Challenges and Concerns With Global Supply Chain Operation, Research Paper Example

Even though, a global supply chain has assisted companies leverage lower costs in manufacturing, several challenges still exist. There are several obstacles that logistics manager face in the process of delivery. They have to ensure their products arrive on time, and they are delivered to the right client. Transport and logistic costs typically account for 5% to 6 % of a company’s revenue. It is the primary cost that often inflates the overall price of the product. Prudent transportation and logistics management help firms enhance their overall supply chain efficiency.

Whether your company uses air, rail, sea or land for logistics, stochastic variable will at one time come into play. These include fuel price fluctuations, longer lead times when dealing with global suppliers, and unfavorable weather conditions. Such situations make time and cost estimation related to TLM complicated. As a consequence, companies experience high inventory and expedite costs (Samson, 2011). Under typical conditions for logistics, departments will often use the same quantity that is supplied during a specified time. This occurs between shipments or transport of large bulks of newly manufactured products. This theory is evident in almost all areas of logistics, including merchandise sales and production.

Unfortunately, logistic manager finds it challenging to predict expected demand for a given product. As a consequence, inventory is used to compensate for times when supply is lower than the supply. In order to reduce transportation expenses and ensure that the correct items reach the right location on time, transportation and logistics managers need to employ a centralized view in relation to the entire transportation schedules (Luo, 2012). Furthermore, the ability to analyze the impact of logistics and transportation on inventory fluctuation is vital.

Literature Review

There have been a number of studies that have been commission over the last two decades, seeking to provide insight into the intricacies of the logistics and transport sector in a number of nations. This has since expanded to include North and South America, Europe, Asia and Africa.

In 2014, a study commissioned by BVL International highlighted the main issues that logistics managers faced across all industries. Two specific issues came to light, Customer expectations and On-time delivery. Customers have very high expectations of the modern-day logistics and transport industry. The current industry is wrought with numerous uncertainties. The study found that customers in the modern-day industry can change orders within 10 days or less, at times one or two days, prior to dispatch.  Furthermore, the industry has realized an increase in demand for customized logistics and transport solutions. More than 20% of the respondents in the study highlighted an increase in customer expectations in the industry within the past three years (Handfield, Straube, Pfohl, & Wieland, 2013). During this time, the traditional measures have been found wanting when engaging in strategies to satisfy clients.

Figure 1: BVL Study Logistics Complexities and Issues by Rank (Handfield, Straube, Pfohl, & Wieland, 2013)

The study by BVL also highlights the impacts of a networked economy on the logistics and transportation industry. Logistics managers have had to adopt a different outlook towards the logistics and transportation industry. While initially players perceived themselves as independent, there has been an increasing use of collaborations. These collaborations are applied vertically and horizontally within the industry. As customer demands increase within the industry, logistics managers are forced to adopt a network thinking and engage in collaborations. However, in order for these collaborations to effectively work, synchronization and integration of systems and process in required. This integration usually comes at a cost, or may potentially affect the existing processes and systems already in place.

These results by the BVL are synonymous with the results reported by the Organization for Economic Co-operation and Development (OECD) in 2002. This report highlighted the fact that there is an increasing need for outsourcing in logistics within the market. With the growing complexities of a networked global market, companies are finding out difficult to realize productivity, profitability and sustainability operating as single entities (OECD, 2002). The research highlights the need to use third party logistics (TPL) in operations. TPL operators are usually highly specialized, have greater expertise. This allows for flexible logistics operations within the industry.

Globalization is a recent global phenomenon that has changes and influenced all facets of life, from trade and finance to governance and social welfare. Globalization has considerably influenced the logistics and transportation industry on all levels. It is responsible for the developed of a network logistic network that spans across different geographical areas, creating an interdependent and interrelated collections of regional markets. As markets continue to expand and include virgin markets, they also adopt the challenges and risks that are associate d with this emerging markets. Most of the emerging markets have a fundamental infrastructural problem, increasing the challenges associated with the cost of logistics and transport with poor infrastructure. Globalization has been identified by the BVL, OECD studies as having a multiplier effect on all other trends and challenges that Logistics and Transportation Management currently faces.

One of the major effects of globalizations is the increase in the amount of goods and commodities transported from one geographic location to another. This translates to the growth and expansion of the logistics, transport and supply network, i.e. the increase in capacity. As TLM seeks to meet consumer demands, there arises the need to increase capacity with transportation. Irrespective of the transportation mode employed, the increasing customer demands has created a problem with capacity during transportation (Ferrier Hodgson, 2014). As transporters look to increase logistics network, there is a challenge with increasing capacity on transportation units. Freight and road transport was found to be particularly prone to this challenge.

ICT has permeated the logistics and transportation industry on all levels. All processes currently have ICT integrated and as a core pillar.  A study conducted by the Ferrier Hodgson in 2014 highlighted some of the challenges that the transport and logistics sector in Australia experiences. One of the most significant challenges in the cost impact of technological advancements that have to adopt in order to remain competitive and relevant in a rapidly transforming market. The introduction of technology such as RFID technology have become integral in monitoring all procedures and processes (Ferrier Hodgson, 2014). However, such technology comes at a considerable costs. It requires upgrading and/or replacing existing systems. These increase in costs has become a problem for TLM as companies continue to drive towards the mitigation of costs and maximization of revenue and profits.

As environmental issues become more apparent and gain popularity, the logistics and transportation industry is placed on the spotlight. Research has found that logistics and transportation has been forced to adopt technologies and techniques that mitigate pollution and the carbon print that the industry has on the environment. This has also led to the increase in certain costs that are associated with green processes and procedures within the industry. The supply chain has become concerned about the environment, a factor that did not exists about a decade ago. By applying environmentally friendly techniques, green logistics aims at mitigating the carbon print its functions and operations have on the environment (McKinnon, 2014). Green Logistics is essential in ensuring sustainability and will become integral in the next decade.

In conclusion, research has depicted the logistics and transportation management in the 21^st century is particularly prone to the effects of market drivers. Globalization has become one of the most significant market drivers, creating a multiplier effect for all other trends and challenges within the industry. The increasing need for sustainability in operations and processes within the logistics and transportation industry has led to the adoption of green logistics. ICT has also become a necessary tool and functional area in logistics and transportation management. However, its integration has led to the increase in operational costs and capital required to enter the market and remain competitive and relevant.

References

Ferrier Hodgson. (2014). 2014 Transport and Logistics Insights. Melbourne: Ferrier Hodgson.

Handfield, R., Straube, F., Pfohl, H.-C., & Wieland, A. (2013). Trends and Strategies in Logistics and Supply Chain Management. BVL International. DVV Media Group GmbH.

Luo, Z. (2012). Innovations in Logistics and Supply Chain Management Technologies for Dynamic Economies. Hershey: Business Sciwnce Reference.

McKinnon, A. C. (2014). Green Logistics: Improving the Environmental Sustainability of Logistics (2nd ed.). Philadelphia: Kogan Page Limited.

OECD. (2002). Transport Logistics: SHared Solution to Common Challenges. Danvers: Organisation for Economic Co-operation and Development.

Samson, R. M. (2011). Supply-Chain Management: Theories, Activities/Fuctions and Problems. Hauppauge: Nova Science Publishers.

Wang, J. (2010). Innovations in Supply Chain Management for Information Systems: Novel Approaches. Hershey: Business Science Reference.