The Power of Logistics

Happy Easter Everyone

I hope you celebrated this Easter in a beautiful way just like I did. I spent enough time with family and friends and thanks to them, I still have trouble standing properly. Maybe the blame should be on me though, they did not force all the food in my mouth. Welcome to another Logistics Monday!

“People say ‘dream big’, but you have to think about the logistics. It is not just coming up with a great idea, but how you can sell, market or promote that great idea.” – Marley Dias

The mission of logistics is to get the right goods or services to the right place, at the right time, and in the desired condition, while making the greatest contribution to the firm. Companies exist to make money and logistics is one key area where a firm’s profitability is determined. Logistics affect the long-term profit in three ways: customer service, costs, and tied-up capital. If the logistics department is aware of these areas and tries to maximize service, minimize costs and tied-up capital, it is possible to improve profitability and gain a long-term competitive advantage.

Logistics activities can be classified into inbound and outbound logistics. Inbound logistics connects the firm and its upstream suppliers, involving movement of parts, goods and material. Outbound logistics links the downstream customers to the firm, which covers storage and distribution of materials. The inbound and outbound logistics are linked through warehouse systems, connecting the arrival, storage and customer delivery of goods.

Bearing in mind the increasing pressures on companies to increase turnover and/or decrease costs, the growing role which logistics can play in making these achievements a reality, is receiving increasing attention. Companies are particularly interested in the strategy of reducing a company’s costs of doing business.  As companies have thus looked inward attempting to identify areas for cost savings and/or productivity increases, most have found logistics to be an area with the most potential for significant cost savings.

These various factors, and others such as growing global competition, that are increasing companies’ focus on the role of logistics, and current and continuing trends therein, are making management more and more aware of the fact that logistics decisions, policies and strategies can influence a company’s total sales as well as the cost of its operations.  It is therefore necessary to understand the development and importance of such strategies that may influence corporate profit and performance and therefore the competitiveness of a country’s products and its economy.

Furthermore, as the logistics of a company improves, the nation’s efficiency will improve, and this can ultimately result in positive effects on prices paid for goods and services, national debt, currency valuation, international competition, availability of investment capital and economic growth which will result in a higher level of employment and standards of living.  However, although the macro-economic role of logistics is significant as has been touched on in previous sections, this thesis focuses on the micro-economic role of logistics and the use of outsourcing with regard thereto. Nevertheless, efficiencies gained, by such strategic implementations as logistics outsourcing, will have a positive impact on the role of logistics in the economy of the country as well.