What are the types of changes that may suggest a need to reevaluate and/or redesign a firm’s logistics network?

All businesses operate in a very dynamic environment in which change is inevitable. Characteristics of consumer and industrial buyer demand, technology, competition, markets and suppliers are constantly changing. As a result, businesses must redeploy their resources in response to and in anticipation of the ever changing environment. Because of the rate at which change is occurring, no existing logistics network can be truly upto date. Hence, any logistics network that has been existing for a number of years needs to be revaluated and redesigned.

There are many types of changes that may suggest a need to reevaluate and/or redesign a firm’s logistics network. They are:

(i)                 Changing customer service requirements

(ii)               Shifting locations of customer and/or supply markets

(iii)             Change in corporate ownership

(iv)             Cost pressures

(v)               Competitive capabilities and

(vi)             Corporate organizational change.

These changing elements of the business environment are briefly discussed in the following section/ Scope

(i)                 Changing customer service requirements: The logistics requirements of customers are changing in many ways. As a result, the need to reevaluate and redesign logistics networks is of great contemporary interest.

(ii)               Shifting locations of customer and/or supply markets: The manufacturing and logistics facilities are positioned in the supply chain between customer and supply markets and any changes in these markets force the firm to reevaluate its logistics network. When the location of customer markets shift geographically, new warehouses and distribution facilities are established following the changing geo- location trends. On the-1suppi side, the service and cost requirements of firms practicing  JIT – based manufacturing have forced the suppliers, firms to examine the locations of logistics facilities. Many suppliers have selected nearby points for manufacturing and/or parts distribution facilities.

(iii)             Change in corporate leadership : Ownership-related change associated with a merger, acquisition or divestiture is a common occurrence for a firm now a days. In such instances, many firms choose to be proactive and to conduct a formal evaluation of new logistics networks versus previous logistics networks before implementing such a change. This approach will facilitate to ensure that the newly merged or newly independent firm will have fully anticipated the logistics impact of the change in corporate ownership.

(iv)             Cost pressures: Many firms consider today their major priority is to figure-out new and innovative ways to remove cost out of their key business processes including those related to logistics. A reevaluation of the logistics network and of the functioning of the overall supply chain can help to find new sources of cost savings. Such sources could be transportation, inventory or warehousing. Companies considering modernization needs of plant also benefit from a comprehensive cost analysis along with a revaluation of the logistics network.

(v)               Competitive capabilities: Competitive pressures may force a firm to examine its logistics service levels and the costs generated by its network of logistics facilities. To remain competitive in the market place or to develop a competitive advantage, a firm should frequently examine the relative locations of its facilities toward the goal of improving service and/or lowering costs.

(vi)             Corporate organizational change: Even when a firm considers any major corporate organizational change such as downsizing, the strategic functioning of the firms logistics network is viewed as something that must be protected and even enhanced through the process of organizational change.