The most obvious reason why global logistics is now getting C-level attention is a four-letter word: COST!
Logistics costs now represent a larger percentage of sales. In fact, they now eat more than ten percent of sales revenues for most companies1; consequently, logistics costs are beginning to erode, or at least counter-balance many of the economic advantages of global sourcing.
Traditionally, global logistics has been almost an afterthought when it comes to corporate strategic planning. Because its an unavoidable cost, logistics has been seen as a complex detail that can be attended to in the margins of the business. But this is no longer the case. With the rising strategic importance of global sourcing, logistics planning is moving toward center stage. You source globally to keep costs down, and it doesnt make sense to let the rising costs, longer transit times and complexities associated with global logistics erode those savings. Its no longer possible to make a decision about where to obtain parts, locate a manufacturing facility or open a retail outlet without first understanding the impact on global logistics. CEOs and CFOs are increasingly alarmed by rising inventory, higher levels of working capital, missed deliveries and glitches in lean manufacturing performance, all of which can result from poor global sourcing strategies. So, as the strategic dimension of logistics planning becomes more apparent, senior management is looking for ways to get the most value and competitive advantage from this business function. This paper both explores the reasons why global logistics has become so strategically important and analyzes some of the steps a company can take to transform logistics operations to meet global challenges. IBMs own experience in transforming its logistics operations serves as a case study to offer insight into the performance benefits gained from a strategic focus on logistics.
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