The Relevance of Logistics
There are several factors that underline the growing
importance that logistics plays in the global economy:
- The friction of distribution.
Distributing goods, parts and raw materials has an economic cost which usually
10 to 15% of the GDP.
For developing countries, this share can go in the range
of 25% while it can be 6 to 8% for advanced economies.
Transporting, holding inventories and processing orders
all involve a cost. Any improvement in
logistics, such as lower costs, less time or higher
reliability, thus has direct commercial benefits.
- Growing materials demands. Social
and economic factors have favored a growth of
consumption and of the associated material flows.
Economic development involves large accumulation of
infrastructure investments. Further,
rising incomes as well as differences in consumer
preferences involve a wide variety of consumption
- Complexity of value chains. Many
consumption goods are getting more complex, a trend
that is associated with the growing number of parts and
the requirement to effectively manage these inventories.
All the tasks involved in making goods available to the
final consumer (research and development, fabrication,
distribution, marketing) are increasingly
- Spatial division of production and
consumption. The ability to use global
comparative advantages has favored a spatial division of
production with processes such as outsourcing and
offshoring. Similarly, the global division of production
requires more complex distribution capabilities to
markets that are often distant. Crossing international
jurisdictions involves additional managerial and
operational complexity. Many retailers have regional or
national distribution strategies requiring the
management of vast inventories.
- Sustainability. Environmental
concerns are permeating freight distribution with
incentives towards better energy and material
efficiencies. The issue of recycling, often labeled as
reverse logistics, is also gaining in importance.