Logistics Impact on the economy has been so strong it ignited the economic growth and expansion from 2009- until now, which is the longest in history. Have you ever wondered we are expanding at a rate and why we are having such a run? Was it the Federal Reserve bank, The President’s economic policies, the demographic shift or the US Currency? Well it is none of those reasons. The correct answer is logistics.
Many years ago, companies lived and died by the Inventory Cycle. Companies used to bulk up on inventory in anticipation of demand and sales afraid of long delivery times from vendors. It used to take weeks or months before customers took possession of their goods. Companies would carry a lot more inventory that they needed, that tied up financial resources and made them vulnerable to demand changes. We all have witnessed large companies getting rid of obsolete items at a total loss.
Nowadays, companies have a lot more flexibility when it comes to inventory control, they do not have to pile up inventory in their warehouses. Shipping companies have made it easier to get the product on time (Just in Time or JIT). Companies can use the services of the Freight Forwarders to make sure the products are shipped on time and received at destination rapidly.
Logistics Impact on the shipping Industry
As more and more products are being imported, Freight Forwarding Companies became an integral part of the Supply Chain Providing services such as Quality Control, Compliance and import services. Companies passed some of the responsibility of getting the inventory on time to Freight Forwarders. These companies order less amount of inventory, but they are receiving it more frequently.
The direct Impact of Logistics on the various sectors of logistics:
- To control Inventory levels, a new class of consultants came to the scene, Supply chain Consultants. The help companies control their inventory levels and ensure on time delivery.
- Warehousing Companies grew in number as companies sought to hold inventory in different locations in order to service a larger area.
- Third party Logistics Companies or 3PL Companies emerged into the market as providers of all the logistics solutions needed to deliver products from Manufacturer to End User such as Order Fulfillment, Inland Transportation, Ocean Freight shipping and Storage. Companies no longer need to have their own warehouses to store their products and fulfill their orders. Knowing that you can depend on a 3PL Company to fulfill orders allow companies to focus more on their core competencies which fueled product innovation.
- International Freight forwarders started opening more locations around the globe to facilitate the transfer of goods from Vendor to Customer.
The re-engineering of Logistics
The reengineering of the Logistics Industry has contributed to creating more jobs and new companies offering logistics services. It also allowed for new products to enter the market creating new demand for products.
Products no longer take days or weeks to be delivered, thanks to logistics they can be delivered the next day or even the same day.
In conclusion, logistics made it easier, cheaper and faster to deliver orders from Factory to end user. There is no more need for companies to carry large amounts of inventory and invest large amounts of money in inventory since, thanks to logistics companies, product delivery has been made easier than ever.