REVIEW OF THE LITERATURE
3.1. Introduction
3.1.2. The Importance of Logistics
Logistics and Supply Chain Management tend to be of the most important factors in a company’s performance and a key to success in the global economy regardless of company size (Randall, 2000). However, logistics is interrelated with
Chapter 3 – Packaging in the supply chain: Review of the literature
72 other sciences as well. As Gudehus and Kotzab (2012) describe modern logistics use the knowledge provided by other sciences and incorporates it into its operations.
The industry is more and more dependent on well-structured logistics. As cited in Gulf News (2012) various weather conditions such as 2011’s tsunami in Japan and floods in Thailand caused disruptions the following year in the supply of parts to the car industry. This fact forced the AW Rostamani Automotive Group to invest in new bigger spare parts facilities in Dubai, in order to overcome similar situations in the future. In the same manner, Victoria Kwakwa, World Bank’s Country Director for Vietnam supports that serious investment in logistics could be vital for Vietnam in order to face unpredicted weather challenges such as those presented above (tsunami, floods and so on) (The Philippines News Agency, 2014).
According to Giannakenas (2003)in many companies worldwide, the cost of various processes related with Logistics, contribute to the black hole of their profits.
Logistics cost is the second biggest cost after marketing and sales costs in a trade company and the third biggest cost after production, marketing and sales cost in an industrial company. Thus there are different types of companies, depending on the effort to reduce the various logistics costs for the purpose of meeting customer requirements.
Logistics management is a measure of the valuation of a company’s performance since the processes that are involved impact not only on the company but also on its relations with the various customers and suppliers. According to Kenderdine and Larson (1988, cited by Lambert et al., 1998), successful integrated logistics management combines all different logistics activities in a system and gives them the ability to work simultaneously targeting to the minimisation of total distribution costs and the improvement of customer service levels. Lambert et al.
already in 1978 cited that the industry was beginning to realise that with the coordination of the various logistics activities, total logistics costs can be reduced and customer service improved.
The function of a supply chain affects most of a company’s departments and at the same time its customers and suppliers, since this is the procedure through which raw materials reach the manufacturer and finally the consumer, as a final product ready for use.
Customer service-satisfaction is a really important measure for all companies.
According to Birkner (2011) based on customer satisfaction marketers are able to determine if a company is meeting basic customer needs or not. As cited in Oxford
73 Dictionary of English (Oxford University Press, 2010) customer service is defined as
“the assistance and advice provided by a company to those people who buy or use its products or services.” More over the Dictionary of Business and Management (2009) describe that “Customer services cover a wide variety of forms, including after-sales servicing, such as a repair and replacement service, extended guarantees, regular mailings of information, and, more recently, freephone telephone calls in case of complaints.” On the other hand according to Heskett (1994), logistics customer service is “the speed and dependability with which items ordered can be made available…”. He also adds that in many cases customers ask for higher levels of dependability than for faster response to the lead time of the product. In addition, as Bender states (1976, cited by Ballou 1999), the development of a new customer is approximately six times more expensive than it is to keep a current customer, so from a financial point of view, customer service improvement is essential (although customer service is encompassed in the broader concept of customer satisfaction).
The growing demand for innovative and constantly improved products, faster transportation and better quality (both in products and services) and furthermore the development of new technologies, have driven to the shortening of product lifecycles and at the same time to an increase in the range of the goods offered (Iakovou and Xanthopoulos, 2005). For what is relevant to the European Union, various developments were succeeded during the last decade, giving new shape and push to several logistics operations. New conditions and procedures to the customs of the EU’s members, the continual economic growth and the demand for more, better and faster movement of products and services boosted the importance of logistics operations and the need for more organised and well stabilised customer – oriented processes. The challenge for the shippers is to serve the European market in the most effective way and at the same time keep the number of warehouses small and the lowest possible inventory (Bowman, 1999).
In recent years most (if not all) of the customers, demand for the lowest cost combined with the quickest possible delivery of the products (Randall, 2000). Thus, producers must organise their businesses in a way that ensures the supply of raw materials, the production of goods and the delivery of products, components or materials at the exact time when an organisation needs them (Lambert et al. 1998), driving the market in a more Just In Time way of doing business.
On the other hand the relatively newly arrived environmental concerns put new pressures on the industry globally and the challenges for logistics in particular, become crucial. New laws obligating companies to conform to a more environmental
Chapter 3 – Packaging in the supply chain: Review of the literature
74 friendly way of doing business have developed initially in a regional level and afterwards in the EU. Logistics is called to give solutions to a range of problems (procurement of raw materials, design and manufacturing of new products that do not downgrade the environment etc.), finding at the same time methods and ways in a try to avoid increased and hidden costs.
In addition, the new economic conditions and the expansion of individual domestic industries to foreign and bigger markets, creates new problems for logisticians who are now forced to find solutions to new issues such as the kind of the packaging and its individual characteristics (shape, size, color, type) that best fit in a country’s culture. The labeling of products is another challenge, since new social conditions which dominate in the EU, require from companies to create products easily identifiable from every EU resident.