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THE IMPORTANCE OF LOGISTICS IN FOREIGN TRADE AND PLANNING OF LOGISTICAL INFRASTRUCTURE

07 February 20187 min reading

Over the last few years, grain production has increased across the globe.  The United States, Canada, Argentina, Ukraine, Russia and Australia have been looking ways to have a bigger share in the grain market; thus, the competition has intensified. Because of the increase in grain supply, as price goes down, the profit goes down as well. As the production goes up, storage and delivery of grain cause problems for companies that have involved in the grain trade. This is because the most cost-effective way of storage and delivery of grain at this time of decreasing profit rates is the main way in which a company can hold it in a competitive market.

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Recently, logistics stands out as a dynamic sector that develops rapidly on a global scale. The volume of international trade has risen due to lifting barriers to international trade, increasing foreign investors and technological developments. Barriers such as customs taxes, quotas and capital controls that separate national economies have gone down; services, workforce and capital become faster and easier to move between countries.

In parallel with the increase in international trade volume, the loss of the borders between countries and the development of the concept of globalization, the logistics sector has recently gained importance. Now, logistics has become one of the most important, largest and most dynamic sectors in the world. Goods and services are designed in any geographical area of the world, produced in a different land and demanded elsewhere. Thus, in order to stand out and have advantages, quick and timely delivery has become important for service and commodity producing companies.

The logistics sector enters into the picture from this perspective; it plays a role in product delivery from any point in the world, storage in required points, package, and the customs clearance and so on. Logistics is an important competition power for companies that are in deadly rivalry to survive among others, look ways to produce quality products cheaper and to market these products and gained new successes from quality and cost perspective.

The logistics which is defined as “the delivery of the right product in the right place and time with an acceptable cost to customers” is a promising sector. However, in order to stay alive, expand and compete in this promising sector, one has to take right and long-term steps. When we say logistics, one should not think of only delivery and storage. For sustainable supply chain, a good logistic strategy should be devised. The supply chain management includes all processes such as purchasing, resource use, production planning, and flow management, marketing, after sales support, service and logistics among others.

Without logistics, it is impossible to be successful in marketing, production, and international trade. In advanced industrial societies, logistics competence is of great importance and customers expect products they bought will be delivered as promised. In extraordinary events, the necessity of logistics competence is understood better. The party that makes the planning in the best way has great advantages in this field. The logistics sector is continuously improving all over the world and the competition level in this sector is increasing. Hence, companies should develop themselves continuously on cost, human resources, quality of activities and management process, their efficiencies and technology.

SUPPLY CHAIN MANAGEMENT Logistic costs consist of transportation, storage, stocking and management expenses. The transportation costs are caused by road, rail, sea, airway, customs and insurance expenses while the storage costs are caused by rent/amortization, energy, handling, packaging and value-added service costs; carrying and not-carrying costs cause the stock expenses; and the management costs are caused by office personnel and general management expenses.

The proper planning of supply chain process is compulsory to lower the cost of transportation and storage, the main cost items in the logistic, mitigating risks and reduction of losses to a minimum level. For this reason, site selection and transportation for logistic activities play an important role. In terms of raw material, production and logistic activities, some regions are at the forefront. For this reason, important transportation ways and routes gain strategic importance. That’s why companies should take geographical conditions and logistic means into consideration while building their facilities.

We can define logistics strategy as a set of principles that help to generate plans, targets, and policies between different actors in any supply chain. The logistics strategy plays a key role in boosting supply chain performance.

Since the supply chain which is affected by many factors and has a variable structure, the logistics structure should be shaped accordingly. A logistics company should have a dynamic structure that will adapt to the changes that may occur in the supply chain. Therefore, the logistics strategy must be flexible enough to respond to emergency situations.

UNINTERRUPTED COMMUNICATION The logistics strategy should be designed to ensure an uninterrupted connection to suppliers, companies and manufacturers located at different points across the world. For this reason, you need to have the technology to keep you in constant contact with the whole world in real time. Regardless of where they are, they must have channels of communication with which you can connect with all the actors in your supply chain. If you can access the data in real time, you can take precautions to help your company reach maximum potential in a shorter time.

Another important aspect of the logistics strategy is the correct use and analysis of data. At this point, the keywords “innovation” and “digitalization” come into play. It is necessary to use automation systems to reach the right data. In the logistics sector where the rivalry is high, the profit margin is low and the number of transactions is at the highest level, companies that can make use of IT technologies will stand out.

With mobile vehicle tracking systems companies now are able to monitor the location of vehicles easily from their headquarters; the automation is utilized in the movement planning, preparation of documents, shipment and delivery information. For example, warehouses of future are managed with voice technology. This technology is in use particularly in the collection of orders and products in storage applications and it ensures productivity and proper guidance. Thanks to portable computers with headphone and microphone, operators can receive orders from this voice system and can direct the order with verbal notification. Such systems reduce the operational costs of logistics companies and increase productivity and help to build a competitive structure.

The rise in export and imports of agricultural products in international trade is at a remarkable level. Agriculture has become a strategic sector thanks to developments such as agricultural products’ matchless role in nutrition, processing of foods for long shelf life, turning into an international commodity in international trade and food security. Industrialization, urbanization and increase in income rate changed consumption habits and caused people to demand more for new and different quality agricultural products.

Logistics costs became an important item for the agricultural sector as production activities and consumption activities drifted away from each other. In this context, the supply chain and logistics operation, that are important parts of this chain, have become just as important as the quantity and quality of production.

Over the last few years, grain production has increased across the globe. For example, Russia and Ukraine are breaking successive records. The United States, Canada, Argentina, Ukraine, Russia and Australia have been looking ways to have a bigger share in the grain market; thus, the competition has intensified. Because of the increase in grain supply, as price goes down, the profit goes down as well. As the production goes up, storage and delivery of grain cause problems for companies that have involved in the grain trade. This is because the most cost-effective way of storage and delivery of grain at this time of decreasing profit rates is the main way in which a company can hold it in a competitive market. Some companies, particularly the ones that do wheat business on the global scale, are enlarging their grain intake stations while some others are making investments for on-farm storage.

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