A Literature Review of Global Logistics Management
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Published: Mon, 5 Dec 2016
“Logistics” was originally use as an military term which defined as “a branch of military science having to do with producing, maintaining and transporting material, personnel and facilities.” in Oxford English Dictionary. However, with the times goes by, in the modern days, it is used in a business term. Department of Trade Industry (DTI) and The Chartered Institute of Logistics and Transport (CILT) mentioned that the objective task of logistics is to distribute right products with exact quantity and quality and moving it at the proper time to the right place with the right balance cost (DTI 1993, CITL 2010). The US-based Council of Supply Chain Management Professionals gives the definition of logistics management “Logistics management is part of supply chain management that plans, implements, and controls the efficient, effective, forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements.” Magan also stated ‘8Rs’ of logistics in his book, namely, the right way, the right product, the right quantity, the right quality, the right place, the right time, the right customer and the right cost (Magan 2008:9). According to above, it is obviously to understand that the procedure of logistic management is to make distribution more effectiveness, costs down the expenses in distribution and stock volumes and decrease damage and waste of goods. Furthermore, with the perfect application on logistics management, it will be much easier to manage the quality of products, provide better service to customers and also more flexible to deal with a contingency or emergency.
As we can learn from above, logistics function includes materials planning, purchasing goods or supplying raw materials, internal transportation, warehouse (storage) and physical distribution. Materials requirement planning is also known as MRP, it is viewed as a micro level of managing of inventory (Weele, 2002). It starts with schedule a sales plan in the sales department and the plan is an estimation of the quantities that will or can be sold in the forthcoming periods. MRP in logistics management may help organizations to possess inventory volume and also can assist the manufacturing planning, purchasing and delivering in the following steps. Purchasing in today is taken a broader view by many researchers as “managing the supply” of materials, services, and information (Gundlach et al., 2006). In other words, purchasing is no longer just blindly purchase but need to manage and consider about the supply. Furthermore, in Babbar & Prasad’s (1998) work, they also mentioned that the production environment, costs and international business environment are related to purchasing issue. In transportation part, transport is a main activities in logistics which concern in time and place utility (Coyle et al., 1996 cited by Stefansson, 2005). In logistics, warehouse operation is also one of an important section which provides a place for storage products such as raw materials, components, processing goods and finished goods between origin and consumption points (Lambert et al, 1998 cited in Stefansson, 2005). In other words, warehousing includes receive, store, ship, and pick up the goods. In addition, Stefansson’s mentioned that DC (operation of distribution centers) is another term which usually used in association with warehousing. The difference between warehousing and operation of DC is that DC focuses on receiving and shipping as an essential activities. Lambert et al. (1998, cited in Stefansson, 2005) indicated DCs only carry smaller quantity and fast moving products; however, warehouses hold large ones. Physical distribution:
The Global Logistics:
In modern days, every works go globally, logistics management also takes advantage of a tend into global (international) logistics. However, according to Zinn and Grosse research (cited by Cooper, 1993), US managers held the different opinion on global logistics, which means that US managers did not expected much about global logistics channels but manufacturing facilities were became more centralized. Even the result did not prove that global logistics is going to be a trend, Capcino and Britt (1991) held a different view in their work, they mentioned that global logistics management will have a gradually increase in 1990s. Cooper (1993) also held the same view as Capcino and Britt, he stated that the evolution of business globalization impacted the logistics went globally. But what is global logistics? And what are the impacts it brings? Houlihan (1987, cited in Babbar & Prasad, 1998) addressed that international logistics is the concept of the extension of international supply chain management including purchasing, products distribution and sales. Also Wood et al. (1995 cited in Brewer et al, 2005:61) “international logistics is not the same as domestic logistics with perhaps the addition of one or more international border crossings.” In this situation, global logistics have to manage as efficiently as possible while produce and trade goods globally. Furthermore, Brewer et al. (2005:76) mentioned “there is a growing tendency in international logistics towards supply chain management and time-based competition” and plenty of different parties may involve in international logistics.
The Impacts of Global Logistics:
Christopher, Peck and Towill (2006) stated some reasons of global sourcing in international logistics “the lure of cost savings, largely due to fewer regulatory controls and significantly lower wages has prompted the mass-migration of manufacturing form the developed world to emergent economies in other regions.” In Bonin and Cross’s work (2010), they also supported that the main reason organizations look global in logistics management is because the cost saving of materials. However, not everything can work perfectly, the great distances between supplier and customers leads the high transportation cost in global sourcing. For example, shipping price and seasonal shortage of conveyance with a lot of manufacturers has increased dramatically due to a lot of organization shifted the factory to China (Christopher, Peck and Towill, 2006). While purchasing goes globally, enterprise must be aware of exchange rate fluctuations (Carter and Vickery, 1998, Carter et al., 1993 and Vickery et al., 1992 cited in Babbar and Prasad, 1998), countertrade (Forker 1992 cited in Babbar and Prasad, 1998). As mentioned above, time-based is also need to be considered in global logistics. Customer may need the goods urgently due to seasonal concerned or unpredictable orders, and sometimes suppliers have problem meet the lead-times not only because of production but also because of the long distance shipping problems. Also, when logistics goes globally, it will bring problems in to management. For example, as mentioned earlier, materials or products are no longer shift domestically from one place to another but cross from one country to another, which means that the goods will be moved to another different environment. In this situation, it may lead some of the political or social problems such as tax or logistic issue. Bonin and Cross (2010) also mentioned that there are some risks may includes the culture differences, language barriers, dissimilarity of values, discrepancy of organizational behavior and delivery times. These are the problems which logistics went globally may faced. Capacino and Britt (1991) suggested that logistics managers must be prepared for the issues what global logistics has caused.
Global sourcing and third party logistics may include in global logistics.
According to Aertsen, 1993, Bowersox, 1990, Lieb, 1992 & Sink et al., 1996 (cited by Selviaidis & Spring, 2007), there are some terms have been used interchangeably as third party logistics which are used to defined the logistics activities that are not carry out in the organization but using the contractual related work to other organization, such as “logistics outsourcing” “logistics alliances” “contract logistics” and “contract distribution”. Leahy et al. (1995, cited by Selviaridis & Spring, 2007) gives further information about third party logistics, according to their work, third party logistics is not just about transportation or warehousing performance but generally associated with providing multiple, bundled services. It is also based on short-term or long-term contract in the relationship of purchasing in logistics services (Mruphy & Poist, 1998 cited by Selviaridis & Spring, 2007). Outsourcing is a part of third party logistics activities. The reason why organization sourcing materials from third party may includes the centrality of logistics function, the exchange of cost and services, information technologies and relationships with logistics service provider (Rao & Young, 1994 cited by Selviaridis & Spring, 2007). Van Damme and Ploos can Amstel (1996 cited by Selviaridis & Spring, 2007) also gives four varieties of reasons to use outsourcing, which are economic viability, demand variability, customer service, personnel and equipment availability and extent of supplier dependence.
The term fourth party logistics is appeared in recent years and is used to define more advanced contracting arrangements.
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