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Business Scope in Global Logistics

Global logistics refers to the handling and management of the physical transportation of goods from one place globally. The process involves careful planning, costly infrastructure, and implementation of efficient technology; and involves more than one form of transport for the physical transfer of goods from the ‘point of origin’ to the ‘point of consumption (Reed, 2000).

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The industry is in a phase of rapid expansion thanks to the opening of markets and the integration of businesses across the world. The global nature of this business requires the utmost efficiency in operations and management; with the topmost priority being highly accurate and ‘real-time information access and transfer, careful monitoring, and tracing of goods flow throughout the journey, safety and theft prevention, on, etc. All the aspects need to be perfectly coordinated and seamlessly managed; as a loophole in one can lead to the subsequent flaws in others. For example, if the shippers’ information system is not updated, clients can miss out on important shipments, orders, etc. Therefore, the nature of business constantly pressurizes suppliers and shippers to grow, develop and improve on a consistent basis.

Also, the ‘global nature of business presents the industry with global-level issues. Constant monitoring of financial markets, exchange rates, political scenario, government and regulatory body regulations, consumer demands, integration of supply chain, networking operations, connectivity with suppliers and manufacturers, warehousing and inventory management, transportation infrastructure, custom duties, and laws, etc are some of the broader level considerations of shippers across the world.

Also, as the business requires to be operated and managed across cultures and across time zones, additional concerns to the industry are the need to be aware of cross-culture communication skills, language skills, knowledge about local customs and norms, integration in national environment and economy, being proactive as to respond to changing local political and social scenarios, collaboration with other business, adaption to local market norms, etc.

Inter-modality refers to the combined usage of one or two modes of, in this case, transportation. Logistics involves the use of several kinds of transport (intermodal transportation), and all need to be properly integrated in order to manage a smooth transfer of goods and flow of information across countries. The different transportation services include air transport, water transport, motor freight, railroads, etc.

A business requires to use inter/multimodal transport in order to provide superior service in a timely and cost-effective manner. United Parcel Service is a perfect example of how logistics firms need to continuously improve and develop their transport processes etc. The firm started with on-foot messengers who slowly started traveling on bicycles; then came loaded trucks and finally, the company launched its own airline to dedicatedly handle its ever-expanding job across the globe. The benefits of employing several modes of transport are better speed, improved efficiency, cost-affectivity, better integration of different processes, etc. Also if a country has a conducive infrastructure for global logistics then it would only serve to expand its domestic market and improve global accessibility which would lead to economic growth and better trade options.

Research published by the Organization for Economic Co-operation and Development (OECD) emphasizes the need for improvement in roadway infrastructure for carrying cargo easily and without delay. The report highlights the case of Germany and France; both countries are on their way to commercializing high-tech transport trains (up to 160km in France and 240km in Germany). Such drastic attempts for infrastructure require heavy government funding and majority support in the parliaments of the country under consideration. A cross-country comparison shows that except Switzerland, a wide level of attention and support from the government is missing for this issue in Netherlands, Sweden, Germany, and Austria.

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As seen the business works with numerous parties from the source to the host country. An effective logistics operation would require all operations to be effectively coordinated, by inculcating, for example, better and superior technology like ERPs and SCMs. Also, technological advancement needs to be compatible across countries in order to achieve interoperability and requires an integrated collaboration from governments and the private sector. Therefore, standardization is a high priority issue toward the implementation of intermodal transport in logistics and the biggest barrier to it is the lack of coordinated action and government will. Also, the technological infrastructure differs significantly across countries so it gets very challenging to implement the same technology everywhere. This results in high costs for transportation and supply chain management which in itself is a barrier for logistics and logistic-dependent business growth in countries lacking proper infrastructure. Human resource standardization is also needed and for the purpose of progressive training programs and collaborative human resource development is required for competitive but compatible operability across countries. Various countries have begun to enter into joint projects regarding the construction of caravan pathways and roads connecting different cities across countries such as the Beijing-Brussels Caravan (initiated on Sep25th 2005, by IRU member Kazakhstan) and the Black Sea Ring Highway Caravan (initiated by the Black Sea Economic Cooperation, April 19th, 2007, organized by IRU). However, political tension and diplomatic relations play a vital role in determining the success of implementing practical measures for improved intermodal facilities for logistics across countries.

The process requires complex documentation which also sometimes acts as a barrier toward the expansion of the industry. Inter-country documentation regarding shipment contracts, legal documents, country quotas, product details, LOCs, etc. Many smaller logistics businesses scare away from the use of intermodal transport because of higher costs for handling goods and safety issues and extra maintenance charges. But the increasing congestions on coasts and seaports and the rising cost of road transport have accentuated the importance of an effectively planned intermodal transport system. Still, the lack of common guidelines and standard procedures and the unorganized nature of the supply chain and transport system remains the biggest barrier toward an improved intermodal transport system. A joint effort of governments to facilitate intermodal transport for freight can result in effective pooling of the resources, better strategic advantages, improved international relations, competitive advantage, and harmonizing the regulatory and legal environment in the region, etc. (Dayal, 2007). The industry needs to have a conducive and progressive infrastructure across countries for the industry to achieve smooth operations and economies of scale to turn out healthy profits.

References

  1. (1997) Road Transport Research. France. Published by OECD Publishing.
  2. Dayal, R. (2007) Inter-modal transport and logistics- evolving a system for Asia-Pacific Region. The Hindu BusinessLine [internet]. Web.
  3. Reed, C. Global Logistics and Transportation. Techexchange.com [internet]. Web.
  4. Sutranet. Transport and Logistics Centre. By SUTRANET [Internet]. Web.
  5. UNESC. Toward an International Integrated Intermodal Transport and Logistics System for the Asia and the Pacific. By United Nations Economic and Social Council [Internet].
  6. Ramberg, Pedersen and Knoors. Outbound Intermodal Logistics, from the Manufacturer’s Gate to the Final Customer [internet].

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