The Global logistics is concerned with undertaking various crucial decisions. In this regard, the role of Logistics is significant. The distribution of Logistics could be intensive or selective or exclusive, depending upon the Market segmentation. Intensive distribution is aimed at maximum market coverage; selective distribution is aimed at making the product available to selected dealers or retailers only in a given territory while an exclusive distribution is most restrictive form of market coverage. Based upon the category of classifications, under the Market segmentation, the firm’s Logistics design helps in easier differentiation of its offered products to the target audience. It further takes into consideration the Target market factors, product related factors and Company-related factors more efficiency and effectiveness of the supply network channel so resorted to which is all in turn depending upon the Market segmentation concept. Further it also enables to manage the channel relationships by empowering the channel, controlling the same and undertaking the channel leader role. In case of the service channels, minimizing the waiting time, managing service capacity and improving service delivery mechanisms also help in making the network efficient, more effective and differentiated from that of the others. Therefore, in this entire manner, Logistics Management has resulted in enhancing the Customer value even globally.
For example, in countries such as China and Russia, there are constant political changes and the economies being unstable; it is believed that the application of the management technologies for the enterprises is also therefore limited. Hence so many firms are concerned about logistics issues when they move into new markets such as China and Russia thereby hindering effective Global logistics. These countries are geographically vastly spread over a larger piece of land and the issue here arises as to link the Global logistics strategies with that of the logistic system typically prevalent in these countries. Therefore these constraints could be overcome if market segmentation is efficiently undertaken to cater to the peculiarities of each of these geographical segmentations. The Global logistics issues could be further addressed to by switching to the local Logistics Management network based upon effective market segmentation to avail the best from the host country though the same shall not be integrated to the global standards.
However, as an operations manager, following are the important issues you need to deal in Global logistics:
Sharing of Information: With the lack of appropriate incentives given to the channel partners, aligning of the same has become an issue. In case of purchasing, the cost data information is needed to design the pricing of the purchase accordingly. However, the issue is that the channel partners may either abuse this information or conceal the same in order to the gain the informational superiority by delivering the information to the Company as against a hefty price for the same. Another issue is that the information is subject to the trust of the channel partners and their cooperation to share the same, in order to determine the selling price of a commodity that would in turn determine the trend of the purchases in the Company.
Procurement management: The next challenge pertains to the procurement challenges. Often the raw materials required to produce a product is purchased either on cash basis or on credit. However, the issue arises when such a purchase is prone to the monopolistic approaches of the suppliers. Hoarding the materials to create artificial crisis in the market and then eventually increasing the prices of the procurement, affect the purchasing power of the Production companies significantly. Also, at the times of genuine crisis, the procurement could come with a major cost thereby increasing the overall cost of production in the business.
Logistics issue: When the channels of logistics are not properly designed or when it is prone to frequent changes owing to the influence of the external factors, there is a disruption that is caused to the Logistics process. Frequent disruption may result into receiving lesser volumes of purchased goods on time and thereby delay in the production processes which in turn affect the sales volumes of the business.
Effect of Globalization: Globalization impacts the businesses either positively or negatively. The issue becomes when the fluctuations in foreign exchange rates adversely affect the purchasing activity of the Company. Further, the demand for the Company’s goods could also fall in the global markets thereby making the purchases undesirable. Also the political scenario and regulations guiding the host countries may act as deterrence to the Company’s products thereby affecting the purchasing activity for the same.
Moreover, in Global logistics, when the power is exercised over the vertical layers in upward succession, there occurs double marginalization. The unintended consequences of double marginalization would be as under:
It raises the retail prices to be higher with the sequential mark-up cost however, the overall profits is relative lesser in case of double marginalization than in case of vertical integration.
Results into higher buyer prices but profits remaining lower to the sellers.
The dead-weight losses are increase in the process of double marginalization that also reduces the profits in the whole market.