Every day the world is becoming more and more competitive. It really does not mind if your enterprise is settled in UK or India, globalization has arrived and it is changing the way we do business.
The competitiveness level has increased so much that every step in the supply chain is important. Here is where logistics have gain importance. I do not mean they were not important before, but it is one of the things that is really making a difference among companies in the last decade. Usually, when people think of creating a business, they think about the 4Ps: product, price, placement and promotion. But what about the internal processes? How do the suppliers send the materials to our factories or shops? How do we send it to our clients?
Many companies have noticed it. For instance, Apple also realized about the importance of logistics years ago. In 1998 they had just created the new translucent blue iMacs. Until that moment, their products were always transported by sea, a slow but cheap method. Nevertheless, Jobs, conscious of the importance of his product being in every shop for Christmas, decided to pay 50 million dollars to buy up all the available air freight space in advance. That decision was terrible for Compaq, one of their main competitors, who had no choice but to transport all their products by sea.
They kept evolving and, in 2001, they established a new logistic system to send their new iPods directly from their Chinese factories to their final consumers’ houses. They saved a lot of money reducing inventories and warehouses (Businessweek magazine, 2011).
ASICS is another example of innovation in this field. This Japanese athletic footwear company was distributing in America thanks to a Distribution Center (DC) built with the latest technologies. As the year passed, the DC operations team realized they were getting to the limit of their capacity. Therefore, in 1997, they started to think about what to do to improve their efficiency and increase their capacity.
After years of thinking and changing their initial idea, they finally built a new DC changing their distribution system to a crossbelt sorter unit system, completely wireless. Immediately after receiving a command, the whole chain starts to work. All of this is supplemented with a sophisticated net of scanners all over the DC, exactly controlling which product is in which exact place. Again, their efficiency has increased astonishingly since then (Logistics Management Blog, 2013).
These are just two examples of successful companies and how they managed to have an excellent logistic system. Nevertheless, you still have to choose between two options. On one hand, you can do as Apple or ASICS, and integrate all the logistic system inside your company. It requires continuous investment but it will afford you to control all the process, rethinking those parts where you are not being efficient. On the other hand, you can also leave those inefficient areas to someone who is specialized in logistics. Trying to control something that clearly exceeds your possibilities is nonsense and can suppose heavy losses.
Nevertheless, whatever you choose for your business, there is no doubt you have to study the whole logistic process. Even if a company has externalized part of its logistic system, it will have to control how the product is getting to its destiny and it will have to analyze the cost of this externalization. Logistics have become a key factor of the value chain and they are here to stay.