Impact on Company Viabilityand Profitability

Global supply chain logistics lies at the heart of theviability and profitability of companies within thesupply chain. These include companies at all stages:extraction, production, supply, warehousing,distribution and transportation. Effective performanceof logistics within the entire supply chain is anincreasingly important factor for companies.

Viewing logistics as an integrated system is arelatively recent development. Companies no longerconsider logistics in terms of its individual elements(e.g., warehousing, distribution, transportation, etc.).Manufacturers now see logistics as more than anecessary cost of doing business over which theyhave limited control.

TrendsEconomic and global trends have steadily increasedthe impact of supply chain logistics on companies.These include:

• A sharp rise in global economic competitivenesswhich puts pressure on companies to reduce costs,enhance quality and increase productivity.

• Widespread adoption of advanced, computer-basedtechnologies which make it possible to gather moreinformation on all company operations.

• The surge in global logistics flows due to the growthin international trade and global access to theInternet for business transactions.

• Growing transportation costs due to longerdistances, higher fuel prices, greater demand,limited port facilities and decreased carriercompetition due to mergers.

Entry-level and frontline jobs in logistics usuallyrequire a high school education and perhaps,some additional certifications such as the OSHA10-hour Safety Card, Forklift Operator Certificationand the Certified Logistics Associates andTechnician (CLA and CLT) credentials. Themore education earned (industry certificationsand 2-year, 4-year and advanced degrees), thehigher the position and salary. Below are somesample jobs and salaries for logistics workers

from entry-level through management:

Entry-level and frontline jobs

material movers, packers and packagers,freight handlersAverage wage: $9.57 - $13.00 per hour

Frontline jobs

order pickers, receiving and shipping attendantsAverage wage: $10.51 - $18.00 per hour

Frontline supervisor jobs

team leader, frontline warehouse supervisorAverage wage: $21.72 - $26.65 per hour

First level management

transportation coordinator, outbound operationsmanager, freight rate specialistAverage salary: $35,700 - $50,900 per year

Mid-level management

inventory control manager, transportationmanager, warehouse operations managerAverage salary: $69,200 - $78,100 per year

Upper-management

director of logistics, vice president of logisticsAverage salary: $138,000 - $192,000 per year

Source: Salary information from BLS.gov 2013

CLA: Foundational Knowledge: Chapter 1 - Global Supply Chain Logistics I Page 21

Companies use a wide variety of logistics datato make their operations more efficient.

• Customer expectations for much higher levelsof responsiveness.

For these reasons, distribution centers playa more vital role than ever. Under the influenceof e-commerce, supply chain collaboration, quickresponse and Just-in- Time, logistics companiestoday must: 11

• Handle and store more items• Perform smaller transactions more often• Provide more product and service customization• Offer more value-added services• Process more returns• Receive and ship more international orders

At the same time, companies today have:

• Less time to process an order• Less margin for error• Less skilled, English-speaking personnel

Cost Effectiveness and ProductivityEnhancement

To remain competitive, every company operatingwithin the supply chain network must workcontinuously to reduce cost, while improvingperformance. For this reason, companies measureperformance at each stage to determine the impactof operations on cost and performance.

Common MeasuresThese measurements include many factors, such as:productivity, quality, response time, operating costs,labor costs, inventory costs, shrinkage, expenses,damage, depreciation, capital costs, asset recoveryand financing.

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The added complexity of supply chain logistics isfurther increasing the importance of effective costand performance measures. Materials managementhas a tremendous influence on the ultimate cost of aproduct because it handles the total flow of materialswithin an organization and between that organizationand its customers." The objective is to be ableto deliver what customers want, when and wherethey want it, and to do so at minimum cost.

Many companies use performance measures foreach of the major tasks within supply chain logistics.The performance of front-line workers can affect eachof these measures. Here are some examples:

• Customer response. Order cycle time is the time ittakes to process an order from the time the orderis received from the customer until the order isdelivered. This is a key factor in measuringcustomer service and maintaining customer loyalty.The quality of the product at time of delivery andthe accuracy of the invoicing is also vital to goodcustomer service.

• Warehousing and Distribution. There are manystandards that warehouses and distribution centersuse to track their productivity. These vary dependingon the size, complexity of the product line andindividual company policies. Some of the morecommon measurements are: units per hour, lineitems per hour, cases per hour, pallets per hourand labor cost per case.

• Quality must still take precedence over productivity.It doesn't do much good to get the product out thedoor in a hurry if it's wrong when it gets there.

Terms To Know

Cross-dockingThe process of moving items directlyfrom an incoming trailer or container toan outgoing trailer or container with littleor no storage time in between.

DemandA need for a particular product orcomponent.

Distribution centersA warehouse with finished goods and/orservice items.

Order processingThe activity required to administrativelyprocess a customer's order and make itready for shipment or production.

PaCkagingMaterials surrounding an item to protectit from damage during transportation.The type of packaging influences thedanger of such damage.

ReceivingThe function encompassing the physicalreceipt of material, the inspection ofthe shipment for conformance with thepurchase order (quantity and damage),the identification and delivery todestination, and the preparation ofreceiving reports.

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Terms To Know

Stock1) Items in inventory.2) Stored products or service parts readyfor sale, as distinguished from stores,which are usually components or rawmaterials.

Supply1) The quantity of goods available for sale.2) The actual or planned replenishmentof a product or component. The replenish-ment quantities are created in responseto a demand for the product or componentor in anticipation of such a demand.

Supply chainThe global network used to deliverproducts and services from raw materialsto end customers through an engineeredflow of information, physical distribution,and cash.

WarehouseFacilities used to store inventory.

• Transportation productivity is usually measuredseparately: cartons delivered per mile driven, totalcost per mile, cost per stop on the delivery route,cost per carton delivered, etc. Trailer utilizationand on time delivery are also used as metrics fortransportation.

Logistics Workforce Productivity IndicatorsProductivity is a critical measure of performancethroughout supply chain logistics. It directly affectsa company's competitiveness, reputation andprofitability. In turn, it affects workforce compensationlevels.

While productivity is undeniably a critical part of anydistribution operation, it should again be stressed thatproductivity must not sacrifice quality. Efficiency atorder fulfillment is the main productivity measure forlogistics. Thus, the output of the logistics workforceis typically measured in orders."

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