Logistics Trends and Key Business Challenges

The logistics industry has become a center of attention as the impact of various economic factors such as the steady drop of oil price and increased traffic to the point where some countries have been compelled to accelerate transportation infrastructure development, particularly, in the United States and some developing countries. The impact of recessions in the past has forced transporting businesses to cut operating costs by improving work processes and become more efficient in order to cope under such economic conditions. Because the cost of logistics is a major part of the final product cost that is harder to reduce, the production process of gathering supply from various sources around the globe will be limited, or in other words, the transportation model is about to undergo some changes in light of cutting logistics’ costs. Manufacturers are trying to avoid being affected by increased labor cost, violations of manufacturing copy rights that undermine product differentiations in the market place, and issues with quality control in overseas products.

     Hence, the industry has turned its attention to domestic markets. Such economic factors have affected logistics service providers with adapted customer needs, and consequently, readjusted industry trends.Customer now demands delivering capability that covers a multitude of areas with integrated services by the same provider, or Bundled Service, with on-time delivery and minimum fluctuation in freight costs in order tomaintain market share by selling products to end customers more frequently. Service providers therefore need to handle to diversified end-customer needs and more complicated supply chains.

     Meanwhile, as the industry makes adjustments to meet complex end-customer needs to stimulate sales;manufacturing operational and sales procedures are constantly modified, as a result. Logistics provides are affected directly, namely, by the difficult nature of in planning and preparing resources necessary to provide such services, for example, transporting vehicles, labor and loading equipment, etc. Excess logistics resources to what is needed to meet customer needs increases the costs of logistics (minimum resource utilization rate). Efforts are taken to build partnerships and strategic partners in light of sharing the burden and added flexibility pool resources can render; however, for collaborating partnerships to be successful, each party must compromise and give way to mutual benefit which usually entails increased costs from risk management variables that occur as a result of embracing the joint-force concept.

     As such, to allow the customers to sell products with more reasonable costs and enable logistics providers to operate with maximum resource utilization rate, key factors that must be in place to render a success consists of; disclosure of useful information, effective communication, and business flexibility and supply chain suppleness. To accommodate customer demand and business challenges, present and future, the ability to use information technology with logistics services and collaborate amongst service providers to improve cost and maximize service efficiency, is crucial. However, the economy is changing so rapidly it seems to be steps ahead of current information technological capabilities that can be applied to today’s industry, already. Or, it could be said that current information technology does not have an answer to business requirements of the future. Hence, another futuristic challenge for businesses to put on the front burner, today.

     In sum, business factors, whether it be cost reduction, operational efficiency, service improvement, or business growth, all have a direct impact on logistics performance. Thus, logistics providers must reevaluate their business strategies and modify operational procedures regularly, advance processies that need to be equipped with practical information systems to deliver more standardized automated applications, system visibility that can be monitored at each and every stage, improve services to better respond to customer needs, and engage in business partnerships that pool resources effectively to maximize service capacity, all in all, are advancements that support and propel business growth in to future international markets, with a smooth operator.

Compiled by BLOG.SCGLogistics

References: Oracle

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