Procurement
hallenges to Global Logistics
Adapting the Council of Logistics Management definition of logistics, “Global logistics plan, controls, and manages the movement and storage of goods, services, and related information as it moves across international boundaries from raw material provider to consumer also considering the handling of return goods and containers. While there are some that would argue that there is not much difference between domestic and international logistics, there are some substantial differences which are often characterized as the “four Ds” –demand, distance, documentation, and diversity. The demand is greater, the distances are longer, the documentation is more extensive, and there is substantial diversity in requirements and cultures.
Given these differences, there are some specific challenges that global logistics managers must consider. Figure 1, adapted from Helferich and Cook, illustrates some of the generic global and domestic institutions critical in supply chain logistics. These institutions are the organizations that must collaborate and coordinate to move product and information from the raw material stage to the ultimate consumer. To effectively achieve this objective, global logistics managers must manage the “Five V’s” across the top of the figure. The first challenge is to provide the consumer with better value in return for their dollar. While the firm may see global sourcing as a means to reduce material or component costs, the only value that is relevant for consumers is a reduction in total landed cost while also considering such elements as quality and post sales support. Manufacturers need to make sure that their decisions to reduce sourcing costs also continue to provide the best overall value to consumers.
Maintaining supply chain velocity is the second challenge faced by the linked partners of the typical supply chain today. While firms and supply chains are trying to increase product velocity in the supply chain to
Adapting the Council of Logistics Management definition of logistics, “Global logistics plan, controls, and manages the movement and storage of goods, services, and related information as it moves across international boundaries from raw material provider to consumer also considering the handling of return goods and containers. While there are some that would argue that there is not much difference between domestic and international logistics, there are some substantial differences which are often characterized as the “four Ds” –demand, distance, documentation, and diversity. The demand is greater, the distances are longer, the documentation is more extensive, and there is substantial diversity in requirements and cultures.
Given these differences, there are some specific challenges that global logistics managers must consider. Figure 1, adapted from Helferich and Cook, illustrates some of the generic global and domestic institutions critical in supply chain logistics. These institutions are the organizations that must collaborate and coordinate to move product and information from the raw material stage to the ultimate consumer. To effectively achieve this objective, global logistics managers must manage the “Five V’s” across the top of the figure. The first challenge is to provide the consumer with better value in return for their dollar. While the firm may see global sourcing as a means to reduce material or component costs, the only value that is relevant for consumers is a reduction in total landed cost while also considering such elements as quality and post sales support. Manufacturers need to make sure that their decisions to reduce sourcing costs also continue to provide the best overall value to consumers.
Maintaining supply chain velocity is the second challenge faced by the linked partners of the typical supply chain today. While firms and supply chains are trying to increase product velocity in the supply chain to