Page 166 - DMGT546_INTERNATIONAL_TRADE_PROCEDURE_AND_DOCUMENTATION

Unit 7: Logistics and Characteristics of Modes of Transportation

Discussion of the concept of logistics, its place in the value-chain process leading to profitability, Notes
its contribution as one of the primary functions and its interface with other functions of the firm
bring out its importance as a strategic resource. To be of a real strategic influence, a good
amount of competency has to be reached and a well-defined logistical mission and aims has to
be committed to, by everyone in the firm, especially by the top management.

7.5.1 Logistical Competency

Logistics involves detailed and complex work. Logistical management starts with how logistical
competency fits into a firm’s overall strategy. It is fundamentally important to view logistics as
to how it can be exploited as a main competency. To develop logistical competency, it is important
to develop an integrated framework that defines and relates important concepts. This integration
should be in such a way that competitively superior logistical performance should contribute to
the overall strategy of the firm.

Logistical competency is a relative assessment of a firm’s ability to provide competitively
superior customer service at the least possible cost. This means that logistical performance is
dedicated to supporting any or all marketing and manufacturing requirements in a manner that
exploits delivery capability. The strategy is to provide superior service at a cost below industry
average.
Alternative logistical capabilities, emphasizing flexibility, operational control, and most of all
a commitment to provide perfect service performance typically characterise the service platform
of superior logistic achievers.

7.5.2 The Logistical Mission

Logistics exists to satisfy customer requirements by facilitating important manufacturing and
marketing operations. The challenge is to balance service expectations and cost expenditures to
attain business goals.
Logistical service is measured in terms of:

Availability: Availability denotes having inventory to consistently meet the need of the
customer material or product requirements.
Operational Performance: Operational performance means the elapsed time from order
receipt to delivery. Operational performance involves delivery speed and consistency. A
firm’s operational performance can be measured in terms of how flexible it is in
accommodating unusual and unexpected request of customer.
Service Reliability: Service reliability pertains to the quality attributes of logistics. For
logistics performance to continuously meet customer expectations, it is necessary that
management should be committed to continuous improvement.
Total cost is positioned to include all expenditures necessary to perform logistical requirements.
The concept of total cost had not previously been applied to logistical analysis. Managers focused
on minimizing functional cost, such as transportation, in the expectation that such effort would
achieve the lowest combined cost. The total-cost concept opened the door to examining how
functional costs interrelate.
The right level of logistics cost expenditure must be related to desired service performance. The
simultaneous attainment of high availability, operational performance, and reliability is
expensive. An important managerial challenge comes from the fact that logistical cost and
increased performance have no proportional relation.

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