Editor’s Note: Almost 14 months ago we wrote one of our most popular posts entitled, “The History of Supply Chain and Logistics Management” contained a bit of history, definitions, and a great infographic visually going through the history of supply chain and logistics management.
Today, we bring you yet another infographic. We feel infographics are a great way to explain a big idea. In this infographic you will learn, for example, that the global market value for logistics has surpassed $4trillion. You will also learn:
- Interesting global logistics facts
- The financial and economic outlook of each mode of transportation
- Which countries are ranked as the best logistics performers (we have a long way to go United States)
- Why Logistics management efficiency is important to companies
But first, we want to back up and give you a general overview of what is logistics, what are the 6 rights of logistics, the origins of logistics, and how outsourcing logistics functions to an expert firm can give you a competitive advantage. Underneath, you will then see the full infographic explaining the Global Logistics Marketplace
Logistics can be described as having the right type of product or service at the right place, at the right time and in the right condition. The global logistics industry has grown significantly while logistics has become an important part of the business economic system and major global economic activity in recent years. Logistic activities accelerate economic growth and productivity growth. Efficient logistics is an important determinant of a country’s competitiveness and source of employment.
What is a Logistics Framework?
Logistics is, by definition, a functional system which consists in combining and coordinating the operations of different modes of transport as a fundamental pre-requisite for ensuring efficient service. In other words, logistics is defined as a business planning framework for the management of material, service, information and capital flows. It includes the increasing complex information, communication and control systems required in today’s business environment. It is also defined as the procurement, maintenance, distribution, and replacement of personnel and material. A typical logistics framework consists of physcial supply, internal operations and physical distribution of goods and services. At the same time, logistics can be defined as having the right type of product or service at the right place, at the right time and in the right condition. However, our expectations for a firm or company are directly related to logistics.
The 6 Rights of Logistics
The customer expectations define the purpose of a logistics system – it ensures the six rights of logistics, which are:
- the right product,
- in the right quantity,
- in the right condition,
- to the right place,
- at the right time,
- for the right cost.
The Origins Of Logistics
The etymology of the word “logistics” is often thought to be related to armed forces, which uses the term to describe all tasks related to troop support. However, the origins of logistics run back much deeper into the past. Logistics has been playing a fundamental role in global development for almost 5,000 years now. Since the construction of the pyramids in ancient Egypt, logistics has made remarkable strides. Time and again, brilliant logistics solutions have formed the basis for the transition to a new historical and economic area. Examples of this fundamental progress include the invention of the sea cargo container and the creation of novel service systems during the 20th century. Both are integral parts of globalization today.
During the Second World War (1939-1945), logistics had evolved greatly. The army logistics of the United States and counterparts proved they can do more than what the German army could handle. The supply locations for German armed forces were inflicted with serious damages and Germany was not able to wreak the same havoc on its enemy. The United States military ensured that the services and supplies were provided at the right time and at the right place. It also tried to provide these services whenever and wherever required, in the most optimal and economical manner. The best available options were developed to do the task. This also gave birth to several military logistics techniques which are still in use in a more advanced form.
The global logistics industry has registered significant growth in the last decade wherein the big driver has been the emergence of Third Party Logistics (3PL) and Fourth Party Logistics (4PL) (make sure you read our post 3PL vs. 4PL to better understand all the layers of logistics) players in the industry who are expected to play much more important role in the years to come. The global logistics industry is characterised by high costs of operations, low margins, shortage of talent, infrastructural bottlenecks alongside increasing demand from clients for providing one-stop solutions to all their needs and for investing in progressive technology. All these factors further decrease the margins involved in this industry and fastens the process of consolidation in the industry through acquisitions, mergers and alliances. Just think back to all of the acquisitions you’ve heard of over the last 18 months. It’s staggering.
Outsourcing Logistics and Supply Chain Functions Can Provide a Competitive Advantage
Speaking of the rise in the use of third party logistics. When you outsource logistics functions, like transportation management, you can gain quite the competitive advantage. As previously stated, margins and the lack of expertise are a big factor in this movement.
Today’s highly competitive business dynamic means maintaining a supply chain that runs like a well-oiled machine isn’t just a goal, it’s a necessity. It becomes quickly apparent to most companies that it’s impossible to do it all, and therefore it’s critical to find the right outsourcing partners to supplement weaknesses in the supply chain, such as contracting out assembly or hiring a 3PL provider.
While it can be tempting to try to do it all in-house, outsourcing can alleviate internal burdens so your business can focus on strategic areas. Just a few of the top reasons to consider outsourcing include:
- Cost reduction – The right partners can help to reduce overall costs. For example, a manufacturing partner might be able to buy materials at a bulk rate or a 3PL provider could access reliable truckload freight contractors you cannot.
- Time savings – A company may have inadequate staff or management knowledge about a particular supply-chain step, and therefore outsourcing saves time while boosting expertise in the supply chain.
- Rapid growth – Every business desires growth, but at times it can be difficult to manage increased demand. This is the case particularly if that growth happens quickly. Outsourcing can alleviate the stress of growth while eliminating supply-chain hangups.
- Eliminate major investment – Certain aspects of the supply chain can be extremely costly to implement in-house, such as purchasing manufacturing equipment or a fleet of trucks for transportation. Outsourcing makes better financial sense.
- Boost strategic focus – By outsourcing certain functions of the supply chain, the management team can now focus on strategic analysis, product development and other important initiatives.
The right outsourcing partners can create a competitive advantage, but it’s important to do your research first. Start by analyzing your business’s core competencies so you can figure out what aspects of the supply chain would benefit from outsourcing. Some of the most common parts of the supply chain that can be improved by outsourcing include raw material processing, manufacturing, assembly, support operations, warehouse storage, distribution and transportation.
Outsourcing to a qualified 3PL provider is one of the best ways to reduce costs and save time while ensuring products are shipped promptly and safely.
Infographic: The Global Logistics Market
And now for the infographic. This infographic comes to us from freightXtension who are experts in cross-border shipping.