Reference no: EM13981298

International Logistics in Supply Management

Entering foreign markets is necessary for the efficient and successful growth of a company in global economic competition. This becomes extremely vital in the era of globalization of the world economy, which is characterized by the formation of a global economic space and the creation of a single market of production and distribution of wealth. The  introduction and fast pace development of international logistics systems (ILS) is a manifestation of globalization, a process most directly impacting the world economy and the economic activity of international organizations. The purpose of this research paper is to explain the economic, managerial and organizational relations connected with the formation, operation and optimization of logistics infrastructure in a foreign economic activity. The object of research is the process of formation of international logistics in a globalizing world economy. This paper will examine the development of key trends and tendencies of logistics systems and processes in the world economy on the scientific basis for the formation and their effective functioning.

Logistics  processes directly or indirectly affect all aspects of human activities. The connection between logistics and other fields of human activities is determined by the mere fact that, objects in logistical systems are natural, financial and information resources. Therefore, their functioning ensures streaming processes in the global economy.

The role of logistics has significantly increased in the post-industrial era, which has caused important changes in the world economy. They are symbolized by an increase in the share of services in the production and utilization of the world's GDP. These changes have had a significant impact on the logistics, as this industry is directly linked to post-industrial development of the world economy, as the active use of scientific knowledge and the migration to the developed countries. Furthermore, technology has become vital to the development of availability and abundance of different information and ensures the informatization of logistics processes; the availability of means of communication and transportation; high level of education and active use of knowledge transfer, improving the workflow of all the logistics business through the correct and rational use of labor resources. This can be further explained in the following:

"A second factor that impedes laggards from achieving global optimization is a reticence or inability to invest in cutting-edge technologies. Managers in these companies are typically risk averse and loathe upsetting their current processes by implementing "disruptive" technologies. Moreover, lagging companies do not view technology investments strategically; they lack the proactive perspective and culture needed to aggressively seek out and acquire new technologies (Poirier, Quinn, and Swink, 2009, p. 223)".

There are many reasons that encourage companies to enter the global market. The desire to grow and survive in the competition is the main incentive to develop international operations for companies. At the same time, the technology progress and increase in production capacity,  only contribute to the globalization of economic activities (Bensman, 2008). Currently, there are several major factors driving the development of logistics at the macro level. These includes economic growth in most countries and liberalization of their economies; effective functioning of logistics infrastructure improvement; the emergence of free trade areas; technology progress. All these macroeconomic factors play a significant role in the development of the world economy, but from the perspective of this study, the greatest interest is the position of the effective functioning of logistics systems and global logistics infrastructure improvement. This factor is one of the driving forces of ILS: it reflects the trend around the globe.

The international logistics systems completely differ from internal logistics, as it is not only changes the place of delivery for products. The most obvious differences in this context are:

• international trade is usually associated with a much higher volume of orders than deliveries for domestic orders;
• international markets vary and depend on the number of products, local infrastructure, intermediaries etc;
• many companies do not have experience in international markets because it is associated with certain difficulties;
• during the delivery of goods, new intermediaries appear such as freight brokers, customs brokers, logistics providers;
• delivery distance and a large number of intermediaries involved impede direct communication between the company and the consumers of its products;
• trading conditions, the basis of delivery, terms of payment may be completely unfamiliar and unusual for normal operation;
• international transport documents and documentary procedures are much more complex and vary, depending on the local law ("10 Keys to Global Logistics Excellence," n.d., p. 8);

An important uniqueness in the modern world economy was the creation of international logistics infrastructure. It includes interstate system formed at the level of several countries and even continents. This can also be justified or explained in the following: "Manufacturers will need to consider the many different possibilities and then make an informed decision about what the need levels of inventory within the company. The one consideration needs to be to optimize locally in order to maximize your investments in critical resources: infrastructure, assets and technology (Sankar, 2011)".

Study showes that the globalization of the world economy has led to the formation of international standards of logistics systems functioning. The solution of organizational problems of establishing a satisfactory standard of customer service, can be provided by the means of an orientation of logistics services for the implementation of the basic indicators: availability, functionality and reliability.

High standards of basic logistics services have been developed due to the globalization of the world economy, the largest providers' of logistics access to international markets, capable of providing  affordable, reliable and functional service to customers. In addition, local infrastructure and roads play an important role covering most of the destinations and routes of international trade.

Driving forces of globalization in Supply Chain Management

The active exchange of the latest technological developments, effective results of scientific research contributes to the convergence of economic levels in different countries, the ways of social and economic integration between them, promotes global economic prosperity in competitive markets.  This can be further explained as follows:

 "A significant factor for success here is the willingness to overcome cultural barriers and to create the most effective business enterprise possible with today's technologies. When these components are in place, the firm can boast of a highly effective supply chain trait: a globally optimized operation (Poirier, Quinn, and Swink, 2009, p. 236)".

It could be mentioned a big number of successful logistical formation on a larger scale. For example, regional structures and systems in the EU, Southeast Asia and North America. Their experiences show the natural tendency of regional integrations. This is facilitated by the similarity of political systems, consumers needs and their ways of living, the traditions, the closeness of the historical roots to use a single source of energy and natural resources, contingency communication, lack of trade and customs barriers. However, the search for new growth possibilities and competition caused the desire of many companies and firms to seek new markets, cheap sources of raw materials and labor across national borders of their countries. This is the emergence of outsourcing to enhance effective and efficient organizational growth in profit margins. For example, companies such Nike and others, would prefer to outsource to third world countries for the manufacturing of their products, and bring back to the United States for wholesale and retail sales.

The international division of labor and cooperation have led to the development of a large number of multinational companies using worldwide supply chains and distributive channels. The prospects of development are mainly associated with a possible increase in return on invested capital, lower logistics tariffs in other countries, better financial conditions. International logistics channels contribute to the creation of the new concept of the international company, based on international freight forwarding companies, insurance companies, global telecommunication networks  ("10 Keys to Global Logistics Excellence," n.d., p. 12-13).

Additionally, it is imperative to implement global logistics deregulation procedures initiated by many countries to remove trade limitations, transport, customs and financial barriers to the development of international trade, socio-political and economic relations. These procedures facilitate the movement of capital, goods, and information across national boundaries.

At the same time, we can assume that all restrictions on the development of global logistics cannot be removed. There are many barriers, due to various reasons, including political systems, different levels of economic and social development of the countries. Such barriers exist, such as between the EU and Eastern Europe, the EU and Russia, the US and the EU, the US and Mexico, the EU and Central Asia, the US and Japan. In addition, the global logistics need to consider competition on a larger scale, restrictions on the distribution networks of transnational corporations and others  (Bouchard, 2015).

Tendencies in International Logistics Infrastructure

Globalization of the economy has caused a fierce competition among enterprises for location and placement, and general conditions of trade continue to undergo rapid changes. Creation of new global corporations and rapid development of information and communication systems enhance these processes. Unfortunately, the ability to predict the trends in the industry declines, which have the negative impact on the logistics and economic analysis. All this facts together require fast decision-making and response. The division of labor in the economy, taking into account the different logistics infrastructure, is based again on the type of communication or distribution (for example, regional networks, cooperative relationships, etc.). Therefore, it is very important to understand what logistics can bring to those global changes.

Conclusion

The concept of international logistics in Supply Chain Management in a broader sense can be interpreted as trade management methods arising during economic activity. Thus, the logistics are considered as one cycle of international economic activity: the solution to the appropriate production problems, implementation of effective transborder delivery methods, and the application of these methods to the organization and management of the sales process.

Thus, ILS embodied the creation of strategy and tactics to stable macro logistical systems, linking businesses around the world based on the division of labor, partnership and co-operation in the form of treaties, agreements, general plans at the international level.

The organization does not have to work on their own in the international arena in order to enter the foreign markets. For example, it can export their products or cooperate with the local distributors. There are several ways to enter international markets. Different companies may organize their international operations in many ways. They have their own advantages, which determine the specific peculiarities of logistics activities. However, there is a general trend towards global operations when the whole world is seen as a single integrated market.

References

The 10 Keys to Global Logistics Excellence. (n.d.). Supply Chain Digest, 2-25. Retrieved from https://www.scdigest.com/assets/Reps/SCDigest_Global_Logistics_Excellence.pdf

Bensman, D. (2008, May). Globalization and the labor markets of the logistics industry. Paper presented at t Sloan Industries Studies Conference, Boston Massachusetts.

Bouchard, D. (2015, March). What is Globalization Doing to the World of Logistics? - Inbound Logistics. Retrieved from https://www.inboundlogistics.com/cms/article/what-is-globalization-doing-to-the-world-of-logistics/

Du, J., & Bergqvist, R. (2010, July). Developing a Conceptual Framework of International Logistics Centers. Paper presented at WCTR, Lisbon, Portugal. Retrieved from https://www.wctrs.leeds.ac.uk/wp/wp-content/uploads/abstracts/lisbon/general/03065.pdf

Poirier, Charles C., Quinn, Francis, and Swink, Morgan. Diagnosing Greatness: Ten Traits of the Best Supply Chains. Ft. Lauderdale, FL, USA: J. Ross Publishing Inc., 2009. ProQuest ebrary. Web. 3 August 2015. Copyright © 2009. J. Ross Publishing Inc. All rights reserved.

Sankar, Ravi. "Five Ways to Optimize Supply Chain Management." Http://www.industryweek.com/planning-amp-forecasting/five-ways-optimize-supply-chain-management. N.p., 31 Oct. 2011. Web. 3 Aug. 2015.