The Importance of Supply Chain and Logistics in Today’s Businesses

The global meltdown has made corporations sit back and think how to manage what you cannot even anticipate and still survive and grow. The globalisation of economy and e-business has heightened the strategic importance of supply chain and logistics management and created new opportunities for using supply chain and logistics strategies and planning as competitive tools. Moreover, the combination of enterprise information infrastructure and the Internet has paved the way for a variety of supply chain and logistics optimisation technologies.

Supply chain and logistics management is an area that is essential to a firm’s competitive strategy and revenue generation. Relevant business activities may include one or more of the following areas: transportation, inventory, order processing, purchasing, warehousing, materials handling, packaging, customer service standards, and production.  Supply chain and logistics management represents a synthesis of many concepts, principles, and methods from the more traditional areas of marketing, production, accounting, purchasing, and transportation, as well as from the disciplines of applied mathematics, organisational behaviour, and economics.

Supply chain management is unique and, to some degree, represents a paradox because it is concerned with one of the oldest and also the most newly discovered activities of business. It is difficult to visualise any product that could reach a customer without logistical support. Yet, it is only over the last few years that firms have started focusing on logistics and supply chain management as a source of competitive advantage. There is a realisation that no company can do any better than its supply chain and logistics systems. This becomes even more important given that product life cycles are shrinking and competition is intense.

Logistics and supply chain management today represents a great challenge, as well as a tremendous opportunity, for most firms.  Supply chain and logistics related costs account for 20-25% of typical firm’s total costs.  On the revenue side, the supply chain and logistics decisions have a direct impact on the market penetration and customer service.

Written By
Dr. Santanu Roy – Prof. Operations Management at IMT Dubai