Logistical Issues Faced by Organizations

The way large industrial, mining, and commodity companies use their supplies, equipment, and other resources has significantly changed in the recent years. The uncontrolled accumulation of stocks, poor supplier management, and the lack of effective material base and logistics infrastructure management system have all led to a rapid increase in costs. It is impossible to ignore these issues, as the successful performance of companies will depend on the adequate resolution of the above-mentioned issues. In addition, the accumulation of unsolvable problems in the logistics unit has significantly increased the risks associated with the supply of necessary resources. These shortcomings inevitably lead to the failure in the manufacturing process. Long-term practical experience in logistics helps to develop well-planned, workable, and feasible solutions to the problems in the field. The current paper examines the logistical issues faced by organizations and discusses what can be done to change the entire situation for the better.

The current issues associated with supply chain are mostly linked to the monetization. The successful distribution and manufacturing are highly dependent on the market’s volatility and economic conditions. Companies also face various challenges during the expansion into new markets. They include localization burden and complex taxation. Modern markets require the development of various services and pricing models. The optimization of supply chains will enable the businesses to fulfill critical functions. The frequent application of outdated technologies by many enterprises will slow down their supply chain operations in the global and domestic markets (Rushton, Croucher, & Baker, 2014). As a result, the current system will not be able to meet the modern demands. In the case if the enterprise is going to redirect its products to another place and, at the same time, it does not recognize the specifics of the overall system, it can cause the irreversible effects, higher costs, and reduced efficiency. The expansion of logistics requires the companies to adequately form the price and take into consideration the service implications of undertaken actions and decisions in advance.

Despite strength, intelligence, enthusiasm, and engagement in profitable business, upper management often neglects the regime and quality of food, health prevention measures, recycling waste, transportation, and other issues. It will be hard to deal with these organizations on a long-term basis, despite the prospects of their business. The traditional attitude to logistics, as the residual and auxiliary production, boosts crisis situations, significantly affecting the competitiveness of enterprises, while entering the world markets. The backwardness of transport and storage infrastructure and outdated technology of supply chain management, also lead to an increase in unproductive costs.

Nowadays, industrial and raw material companies are mostly located in the geographically remote areas, where logistics service market is poorly developed. In this case, shortcomings in the development of own logistical capacities can lead not only to increased costs, but also to the direct risks that may cease the main production. It occurs mainly due to the disruptions in supply and the inadequate handling of incoming material and technical resources. The lack of modern mechanized warehouses and storage areas also leads to a significant loss of raw materials, necessary storage conditions, and equipment for their uninterrupted work processes. These losses are reflected in the cost of production. The storage of chemicals by enterprises poses a significant threat to the ecological environment, where they are located.

In order to resolve the logistical issues faced by organizations, it is crucial to develop the adequate strategic management. As a rule, most of the large industrial companies have long-term development program, but they often omit the detailed description of supply logistics development, modernization of transport and warehousing, and inventory management strategy (Poirier, Quinn, & Swink, 2010). In most cases, the companies mention modernization costs of several objects, not all in their reports. They do not predict the dynamics of the material flow, optimize inventory and improve the efficiency of logistic units. Therefore, the relationship of objectives set by logistics support unit with the strategic development plan is indistinctly expressed. In the case when companies do not set measurable targets, then they see no need to adequately organize the process of their implementation. As there is no strategy for the development of the logistics support unit, decisions on investment projects are taken primarily from the views expressed by managers of the individual department without proper design and economic study of other projects. The main issue in the described case is the lack of the long-term program that will help the company to resolve logistical issues, reach a new level of development, and successfully compete with the main rivals for a large base of clientele.

In order to succeed in the competitive and ever-changing environment, the organization’s comprehensive strategy should include the following aspects: the development of clear requirements, long-term goals and objectives, and the adequate organizational structure that will ensure the constant control of logistics support unit. Moreover, the effective mechanisms of interaction and conceptual delineation of responsibilities also play a crucial role in the resolution of logistical issues (Morton, 2005). The organizations also need to develop the policy that is focusing on the cooperation with partners, customers, and inventory management methodology throughout the supply chain. The creation of distribution channels and long-term and well-balanced program of modernization will help to reduce the losses and regularly update the company’s logistics unit. The system of managing the quality of supplies and services should be established along with the strategy of information management and business process.

The poor organizational structure is another significant logistical issue faced by modern enterprises, and the performance and further prospects are directly dependent on its resolution. Proficient, experienced, and qualified personnel will help to address this challenge in a proper manner. In the country’s remote areas, there is an extremely low professional level of managers and key specialists working in the logistics support unit. The main issue is the outdated approaches used by chiefs and managers, while addressing the professional requirements, staff’s demands, the level of salaries, lack of opportunities for growth, and professional development. The lack of work experience in foreign logistics companies also affects the company’s performance and future prospects. In order to resolve this issue, the organization needs to develop a long-term program, focusing on education and training of key managers and specialists in the particular field (Kovács & Spens, 2009). There is also a great need for the effective training program and job rotation of logistics unit managers. In order to avoid issues in the future and resolve current ones, the upper management of every company should thoroughly examine the international practices in the field of logistics. The involvement of consulting companies will accelerate the development of modern production technology and design of logistics infrastructure.

The companies should also pay particular attention to the process planning and management. Currently, most of the companies lack the properly organized process of planning. It is difficult for the companies to correctly transform the strategic objectives into tactical objectives and realize goals set by all divisions of logistics support unit (Ballou, 2007). Many problems occur, while forming indicators of effectiveness and quality of supply, stocks, warehouses and transport covering supply chain management. In some cases, managers and specialists find it hard to create the correct motivational scheme and help the unit reach the new level of its development.

To conclude, the transition to a market economy has significantly changed the nature of relations in the sphere of logistics. In a market economy, the main challenge for the suppliers is the organization of product sales, and consumers - the minimum cost of purchase. The process of logistics reforming has been significantly transformed during the adaptation to the market type of management. Every organization has to recognize that the correctly organized activity-based planning is the foundation of logistics support unit management and the fundamental condition of process automation. Otherwise, attempts to apply modern IT-technology in the poorly organized activity will only bring additional expenses and frustration.