How Logistics Improvements Affect The Economy

How Logistics Improvements Affect The EconomyDefine Logistics guidance and develop how logistics returnivity improvement affects the economy as a wholly as well as the position of individual consumer. The definition of logistics worry (LM) varies from comp completely(a) to comp whatsoever but the most comprehensive definition is stipulation by Council of Supply Chain counseling Professionals (CSCMP) as logistics management is the religious serviceing of each(prenominal)ow for twine management that blueprints, implements, and controls the efficient, efficacious forward and r incessantlyse extend and storage of goods, runs and related tuition from the point-of-origin to the point-of-consumption in hostelry to discover clients requirements (Council of Supply Chain Management Professionals, n.d.)Logistics productiveness Improvement and the EconomyLogistics has fuck off an enormously important component of the gross domestic product (GDP) of alter nations and gum o libanum affects the swan of inflation, interest rates, productivity, energy be and its availability and different aspects of the economy as well. Ever changing melodic line environment c whollyable to globalization, go across clip reductions, guest orientation, and outsourcing has contributed to the interest in logistics (Hertz Alfredsson, 2003). The increase in global merc guideise sharing, the shortening of product life speech rhythms, and the increase of global rival all underline logistics as a strategic pargonntage of warlike advantage (Arvis, Mustra, Panzer, Ojala, Naula, 2007). Moreover, in establish to remain in free-enterprise(a) marketplace and earn reasonable profits, organizations interest in logistics has been increased. Logistics operations agree give out more efficient ascribable to technological advancements which make it viable to deliver goods on time while reducing the greet involved. orbicular market access has been improved over the time with the advancement in engineering and trade liberalization endinging in the economic growth and instruction of the countries. Patterns in the market controversy situation argon continuously dictating the supply chain flows (i.e. product, price and information flows) in a predictable, timely and cost-efficient way. Global firms integrated decisions regarding which country to locate in, which suppliers to buy from and which consumer markets to enter argon largely base on logistics costs, tonus and operate aim. Therefore, the countries with noble(prenominal) popular logistics costs ar more likely to miss the opportunity of globalization. roughly every sphere of human activity is affected, directly or indirectly, by the logistics transition. Certainly, the improved logistics is bideed to harbor important economic effects. Lower logistics costs and go affect positively in turnout, dispersal and trade and/or retail activities of the firms. minify/minimum logistics c osts enable a production or distribution facility to serve a wider market ara, with capability gains from economies of scale. It as well as means that a firm keep draw supplies from a wider atomic number 18a with electromotive force gains in terms of the cost and/or quality of parts and corporeals. Logistics costs include transport costs, costs of owning and run w atomic number 18ho social occasions, purchase order costs, and carrying costs of roll (Consulting Decision- economics, 2002). To understand, how logistics productivity improvement helps in boosting economic growth, the next Figure 1 behaves how investments in transportation infrastructure (a sub-sector of logistics) shag lead to generative effects and growth in the national economy. It send packing in any case be drawn that reduction in shipping costs and tour time and increase in schedule reliability can be expected to take a leak significant doctors on scroll management at supply chain level.Figure 1 Transportation and the Economy competent TransportationInfrastructure Investment subjoind Transportation Capacity, Efficiency, Reliability, and Level of dish outTransportationCost SavingsBusiness Expansion(Relocation and Restructuring)Transit clock time Savings(Reliability Improvement)Increased CompetitivenessIncreased productionivityIncreased Economic Growth cum (Consulting Decision-Economics, 2002)Consequently, the efficiency and reliability of the logistics system affects economic productivity which is the most important determinant of economic implementation. Therefore, logistics industry is the artery and the staple fibre industry of the national economic development in the world. Its development level is one of the important marks to evaluate the level of suppose modernization and comprehensive national strength. Logistics is the accelerator of the economic development and growth.The World Bank, with its master and academic partners, has produced the Logistics Perfor mance Index (LPI) to help countries develop logistics reform programs to enable trade and enhance their emulousness. The LPI is a comprehensive index created to help countries order the challenges and opportunities they face in trade logistics performance (Arvis, et al., 2007).Logistics Productivity Improvement and the private nodeIn directlys uncertain and changing business environment, firms must oppose to changing guest need in order to remain advantageful. Customers expect many kinds of goods to be unattached with them whenever they need. When a person comes into a livestock with the expectation of having the desired item/article from the store and eventually walks by with or without it. If the item is either non available or in stock, on that point is a problem for both the retailer and the node. The retailer loses business and the customer has to go an separate store/retailer for the item/article. The self alike(prenominal) situation applies to businesses buying supplies it is costly to a business if it cannot obtain supplies when needed. To get laid with this problem (i.e. stock outs) and to improve responsiveness to the customers businesses should carry gillyf humiliate. But carrying record requires huge capital investments in constructing wargonhouses and insurance expenses to cover the risk of detriment or damage. All of these costs are strike downd if stock can be reduced. Inventory held in retail stores or at warehouses can be reduced if replenishment is fast and reliable.Firms that analyze their costs carefully, consider that chronicle and the number of warehouses can be reduced without loss of customer benefit by using more on the table and efficient transportation system. Such changes in a firms logistics set-up are close to measure referred to as a reorganization effect (Consulting Decision-Economics, 2002). Businesses are constantly under immense imperativeness to have enough stock to satisfy customers and to reduce the cost of carrying record as well. To accommodate these conflicting pressures, firms are left with no choice but an efficient and effective logistics system enabling them reduced inventory costs while maintaining or improving the level of customer service (that is an increase in productivity). These productivity gains will not occur unless a firms management perceives that the logistics system is robust and reliable enough to support its plans. Zhang, Vonderembse Lim (2005) are of the view logistics flexibility and its components bodily supply, purchasing, physical distribution, and demand management flexibilities are related to each other and to customer satisfaction. Figure 2 portrays the relationship, how flexible logistics affects the customer satisfaction.Figure 2 Impact of Flexible Logistics Competence on electrical capacity and Customer SatisfactionFlexible Logistics Flexible LogisticsCompetence CapabilityPhysical Supply flexibilityPhysical DistributionPurchasing Flexi bilityDemand ManagementCustomer Satisfaction seed (Zhang, et al., 2005)Logistics, as a business competence, deals with the attainment of customer satisfaction at the minimum level of (logistic) costs. Customer satisfaction or improved customer service, is reached as the suppliers of goods and operate succeed in achieving the growing needs of consumers to deliver their products according to the ever emerging demands of the customers, not only with regards to the physical nature of these products, but also with regards to their demands of reliability and flexibility of the logistics organization. According to Lim Palvia (2001) a responsive and efficient logistics communicate helps the organization to satisfy their customers in a number of waysIncrease in product availability i.e. high order fill rate and promised pitch date bowdlerised order calendar method timeReduced distribution system malfunction i.e. accuracy of billing and product slantDistribution system flexibilityDistri bution system information i.e. label of price change, new product information, shipping delay and order stipulation informationImproved post-sale product supportWhy has logistics been receiving more aid as a strategic function of the organisation? Discuss the mention challenges faced by logistics today and identify what you see as the superior area of opportunity for logistics, and explain why you chose this area. (Your answer should not fall 2000 words).Logistics as a Strategic Function of the OrganisationThe strategic splendour of logistics is well unders in like mannerd especially in organizations that identify customer service and not the physical product as the single out entrap of any organization (Korpela Tuominen, 1996). For companies successful with logistics partners, a common factor overriding all others is the recognition that this business activity is an important part of marketing system (Bowersox, 1990). Braithwaite Christopher (1991) gave avocation reasons , why logistics is a strategic function for most of the organizations broaden lead-times of supplyExtended and unreliable transit timesMultiple freight mode and cost optionsIntermediate component shipping with local added quantifyInitially, logistics was considered to have a supportive role to primary functions of organizations such as marketing and manufacturing. But now they have stretched out to cover purchasing, storage and transportation activities, distribution, inventory management, packaging, manufacturing, and even customer service. More importantly, logistics management has evolved from a passive, cost-absorbing function to that of a strategic factor which provides a unique competitive advantage (Bowersox Closs, 1996). Companies committed to strategic use of logistics usually outperform the competition in speed and consistency of order cycle (Bowersox, 1990).Organizations do have some standards, they intend the customers to rely on and expect employees to adhere to. A product marketer for example, having 95 percent order fill rate, if lack to increase it to 98 percent, will require a just-in-time or prompt response inventory replenishment type of business strategy. Marketers will reach not only to consistently deliver complete orders to the customers at the time and location requested but also to expand the level of service to keep customers loyalty. By developing a high level of standards performance, the companies reduce the number of less-than-standard situations that have to be resolved. Moreover, high quality logistics service residency is almost invariably less expensive than a procedure based on an expected percentage of failure that demands frequent correction (Bowersox, 1990).Advances in telecommunications and information technology have apt(p) companies the way to manage the physical movement of product over long, often circuitous, routes. Many carriers (for example DHL , FedEx and TCS read Logistics in Pakistan) have invested he avily in lead and trace systems to be able to establish the location of any consignment at any time, improving the visibility of the global supply chain to shippers and their customers. Also on that point is a growing competition among international companies to produce and deliver customized products and services fast and efficiently all over the world. Eventually, this will go hand in hand with an improvement of lead times to the extent that customized products have the same responsiveness as standardized products have now.Logistics has become a strategic function of the business organizations by providing competitive advantage finished competence in delivery speed, reliability, responsiveness, and low cost distribution. Integrating logistics into corporate strategy has a greater effect on customer nurse than any other process, whereas, integrating logistics into overall organizational strategy is precise to reducing costs, entering new markets, creating customer service, and gaining competitive advantage. Logistics excellence has a significant impact on corporate profitability and firms can use logistics to create a competitive advantage.Key Challenges to the Logistics TodayAs businesses become more outsourced, virtual and as global customer markets expand on with the emergence of new regional supply capabilities, the need for improved skills of procurance and logistics as well as useable transformation becomes more acute. Organizations today face great challenges because the successful provision of many goods and services requires the effective integration of logistics activities across a complicating and lengthening supply chain. In young years, most industries have recognized that substantial savings are available to companies that are able to coordinate and innovate within their logistics operations. Chiu (1995) identified following challenges, logistics systems are facingDiversified productsShort order cycle times merchant vessels in small qua ntitiesHigh frequency and reliability of deliveriesCustomer service orientationLow stock level and rapid inventory turnoverTimely and accurate information requirementsCheong (2004) on the other hand, separate the challenges to logistics providers by their level of tangibility i.e. Logistics Network Configuration degree (most tangible), to poppycock Flow layer, to Information Flow layer, and closingly to Relationship Management layer (least tangible) as shown in the figure. 3. Logistics network configuration is concerned with designing the optimal network to satisfy service requirements at the minimum cost and the challenges at this level consist of decisions regarding number, size and location of warehouses location their links to the distribution centers warehouse sizing allocation and customer points. Second layer is material flow which refers to the movement of products from the upstream entities, via the logistics provider, to the downstream entities.Figure.3 Layers of Chal lenges Faced by Logistics ProvidersSource (Cheong, 2004)At material flow level, the decisions on inventory management computer programing the transport lot sizing warehousing and consolidating the products are the challenging areas of logistics management. one-third layer is information flow, which refers to the flow of information throughout the supply chain and includes order processing information sharing IT systems integration Internet and visibility. The final layer, the relationship management is concerned with performance measures and contract design. The biggest challenge in inter-company coordination is information sharing and the issue of trust (Cheong, 2004).Area of OpportunityThe stipulation of power in logistics industry is very much important in determining the future trends. In the USA, for example, the resellers and retailers have typically occupied a weaker power position in the logistics channel than the manufacturers whereas this has not been the case in Austra lia where the retail chains, particularly in the grocery industry, have always held the ascendant position (Gilmour, 1993 Gilmour, Driva, Hunt, 1995). The opportunities for retail logistics are hence different from that of distributors. The most potential area of opportunity for overall logistics industry is information and computer technology in my personal view. Information and computer technology have had a significant impact on global logistics operations over youthful years. Chiu (1995) identified five major information technologies which have become progressively common in logisticsPoint-of-Sale (POS) systemsBar CodingElectronic data Interchange (EDI)Value-Added Networks (VANs)Electronic laying Systems (EOSs)In addition, there are some other terminologies i.e. Enterprise Requirements Planning (ERP), storage warehouse Management Systems (WMS), Transportation Management Systems (TMS), productivity tracking software and Activity-Based Costing (ABC) software etc. which repr esent the status of IT in logistics. There are many examples of the use of WMS and other technology in warehousing, such as those systems installed at Hewlett-Packard, Malaysia Airlines, Texas Instruments, and Unipry Italia. Furthermore, there are some latest equipments as well, which are being used in warehouses and distribution centres including voice synthesizer and video text, to facilitate the receipt of an order paperless picking warehouses using radio frequency (RF), and new transport equipments such as B-doubles scheduled and monitored by on-board computers facilitate the delivery of the order.Time-based competition has put the businesses under continuous pressure and to be successful in todays competitive environment the use of information technology has become obvious. Mentzer (1999) identified quaternary specific strategies that organizations use in time-based competition just-in-time (JIT), quick response (QR), trafficker managed inventory (VMI) and continuous replenis hment programs (CRP). Efficient consumer response (ECR) is another time-based competition strategy found primarily in the grocery industry that focuses on inventory replenishment, store assortment, promotion and product introduction. cooperative, Planning, Forecasting, and Replenishment (CPFR) transfers end-customer information as far up the supply chain as possible to plan upstream supply chain activities such as distribution and production scheduling.The future of logistics development is subject to col dig outative logistics and virtual or fourth-party logistics. Col outwearative logistics is described as a model relying on real-time information which flows seamlessly amongst all parts of the supply chain.It is mostly believed that collaborative logistics between companies dynamic in supply chain setups reduce the cost and increase the efficiency. virtual(prenominal) or fourth-party logistics is described as third-party logistics providers who act as a general contractor of all logistics activities for an organization. In either of the situation, information technology has important role in effective and efficient logistics.Identify the objectives of warehousing and explain different trace performance indicators for all the store activities. (Your answer should not exceed 2000 words) memory board ObjectivesA warehouse is simply a technical building used for the storage of goods. Warehouses are normally used by manufacturers, importers, exporters, wholesalers, transport agencies etc. warehouse processes include receiving, put-away, order preparation/picking, dispatching and inventory management. In a warehouse, storing goods in an adequate pose with the duty-hand(a) equipments by well trained personnel in a properly plan layout results in maximal protection of items (Tomkins, et al., 1996). So the objectives of a warehouse should beSpace utilizationEquipment utilizationMaximize human resources utilizationReduce SKU handling and maintain required SKUMinimize companys operating expensesAccessibility of all materialsProtection of all materials (including companys assets)In order to achieve objectives of a warehouse business, the first step is to fix right product, in right quantity, in right condition and on right time is received. Secondly, to allocate proper storage blank space to that inventory that maximizes the space utilization. Finally, while shipping an order, ensure right SKU, in right quantity, in right condition and at right time is dispatched. Moreover, the efficient and effective use of equipment and human resources is of pristine importance. The size, architectural design, configuration and location of the warehouse, are also the major determinants of the success or failure of the company in chasing its objectives.Key Performance Indicators (KPIs) of WarehousingWarehouse management is an area where logisticians can focus to gain maximum efficiency for minimum cost. Usually organizations measure their performan ce by analyzing if the things are going in the right way or not, and if not, what were the causes of poor performance? The main instruments for assessing performance are key performance indicators (KPIs), the specific characteristics of the process which are measured in order to describe if the process is complete according to pre-established standards. Moreover, KPIs measure the business health of an enterprise and ensure that all individuals at all levels are marching in step to the same goals and strategies.Neely et al. (1995) defined performance metre as the process of quantifying the efficiency and military posture of an action or activity. There are some other reasons too for measuring performance for improving performance, for avoiding inconveniences before its too late, for monitoring customer relations, for process and cost control and for maintaining quality.Selecting and defining KPIs is not as prospering as it sounds. In the current marketplace, while purchasing busin ess password (BI), enterprise resource planning (ERP), supply chain management (SCM), customer relationship management (CRM) or business performance management (BPM) systems, there is the dilemma of choosing only few KPIs from the several hundred (or thousand) metrics that are included in the package. Key performance indicators (KPIs) reflect strategic cling to drivers rather than just measuring business activities and processes. Key performance indicators help aligning all levels of an organization (business units, departments and individuals) with clear targets and benchmarks to create accountability and track progress.Furthermore, they accelerate collaborative planning across the organization to ensure that everyone is operating from the same playbook. The success of any performance management program is thus dependent on selecting the correct KPIs. Selection of the wrong KPIs can result in sub-optimized results. While selecting KPs, it should be bore in mind that although all KPIs are metrics, not all metrics are KPIs. The trick is clear-sighted between the two. In a study on performance measurement of a manufacturing warehouse, Birkholz (2004) used warehousing KPIs based on business processes receiving, put-away, storage, order picking and shipping/dispatching. Warehousing KPIs were classified into five categories financial, productivity, utilization, quality and cycle time. A summary of all the warehousing KPIs is given over in evade 1. plug-in 1 Warehouse Key Performance IndicatorsFinancialProductivity utilisationQualityCycle TimeReceivingReceiving cost per receiving line taxation per man-hour% Dock door utilization% communicates processed accuratelyReceipt processing time per receiptPut-awayPut-away cost per put-away linePut-aways per man-hour% Utilization of put-away labor and equipment% Perfect put-awaysPut-away cycle time (per put-away)StorageStorage space cost per itemInventory per square foot% Locations and cube occupied% Locations without i nventory discrepanciesInventory days on hand hostelry plectrumPicking cost per order lineOrder lines picked per man-hour% Utilization of picking labor and equipment% Perfect picking linesOrder picking cycle time (per order) channelpingShipping cost per customer orderOrders prepared for shipment perman-hour% Utilization of shipping docks% Perfect shipmentsWarehouse order cycle time congeries score cost per order, line, andItem total lines shipped per make sense man-hour%Utilization of total throughput and storage capacity% Perfect warehouse orders essential warehouse cycle time = Dock-to-stock time + Warehouse order cycle timeSource (Birkholz, 2004 Frazelle, 2002)Krauth et al. (2005) classified around 130 indicators used for assessing warehouse performance, such as storage surface, storage volume, storage racks, number and characteristics of docks, pallets per hour, pallets per square meter, opening hours, and attention with customs etc. Liviu et al. (2009) grouped key performance indicators for warehousing into tercet categories Inventory Management, Warehouse Performance and Order Fulfilment. The summary of these warehousing KPIs is given in Table 2.Table 2 Key Performance Indicators (KPIs) of WarehousingInventory ManagementMeasureCalculationDamaged Inventory (min.)Total Damage (lei) / Inventory ValueDays on Hand (min.)Avg. calendar month Inventory (lei) / Avg. Daily Sales/MonthStorage Utilisation (max.)Avg. meshed Sq. m. / Total Storage CapacityDock to shoot Time (min.)Total Dock to Stock Hrs. / Total ReceiptsWarehouse Performance IndicatorsOrders per minute (max.)Orders Picked or jammed / Total Warehouse Labour HrsItems per Hour (max.)Items Picked/Packed / Total Warehouse Labour HrsCost per Order (min.)Total Warehouse Cost / Total Orders ShippedCost as % of Sales (min.)Total Warehouse Cost / Overall SalesOrder Fulfilment IndicatorsOn-Time Delivery (max.)Orders On-Time / Total Orders ShippedOrder Fill Rate (max.)Orders Filled Complete / Total Orders ShippedOrder Accuracy (max.)Error-Free Orders / Total Orders ShippedOrder Cycle Time (min.)Actual Ship Date Customer Order DatePerfect Order consequence (max.)Perfect Deliveries / Total Orders ShippedSource (Liviu, et al., 2009)Inventory Management measures are generally concerned with decisions regarding optimum level of inventory to be maintained. A higher evaluate of Damaged Inventory indicator shows less effective inventory management. Days on Hand indicator shows the level of inventory in hand into number of days it will serve. It will have a lower tax if contracts with suppliers are renegotiated and if are kept only the ones who are able to deliver products fast. Storage Utilization indicator shows the level of space utilization, for example, number of layers of pallets per rack. It also describes how efficiently space has been allocated to storage, dock and office. Dock to Stock Time indicates the efficiency of warehouse operations and its value can be reduced by introduc ing portable barcode readers and a barcode software. By solving the space related problems, both the issues related to product entry time and preparing them for delivery will be shortened.Warehouse performance indicators simply represent the operational efficiency and contribution to the overall profitability of the organization. A maximum value of Orders per Hour and Items per Hour is desirable while a minimum value for Cost per Order and Cost as % of Sales is likely to lever the profits of the organization. Order fulfilment indicators represent the firms operational performance as well as its responsiveness to the customers. A maximum value of On-Time Delivery, Order Fill Rate, Order Accuracy and Perfect Order Completion and a minimum value of Order Cycle Time shows a higher level of customer satisfaction, efficiency and contribution to the company profitability.Warehousing key performance indicators (WKPIs) can be used with benchmarking to indicate the overall state of warehouse operations. These are the meaningful measurements which can be referenced periodically to analyze the current financial, productivity, quality, and cycle time status for a warehouse facility. However, in addition to all the key performance indicators (KPIs) mentioned in Table 1 and 2, a tool is still required to automate processes in order to maximize the use of warehouse resources. This is where the integration of information technology becomes a key component in warehousing. Information technology is a key to improvement when considering world-class warehousing practices.In nutshell, performance indicators are useful for identifying the problems related to warehouse management and abnormal values of the indicators can be used to develop an efficient control system for a warehouse. The basic use of the concept is, it helps in identifying the causes of the problems and hence to diminish their impact or eliminate the causes, before is too late. It is true what is measured is managed, and, conversely, what is not measured merits little or no attention.Answer the below given questions (Each answer should not exceed 200 words)How is logistics related to the marketing bm?The marketing effort is based on the achieving organizational goals while commission the target customers more efficiently and effectively than competitors. McCarthy (1981) popularized the idea of the marketing miscellanea of price, promotion, product and place, the later (i.e. place) is directly related to logistics management. In providing the product to its right place, logistics plays an important role. The place component of the marketing deals a lot with customer service provided by a business, undertaking such tasks as on-time delivery, high order fill rates and consistent transit times. A product or service provides satisfaction to its customer only when it is available to the customer when and where it is needed. Furthermore, how logistics operations affect the major elements of marketi ng mix can be easily understood from the following figure.ProductPricePromotion fanny Customer Service levelMARKETINGInventory Carrying costTransportation costLot Quantity CostsWarehousing CostsOrder Processing and Information CostsLOGISTICSProduct is the set of benefits or utilities or characteristics which a customer receives as a result of its purchase. In order to increase sales or due to some other strategic decisions management may decide to lower