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Logistics in Globalisation

Logistics functions are same domestically and globally but differ in four D’s i.e. distance, documents, diversity in culture and demand of customer. In the global logistics distances are longer, documentation is more extensive, and customer demand varies to satisfy cultural differences within both, countries and regions. Developing strategies to respond to the 4 D environment is the global challenge for logistics management.

There are some factors that facilitate globalisation and necessitate global logistics and also some barriers that continue to impede global logistics. Logistics management must balance the cost of overcoming these barriers with the potential benefits of going global.

Forces Driving Globalisation of Logistics

1. Economic Growth: After WWII there was a growth in industrial sector of developed countries and their manufacturing and logistics productivity increased. This forces the firm to expand their marketing into developing nations. Such expansion requires the integration of global manufacturing with marketing through logistics.

2. Supply Chain Perspective: Firms traditionally sought logistical control as many essential activities as possible internally, which resulted in private warehouses and transportation. Such privatisation increased the capital and assets to support logistics operations resulting in decline of Return on Investment and hence the concept of outsourcing and supply chain emerged during 1980s.

3. Regionalisation: Traditionally trade and transportation across the political borders of countries requires political formalities, which adds to the logistics cost without any value addition to the consumer. Regionalisation in the form of trade associations such as EU, NAFTA and SAARC etc. removed such barriers and facilitates global logistics.

4. Technology: Mass communication and information technology exposed international consumers to foreign products, thus stimulating convergence of global needs and preferences. This promotes global marketing and global logistics.

5. Transportation Deregulation: Initially there have been restrictions for international transportation ownership and operating rights e.g. foreign carriers could not operate domestically, steamship lines could not own land based transport like motor or rail carriers etc. but such restrictions have been removed in most of the countries.

Barriers in Globalisation of Logistics

1. Marketing Barriers: This includes (i) entry restrictions by placing legal or physical barriers on importing (ii) poor information regarding market size, demographics and competition (iii) pricing fluctuation and tariff barriers.

2. Competition: Different rules in different countries concerning competitive governance   also serve as global logistics barriers.

3. Financial Barriers: This includes (i) difficulties in forecasting in the global environment (ii) institutional infrastructure barriers result from differences in services offered by banks, insurance firms, legal counselors etc.

4. Distribution Channels: Lack of infrastructural standardisation such as differences in transportation and material handling equipment, warehouse and port facilities, communication system etc. also serves as global logistics barriers.