Part I Introduction
6.1 Main Influencing Issues
6 Logistics Future Trends
Amir Zakery
Department of Industrial Engineering, Amirkabir University of Technology, Tehran, Iran
logistics’ managerial and coordination functions is more influential than IT in increasing the optimal use of transportation facilities. Obviously, a lack of coordi- nation between effective factors decreases overall efficiency and imposes different costs on the system. In supply-chain partnerships, information sharing between supply-chain members is frequently suggested as a remedy to improve collabora- tion. These technological improvements permit the coordination of globally dis- persed sets of economic activities.
According to Kleindorfer and Visvikis [2], globalization was the major factor leading to the growth of logistics in the past decade. Smith [3] referred to trade as a fundamental factor driving economic growth. Trade means that the most cost- effective sources for product design and manufacture can be linked to end markets. It seems that in today’s business world this logic has turned into the dominant theme.
In the new framework of trade policy, business has the best opportunity to grow, and logistics has become the primary “glue” for integrating the networks of interme- diate and final production and service providers associated with globalization [2].
Although global trading is increasing, the nature of firms is also changing. They are shifting from being national firms to becoming international and global cor- porations. Becoming transnational means corporations face a more complex busi- ness environment, although they are encouraged strongly to form collaborative agreements with potential partners: suppliers, costumers, competitors, and allies.
Such agreements create a network of complex business relationships. These organi- zational relationships have become a necessary component of globalization [4].
Different kinds of collaborations have been studied in the literature. Lemoine and Dagnæs [4], for example, studied the dynamics of a successful network of European logistics providers. Their study illustrates some major points: the com- plex and powerful links created between members, how they conduct their business and organize spatially to benefit from becoming global, and how firms control the transportation market and the required infrastructure. The case provides an explana- tion of how globalization can be attained using different organizational models and resource combinations.
In recent years, companies have tended to extend their domestic business logis- tics to global logistics (GLs) because of their international markets and customers.
GLs cannot succeed without suitable strategies. GL strategies have more complex- ity and so are more difficult to develop compared with domestic logistics strategies, according to Sheu [5]. The author presents several reasons for the complexity of global strategies. Coordination of information and money flow is one important source of complexity in an international scenario. Different transfer prices, exchange rates, trade barriers, and labor costs are the other factors discussed [5].
On the other side, Sheu emphasizes that the globalization of logistical activities results in more complex business operations because international companies face more sources of uncertainty relative to domestic logistics. Greater shipment dis- tances and longer lead times are examples of growing risks of operating globally [5]. These factors make current mathematical models that are used extensively for the design of domestic supply chains inappropriate, necessitating remodeling for newer arrangements.
As globalization matures, the number of companies operating in the global mar- ketplace increases. Companies should take a broader perspective when operating in international scale. Before this, although some companies had a presence across a wide geographic area, their main operation was based on local or regional sourcing, manufacturing, inventorying, and distribution. But now international companies are truly global, with an organizational structure and strategy that represents a global business [6].
Typical attributes of global marketplace according to Rushton et al. include [6]
inventory centralization, information centralization, and global branding, sourcing, and production.
However, global companies are capable of providing for local requirements and regional markets—e.g., electronic standards for electrical goods. It means that the transnational scope of global corporations does not mean neglecting of local cus- tomized products and services.
It seems that service companies face more demanding situations. Rushton et al.
emphasize that logistics networks and operations, in order to service global mar- kets, become far more expansive with extra complexity.
Globalization causes different changes in the logistics industry. Rushton et al.
find the following implications for logistics globalization [6]:
G Supply lead times are extended.
G Transition times are extended and subject to uncertainty.
G There are multiple break-bulk and consolidation alternatives.
G There are multiple freight mode and consequently different cost alternatives.
G Production postponement is deployed.
It is obvious from above that there is a direct conflict between globalization and the move to the just-in-time (JIT) operations as a new strategy in some companies.
In global companies, there is a tendency toward increasing order lead times and inventory levels because of the distances involved and the complexity of logistics.
In companies moving to the JIT philosophy, the situation is reversed and there is a desire to reduce lead times and inventory as much as possible [6]. The solution is sought for trade-offs between order and inventory costs versus costs imposed by uncertainty in products’ deliveries.
6.1.2 Information Technology
Many researchers have discussed IT as a means creating logistics competitiveness (e.g., [7,8]). IT in recent years has influenced the atmosphere of many economic activities, and its power is increasing because of both increasing capability and simultaneous decreasing cost. Reviewing recent publications and the overall situation of logistics reveals that IT and its derivatives in commerce, such as e-commerce, are the greatest influencing factors in today’s logistics.
Closs et al. [7] identified two main streams in the literature for IT role in logis- tics competence. They suggest that information is a valuable logistics resource and also a means of achieving competitive advantage.
IT has encouraged several facilities in logistics business. For example, e-commerce development is a major factor in the growth of the distributive industry. However, Ghiani et al. [9] believe the rate of expansion and the extent of development of e-com- merce remain uncertain. E-commerce causes a more complex organization of the whole logistics system that is callede-logistics. The new logistics organization should be capable of managing small and medium-sized shipments to a large number of cus- tomers in different areas (Table 6.1). As we see, IT has changed the way corporations run their business, and so changing traditional logistics system into an electronic- logistics system must be considered by logistics service providers [9].
A major role of IT through all businesses is supporting flexibility, which is nec- essary across the value chain in order to meet customer needs efficiently.
Production phases, including product development, manufacturing, logistics, and distribution activities, should support flexibility.
Closs and Swink [8] suggest that flexible logistics programs are strongly interrelated with all performance dimensions. They focus on the “information connectivity” con- cept and introduce its facilitator role. Information connectivity mediates between flexi- ble logistics and two main competencies of a firm, including asset productivity and delivery competence. They explain that information connectivity fully mediates the relationship between flexible logistics programs and asset productivity, and it partially mediates the relationship between flexible logistics programs and delivery competence.
IT is the initiator and also background for many information- and knowledge- sharing systems for supply-chain collaborations. Knowledge-sharing systems are deployed within and between organizations extensively today. These systems pro- vide the structural (organizational), cultural, and electronic infrastructure require- ments of sharing the right knowledge between the right people at the right time who need it. Electronic infrastructure mainly refers to IT facilities and capabilities, though IT provides an important and mostly unique infrastructure for knowledge- sharing systems. Other new technologies relevant to logistics management such as radio frequency identification (RFID) and global positioning system (GPS) are also dependent on IT. New technologies are discussed in the next section.
6.1.3 New Technologies
Emerging technologies are another influential trend in today’s logistics. Today’s forward-looking enterprises are dynamic and have collaborations with business
Table 6.1 Traditional and E-Logistics Characteristics [9]
Traditional Logistics E-Logistics
Types of load High volumes Parcels
Customer Known Unknown
Average order value ($) .1000 ,100
Destinations Concentrated Highly scattered
Demand trend Regular Lumpy
stakeholders such as suppliers, customers, and some competitors. They use modern technologies and share information and knowledge in an effort to create a collabora- tive supply chain. Such a dynamic and collaborative supply chain is capable of com- peting if not leading a special industry. Today, managing supply-chain activities is supported by different kinds of information flows within and between parties.
Examples such as material requirements planning (MRP), manufacturing resource planning (MRPII), and enterprise resource planning (ERP) are new information sys- tem developments in IT, improving logistics and supply-chain management [10].
In recent years, advanced technologies such as RFID, wireless and mobile tech- nology, and GPS have been applied extensively in logistics systems especially in retail sectors. At the same time, they have also resulted in mixed performances in a supply chain because of large data input, analysis, and reporting in short intervals.
Ketikidis et al. [10] point to the following advantages: tracking product logistics is much easier, information processing is done more efficiently, security is improved, and counterfeit reports are reduced. Fast-track ordering, improved customer rela- tionships, and better control of supplies are other rewards. However, Ketikidis et al. emphasize that advantages have been reported more often in more-developed countries because the required infrastructure is provided there.
Electronic data interchange (EDI) has been used widely to transfer information between suppliers and customers in a supply chain. Bar coding is still extensively utilized to track products. Such long-established technologies as EDI and bar cod- ing, although they provide lower capabilities, are not as expensive as RFID when we consider how quickly they can be implemented at any level in a supply chain.
The reader standard and compatibility with suppliers’ systems seems to be a con- straint for RFID-integrated application in a supply chain, although RFID setup and utilization costs are decreasing [10].
Smith argued that RFID should be viewed not only as a technological innovation but also as a transformational event. It is supposed that the use of RFID-based tech- nology by some leading and progressive enterprise (e.g., WalMart) should revolu- tionize and popularize inventory-tracking methods with other enterprises [11].
Like some other emergent technologies, RFID technology raises some worries from a security perspective. Kelly and Erickson [12] examined this problem and concluded that RFID technology provides enormous economic benefits for both business and consumers, while potentially being one of the most invasive surveil- lance technologies to threaten consumer privacy. However, most believe RFID’s smart technology advantages in counteracting theft are larger than any possible threats to consumer privacy. Nonetheless, methods to resolve the security anxieties of end users should be followed to minimize the disadvantages of monitoring tech- nologies such as RFID.