Management Global supply chain
Logistics encompasses the activities necessary to get material from supplier to a manufacturing facility, through the manufacturing process, and out through a distribution system to the end user. In the international business, the logistics function managers the global supply chain. The twin objectives of logistics are to manage a firm’s global supply chain and helping the firm establish a competitive advantage through superior customer service.
The potential for reducing costs through more efficient logistics in enormous. For the typical manufacturing enterprise, material costs account for between 50 to 70 percent of revenues, depending on the industry. Even a small reduction in these costs can have a substantial impact on profitability. According to one estimate, for a firm with revenues of $ 1 million, a return on investment rate of 5 percent, and materials costs that are 50 percent of sales revenues, a $ 15,000 increase in total profits could be achieved either by increasing sales revenues 30 percent or by reducing materials costs by 3 percent. In a saturated market, it would be much easier to reduce materials costs by 3 percent than to increase sales revenues by 30 percent.