Solving logistics problems by outsourcing<\/p>\n
Jacky Mussry, Contributor, Jakarta<\/p>\n
Today, fierce competition worldwide is unavoidable. At the
\nnational level, the regional autonomy has created competition to
\na certain extent.<\/p>\n
At the regional level, among ASEAN member countries there is
\nthe Asean Free Trade Area (AFTA), while globally, various
\nagreements and regulations implemented by the World Trade
\nOrganization (WTO) have made competition much tougher.<\/p>\n
This extremely competitive atmosphere forces every company and
\nbusinessperson to be extra-cautious, as even to merely exist is
\nno longer easy.<\/p>\n
World's major company Intel's CEO Andy Grove once said that
\n"only the paranoid may survive," by which he obviously meant that
\nonly those who can constantly create competitive advantages can
\nsurvive and continue to exist.<\/p>\n
Given the situation, every business manager at every level has
\nto understand his or her business landscape and the company's
\ncore competencies to set the related objectives and goals.<\/p>\n
To ensure good implementation of the company's goals and
\nobjectives, the marketing head or CEO should formulate the right
\nkind of marketing mix that comprises relevant product, pricing,
\nplacement or distribution and promotion strategies.<\/p>\n
These strategies are commonly called the "4Ps" in marketing
\njargon. The placement or distribution element -- just as
\nimportant as the other three Ps -- refers to the company's
\nlogistics, including transportation, warehousing and storage,
\norder processing, inventory, raw material stocking and handling,
\nand so on.<\/p>\n
Some decades ago, when the demand exceeded supply, consumers
\ndid not have a strong bargaining position, as manufacturers
\nsimply pushed their products into the market. In many product
\ncategories competition did really exist, but at a comparatively
\nlower level. The volume of business then also allowed companies
\nto handle the logistics by themselves. Distribution of products
\ndown to the smallest retailers was no headache.<\/p>\n
Today, however, with abundant alternative products available
\nin the market, fickle and highly demanding consumers have forced
\nCEOs and managers to listen carefully to customers. This is
\nessential if they intend to survive, and survival is only
\npossible if customer loyalty can be maintained.<\/p>\n
Just as marketing experts Louis W. Stern, Adel El-Ansary and
\nAnne Coughlan wrote in their best seller Marketing Channels,
\ncompanies should listen to their customers' voices and match
\ntheir requirements. Also, a good strategy -- based on intensive,
\ncustomer-oriented research -- should again be implemented to
\nserve customers the way they want. Otherwise, the entire plan is
\nrendered useless and eventually the company's existence is at
\nstake.<\/p>\n
As today's distribution has to cover a wider area, companies
\nhave to be cautious about a variety of costs, like inventory,
\ntransportation, order processing, warehousing and so forth, in
\norder to be efficient. In short, the journey of a product from
\nthe plant to the outlet needs a special logistics skill so that
\nthe product is available at the customer's nearest outlet while
\nthe entire range of costs should not inflate the price and create
\nanother burden for both parties, producer and buyer.<\/p>\n
The marketing manager, along with logistics managers, should
\nat all times abide by the logistics definition as issued by the
\nCouncil of Logistics Management: "Logistics is an integral part
\nof the supply chain process that plans, implements and controls
\nthe efficient, effective flow and storage of goods, services and
\nrelated information from the point of origin to the point of
\nconsumption in order to meet customers' requirements."<\/p>\n
It's not as easy as it sounds. For major corporates the
\nsolution, in most cases, is outsourcing so that their core
\ncompetence is not affected. The immediate advantage of
\noutsourcing is reducing their own investment on warehousing,
\nvehicles and related manpower so that huge amounts of money are
\nnot locked up unnecessarily.<\/p>\n
However, outsourcing means the company should master another
\nskill related to partnership with another party specializing in
\nlogistics. Even when the logistics is handled by another company,
\nthe manufacturer should still pay great attention to matters
\nconnected with its own information technology, enterprise
\nresource planning, supply-chain management and customer
\nrelationship management, though at a somewhat reduced level. All
\nthis is required for on-time deliveries as well as efficient and
\neffective logistics.<\/p>\n
To this day, in Indonesia, not many companies have ideal
\nlogistics management. Some of the reasoning behind the current
\nsituation, apart from cost, is that good logistics management
\nalso requires a new mind-set on the part of the management to
\ncreate the required added value.<\/p>\n
For this type of company, outsourcing may be the ideal
\nsolution rather than investing huge amounts of money on the whole
\nlogistics setup. Outsourcing is relatively easier and less
\ncostly. It only requires a certain chemistry between both
\ncompanies, the manufacturer and the appointed company. With the
\nright kind of partnership, the manufacturer can leave all the
\nhassle of distribution to its partner and focus more on its own
\nstrengths and core competencies. As, for many giant world-class
\ncorporations, this has proved successful, local companies should
\nkeep it under consideration to become winners in today's all-out
\nglobal competition. -- The writer is a partner and head of
\nconsulting division at MarkPlus&Co<\/p>",
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