Drivers and Enablers Global Logistics 1
Drivers and Enablers of Global Logistics
Name:
Institution:
Drivers and Enablers of Global Logistics 2
Drivers and Enablers of Global Logistics
Global logistics refers to the management and design of the system controlling and
directing materials’ flow through, out and into the firm internationally to achieve minimum total
corporate objective cost. It includes all the operations that are product related or movements of
components which encompasses both imports and exports simultaneously. Its main components
include materials management physical distribution and material sourcing (Sancha et al, 2015).
Material management is the supplies, raw material and parts inflow through the given firm.
Sourcing strategy is the linking factor between physical distribution and materials management.
Physical distribution is the final movement of finished products to the firm’s customers and
consists of inventory, warehousing, customer service, transportation, and administration (Diabat
et al, 2014; Blümel, 2013).
Globalization refers to the worldwide motion geared towards trade, economic,
communication, and financial integration (IVANOV, 2014; Kilic, 2015). It implies nationalistic
and local perspectives opening to broader outlook of interdependent and interconnected world.
Globalization involves free capital, services, and goods transfer across national boundaries. If
applied indiscriminately it is very dangerous to fragile or smaller economies.
There are three main factors of globalization drive that influence firms to undertake global
logistics operations. According to POPA (2014), the first is cost reduction. Companies are
striving to get new ways to realize values in this increasingly competitive world. The key driver
for the realization of new production values is the cost reduction in material, parts, and labor.
Firms, therefore, will outsource when there internal cost is higher than the cost of outsourcing.
Global logistics reduces production costs for most of the firms and therefore the reduced
production cost encourages the firms to engage in global logistics in delivery of their goods and
Drivers and Enablers of Global Logistics 3
services. The second factor is quality of services accessible through global logistics (Olhager et
al, 2015). Global logistics acts as an outsourcing source. Most companies engage in global
logistics to help in the accomplishment of increased competitive advantage. The contractors’
availability makes it easier for firms to outsource non-core activities. The end result is improved
service quality at very low cost. Quality management as a system’s implementation forms the
main driver to the survival of any logistic company.
The third factor is risk control. Company’s involvement in global logistics ensures
sharing of service risks. Risks are divided into performance and relational risks (Saleh & Roslin,
