Anticipated Challenges to the International Logistics - Literature review Example

Anticipated Challenges to the International Logistics Introduction The extraordinary differences between emerging markets in different regions and countries suggest that it is important to establish multiple chain supplies. Each of the chain supplies should be tailored to meet the needs of particular regions in accordance with the local development capabilities. Notably, barely all stakeholders appreciate the increasing complexity of the global logistics industry that is characterised by a greater number of parameters. The rate of changes in the industry is breathtaking and continues to become complicated every other day. This paper will focus on major challenges that the logistics environment is likely to encounter within the next ten years. The challenges are analysed succinctly with suggestions on possible counteractive approaches. In any case, logistics is an important component of global supply chains, which necessitates those organizations to initiate counter measures to foreseeable challenges. Understanding the International Logistics Sector and Forces at Play Developing countries are largely characterised by shifting politics, limited basic infrastructure, unstable economies, and limited use or application of enterprise management technologies. With that being the norm, companies face serious challenges in conducting business, hence the need to make crucial decisions before entering emerging markets. One is forced to seek alternative strategies in order to balance the extent of integrated globalisation versus localisation in order to succeed in today’s highly unstable and unpredictable markets (Bookbinder, 2007). It is a great challenge to decide whether to remain local and depend on local supply chain relationships or to integrate into the global operations. Staying local means that one will engage with local business partners and ignore any international engagements. That seems disadvantageous largely because of the notion and structures of globalization. A main immediate implication is the growth in protectionism. Players in the private sector are increasingly striving to expand their share, and hence growth in emerging country markets across the globe. The trend is increasingly causing economic pressure in these countries. In response, the countries are forced to initiate and impose levy on import codes and product restrictions. That is done to protect local industries. Here, the World Trade Organization (WTO) has failed to liberalize the global logistics environment that has resulted in increased restrictive barriers to logistics (Smith, 2008). Notably, globalization is making strides ahead but has changed course unexpectedly. Globalization, linked with increasing fuel and labour costs, regulatory shifts, and market dynamics in countries such as China is causing significant impact in the arena where companies source and produce. The complexity of the processes required to reach customers is gradually increasing. The conditions are taking effect in the developing world. Integration and transfer of voluminous data is another area with significant impact on logistics. Organizations are expected and to a big extent forced by circumstances to present and make available sheer amount of data to customers. Capturing, interpreting, holding, and representing these data to customers is a big challenge. This is from the view that some of the information is difficult to acquire and may be used to the disadvantage of the company in question. Companies need to have a global perception of the significance of information for the sake of success. The impression is that there is a need to keep in pace with the dynamics of the international markets regarding effectiveness in the transfer of information (Farris, 2005). The cloud, machine-to-machine stuff, and the internet are increasingly becoming critical elements in the management of logistics. However, reliability of shipment is becoming a main area of concern in logistics. The lead-time to success has become increasingly short which has made things to seem more complicated. Capital decisions require an eighteen months payback period that has to be highly flexible. Some managers, in a survey, emphasized that logistics networks that served for five years earlier were now good for a maximum of 12 months. Impacts such as changes in fuel prices, catastrophes like tsunamis, changes in the route to the market among other factors affect logistics networks. In fact, logistics networks have to be highly flexible for the sake of adjusting in accordance to these factors (Sachan and Datta, 2009). The impression is that most organizations are forced to redesign their logistics networks almost every 12 months, which was not the case earlier. Sustainability has increased over time although not clearly showing on the surface because of persisting economic crises. Regardless of the crises, sustainability is popping up and affecting the logistics setting in pursuit for improved carbon footing. Along with this, there is an increasing focus on cost containment. The highway infrastructure is increasingly being bloated and the trend may persist for longer. There is a need to have integral facilities that will help to remove containers from roads. Shippers require sustainable transportation facilities in the future. That requires intermodal transport approaches using various modalities (Martindale, 2013; Fawcett, 2009). Big shippers, however, face the challenge that providing sustainable transport demands high volumes and hence costs to cater for high links into barges and many destinations. Currently, no one has a forward shipper capability that satisfies the demand. Organizations, though, are joining to work together on this matter. Remarkably, governments and independent terminal operators can play a significant role here. European Port Operators are now seeking to initiate a hinterland strategy that will help to integrate ocean freights with other major modes. Europe is characterized by many mono-modalities where boxes are trucked from one place to another on top of particular intermodal. Movements on the Rhine are often accompanied by the last mile on the truck. Not all that is needed is the modalities, but systems that will competently cope with the dynamics and diversions of logistics. A recommendable approach involves the synchro-modality thinking. Here companies are allowed the opportunity to switch modality on an hourly basis when necessary (Garver and Williams, 2010). Government agencies have a crucial role to play to ensure that the logistics industry achieves that capability. That will help to ensure that shippers and forwarders give their customers reliable access to the logistics industry systems if adopted globally. The system will then have become one that pushes than pulling containers into the market rather. With the knowledge of when a container should reach its destination, it could be easy to organize the process differently from the way it is done today. By collaborating with forwarders, truckers, shippers, and barges ocean operators can easily run synchro-modality pilots. Currently, though, companies are seeking to work with end-to-end strategies despite the fact that they disregarded such in the past. The need for increased productivity and flexibility in operations requires adoption of precise approach and strategy for driving solutions that are end-to-end in nature (Martindale, 2013). As is common with business, one is expected to do whatever they do, expand the scope of their services while making improvements on quality, and reduce their expenses, which is a complex thing to do. The impression is that reliability is a major concern and an issue subject to discussions in the field of logistics. The field is now featuring various interesting developments particularly in the field of collaboration. There is a growing trend with the development of logistic clusters. Transportation collaboration, for instance, has become a crucial area of interest. This is from the view that even competitors have been collaborating on transportation resources. The significance of establishing an information platform is also considered as a critical move in logistics. Customers may have to reach supply chains in order to track the condition of their product orders. Notably, customers will participate in determining their products customization requirements or outcomes now that IP addresses will be involved and used in the supply chain. IP addressed are increasingly being attached to more machines and processes (Lynch and Imada, 2006). Possible Future Challenges A study involving over 250 senior executives from Asian based companies showed that only 28% of the firms were satisfied with revenues and profits from their international markets. The rest reported that the international markets they targeted had not developed as anticipated. They expressed fears that the international markets were unpredictable and would make logistics a tricky sector in the next ten years. Only 31% of the interviewed companies showed that they had necessary operational capabilities to remain in the international trade (Hubbard, 2011). Executives, further, indicated that issues of major concern included the human side of the international trade: cross-cultural communications, securing talent, and the establishment of a global mindset (Hubbard, 2011). From the study, it was clearly articulated that the future of the logistics could require decentralization of operations and tailoring the same to the dynamics of the local market. Untamed Economy that Impedes Collapse The contemporary society and the world community at large is characterized by mass consumption and untamed materialism that will certainly affect logistics in the near future. This highly refutable way of life is unsustainable. It largely means that people have to exploit resources unreasonably, a development and trend that has resulted into climate change and prominence of natural disasters. As indicated in the preceding sections, disasters are now causing undesirable effects on logistics. Organizations have to revise their logistics networks every 12 months in order to ensure flexibility. The flexibility is required to contain uncertainties such as those caused by natural calamities (Bookbinder, 2007). Remarkably, the world is characterized by increasing economic growth rate that has caused a concurrent increase in demand for transport and logistics services. A comprehensive global logistics and transport super grid will help to ensure rapid movement of goods between consumption centres. As climate change advances, however, supply chains may not evade disruptions, a development that is continually causing more challenges for logistics organizations (Smith, 2008). Mega-efficiency in Mega-cities Mega cities have lately emerged to become the world’s centres of power. They are the major drivers and beneficiaries of the paradigm shift towards “green” growth. Mega cities have lately shown interests in collaboration as they seek to overcome challenges associated with the development of large urban centres. Particularly, Mega cities are collaborating on issues such as congestion and emission control. Robotics is playing a major role in revolutionizing products and service industries (Fawcett, 2009). Consumer habits are gradually changing with most people shifting from the habit of purchasing to renting. To satisfy the demand that is increasing significantly with changes in customer preferences the logistics industry may face numerous challenges in meeting the demand (Branch and Stopfold 2013). This is from the conception that the logistics operations may be obstructed by inefficiencies in the global super grid that is not as developed as it should be. Efficient traffic concepts are necessary to relieve congestion. Most of the undeveloped and developed countries have undeveloped structures that have an undesirable impact on logistics. Appreciably though, mega cities are fed with reliable super grid constituted of ships, aircrafts, trucks, and space transporters. The blend of these facilities will be required lest the desired level of economic development is not achieved (Martindale, 2013). Clearly, the logistics industry may suffer detrimentally as demand increases while most developing and undeveloped countries cannot achieve the desired level of infrastructure development. Customer Lifestyles The world is gradually changing into one that can be described as a setting where individualization and personal consumption dominate. Customers have the will, power to design, and create products according to their interests. This will in the future lead to rise in regional streams where raw materials and data are required from all parts of the world. This implies that logistics will have a major role to play. Consumer lifestyles will require that people be supplied with products whether such products are accessible within the specific locality or not (Sachan and Datta, 2009). Timeliness is important in ensuring that organizations remain competitive. Therefore, the logistics will have to embrace the same. Effectiveness in regional production and customization are often affected by infrastructure and decentralized energy systems. Where such facilities are undeveloped, the logistics industry will face serious challenges. Possible consequences for logistics include increased need for long distance transport of both semi-finished and finished goods. Localization of value chains, however, may have reverse implications that the need for long distance movement of products may decline. This is because people may have their lifestyles customized to fit to what their locality can produce. With that, regional logistics will have a major role to play with the high-quality final mile network being a major success factor. Paralyzing Protectionism Excessive nationalism and protectionists may eventually be the order of the day in various regions. This may happen because of the increasing threat of crime at the international levels. Other than the risk of crime, logistics is prone to other malpractices such as waste dumping and illegal trade. Some countries are forced to impose tough measures to control these malpractices. Often, such measures hinder the smooth movement of goods. Protectionist barriers and excessive nationalism often triggered by security concerns and economic hardships have been reversing developments associated with globalization. Developments in technology needed for efficiency in logistics continues to lag behind. This, and poor relationships between countries are a major challenge faced in logistics (Farris, 2005). Countries and regions continued to enter into conflicts over the exploitation of national resources. Global logistics is a field that heavily relies on international relationships. Therefore, perceived conflicts over resources could affect the smooth processes in logistics within the next decade. Implications for this industry include decline in international trade and the establishment of regionalized supply chains (Button 2010). To most governments, logistics is a strategic industry entitled with the role to ensure good international relationships. Logistics providers serve as intermediaries in global trade brokerage in bloc-free countries. This role, however, is challenged and unattainable in the case of countries and blocks with strained relations (Garver and Williams, 2010). The industry has to adopt revised approaches to ensure that they remain effective even under tense inter-national relationships. Global Resilience and Local Adaption This scenario is a consequence of an initial situation where high level of consumption dominated because of low cost automated production. Due to accelerated climate change, disruptions caused by catastrophes, clashes, and political instabilities among other factors that disrupt supply chains and the lean production processes and structures, logistics suffer a tough blow and may even retard. Current economic paradigm is characterized by gradual shift from efficiency maximization to vulnerability mitigation. This is because the global community is already conscious of the consequences that may befall the international trade. Logistics play part of the international trade and may not be spared from risks facing the international trade. A radical shift towards redundant production systems and the change from global to bloc or regional supply chains may be the order of the next decade. This is from the conception that such a shift will help the global economy to withstand economic troubling periods. The resilient world anticipated in the next ten years will rely on the logistics industry that prioritizes supply security. This is ensured by having backup infrastructure for the sake of guaranteeing reliable transport during hazardous and unstable times (Hubbard, 2011). A commendable approach to ensure reliability is the establishment of large warehouse structures close to manufactures. These will be indispensable buffers for the entire logistics industry. Summary The globalizing and information world is characterized by extraordinary variations in the emerging market countries as well as the established ones. These variations are certain to persist and may become broader with time as has been indicated in the preceding sections. To the logistics industry, the variations will demand that companies establish multiple supply chains. Each of the supply chains will be tailored to the interests and nature of communities or regions being served. Further, the supply chains will have to be compliant with the local developments and should be flexible enough to accommodate rapid changes. Lately, organizations have largely been emphasizing on integrated operations. Emerging markets, mainly because of associated challenges, may demand that companies cease placing high value on integrated operations. Instead, they will have to emphasize on dynamic operations. Recommendations Global markets have become crowded already and more companies are still flocking the markets. They have a common strategy to sell innovative and high value products to gain a higher edge in market competitiveness. Certainly, organizations will have to adopt new and effective approaches that reflect well on the changing markets technological developments, and customer preferences. Companies will have to establish multiple supply chain if they are to emerge successful in different regions. This is because a uniform global approach will not work for all markets because of differences in the nature of regional markets. An important element of success that companies will have to focus on in the next decade is the ability to establish adaptable and responsive system of processes, technologies, and people. The dynamics and extraordinary variations of regions especially the emerging markets demand specially tailored operations supported by the local capabilities and talents. That will help to counter global logistics challenges highlighted in this paper. References Branch, A and Stopford, M 2013, Maritime Economics, 3rd edn, Taylor and Francis, California Button, K 2010, Transport economics, 3rd edn, Edward Elgar, New York Bookbinder, JH 2007, ‘Appriciation of the Global Trade Dynamics affecting Logistics’, Research in Transportation Economics , 67-69. 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