transportation capacity planning, global shipment planning, visibility and event management? Should companies be outsourcing some logistics execution functions, such as conducting prebooking and booking confirmation in ocean transportation, managing export/ import customs clearance and document compliance, and warehousing and storage? Additionally, global multi-divisional companies are creating a shared-services organizational structure to procure, plan, execute, monitor and measure global freight movements. Global logistics organizations are evolving into “internal 4PL” business models to effectively manage and service the needs across various lines of business and regions. 2. Establish strategic relations with logistics service providers and get alignment on performance metrics “LSPfriendly” programs are being developed to adopt more collaborative rate negotiation and bidding processes, provide forward visibility into logistics capacity needs and develop packaging that allows for easier handling. To streamline their customs clearance processes, topper-forming companies are leveraging customs brokers, freight forwarders and other third parties. They’re forming long-term relationships with customs officials. Local knowledge can serve as an important lever in avoiding delays and ensuring proper document compliance. Robust sets of global logistics metrics and key performance indicators (KPIs) are being developed and implemented to score-card LSP performance and continuously monitor performance, as well as align payment terms to these metrics. 3. Deploy global visibility and exception management processes and systems This visibility and exception-management infrastructure needs to extend across the various legs and milestones involved in the global flow of goods. Visibility by itself is not a silver bullet in solving all complexities related to global logistics. Yet, when combined with intelligent exception management, logistics planning and execution workflows, this layer of global visibility can be a very powerful weapon in managing variability in the global flow of goods. 4. Optimize the global flow of goods through intelligent routing and consolidation Given the need to deal with transportation capacity issues as well as to maximize utilization of containers, they’re now moving toward a more dynamic process – one in which they can make decisions on ports and inland modes and carriers, and look for consolidation opportunities across their international shipment volumes. Leading companies are dynamically evaluating options for doing merge-in-transit, leveraging hubs for pool distribution, doing trans-loading, and diverting-intransit when appropriate to reduce cycle times and costs. 5. Institute a continuous process for ongoing logistics network design and scenario analysis However, the rapid pace of modern global business dictates a more frequent assessment of logistics network design. With scenario planning, “what-if ” analysis and management, today’s companies can reap the full benefits and minimize the risks associated with global sourcing. What is the logistics management process?Logistics management is a comprehensive process that includes various sub-processes. It involves the management of procurement, storage, and transportation of physical resources. This process is only one aspect of supply chain management.
What's the 4 key processes of logistics operation?The entire logistics process consists of managing inventory, fulfilling orders, and shipping packages. Inventory management, warehousing, and order fulfillment all play a key role in optimizing logistics operations.
What are the 5 P's of logistics?The major cause of conflict for logistics and marketing interface is related to 5Ps (product, price, place, promotion and packaging) of marketing.
What is the purpose of logistics management?The main objective of logistics management is to execute proper planning on transportation modes and inventory available to satisfy the customers. This leads to a smooth freight moving process and timely delivery of products or goods.
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