IL/U1 Topic 4 International Logistics Development
Logistics services happen to be the backbone of Retail Operations. Traditional Logistics was referred to mean transportation services by road, rail, air and ocean freight. However, along with the evolution of International Retailing, Logistics too grew as a discipline encompassing not only freight but a host of logistics related activities including Origin and Destination Services, Warehousing and Secondary Distribution etc.
Driven by ECR initiatives, the Retail industry began to change and evolve as a process oriented, activity driven industry. New supply chain solutions demanded setting up of consolidation centres at various locations to achieve optimum capacity utilization on freighters and bring down the overall freight costs. Further improvements demanded the Logistics service operators to manage such consolidation centres at their end and provide cross dock operations. Hereto the warehousing operations were managed by the Retailers in house as the operational expertise required in managing inventory and warehouse operations were different from Logistics operations. Freight operators had their core strength and experience in managing freight but not the warehousing operations.
However the new initiatives and models of supply chain gave an opportunity for the Freight Companies to realise the potential and grow into being Logistics Service Providers. They began to invest in setting up infrastructure in terms of Distribution Centres and manage the operations thus providing end to end services to the Retail industry.
As the Retail industry began to embrace IT solutions to augment its supply chain services, the LSPs too invested into IT systems and soft wares, building their core capabilities based on their ability to interface with the client systems and provide faster response and visibility to transactions as well as enabling automation of transactions. LSPs grew along with the Retail industry.
As the supply chain processes gained transparency, new process initiatives began to evolve, where in the value add services including packing, labelling, building kits, sales promotion packs etc were offered in house by the LSPs. The LSPs who could extend their competence to provide all of the required services under one roof and service the retail giant gained immensely in terms of growth as well as in expertise.
Over a period of time when Internationalisation of Retailing began to grow rapidly, Logistics Provider industry too grow along. The International Retailers provided an opportunity for the LSPs to service their new units set up abroad. Thus local LSPs began to set up international operations either independently or by way of partnering with local LSP in other countries or buying out Companies. The International Retailers needed to transfer and establish the standardized processes of operations in their new locations and the LSPs too could now offer the same standardized operations.
Over a period of time we see a lot of innovation having taken place in the Logistics Services. In the current times we see many of European Logistics Service Providers having gained Multi National status and establishing global operations through acquisitions and joint ventures. With internationalization, they are able to develop and offer specialised and industry specific solutions that are tailor made for the industry. Take the International Retail industry, international LSPs offer consolidation centres at the buyer’s country, provide specialized freight containers that come equipped with hangers etc. They provide ironing, labelling and repacking services at the Destination so that the garments can be delivered directly to the store. Loading of the container is planned using software that enables the LSP to provide unit wise loading details to the client and help provide detailed information. With RFID and new IT solutions, they are able to provide higher value addition to the International Retail industry today. All of these solutions help the International Retailers to reduce the inventory holding, operational costs as well as better visibility over all legs of supply chain.
Now days the International Retailers choose to work with one or two Multinational Logistics Service Providers and assign specific lanes or regions to them. By partnering with LSPs and giving them higher volumes of business, they are able to get the LSPs to invest, build expertise and provide end to end services across all regions and locations. Relationship management has come of age in the International Retail Industry and International Logistics.