Uncontrollable environment affecting organizations, affecting international logistic activities
Uncontrollable environment is one major condition which is unpredictable and uncertain. Regardless of what it might be, an uncontrollable environment will negatively affect any organization effort, no matter which function it is and perhaps the objectivities and strategies of the business.
Today, business is a global market. In one way or another, we are all closely connected. The logistics systems have had the result of shrinking the world, allowing competitive trade. Hence, if an uncontrollable environment element rises, international logistic activities will be affected.
The uncontrollable environment consist of six elements namely economic, competition, technology, geography, social and culture, and political and legal.
Economic can be a major risk factor, it has a certain impact on the international trade patterns, products goods and service flows, and freight transport flows. In recent years, economic developments have led to the creation of complex company networks and systems of goods flow. The complexity of international logistics system in many divisions has grown as a result of increasing product variation and differentiation.
The relationship between the economic growth and demand for product-transporting services is the result of a range of effects. These effects clearly show the increasing importance of the economic sector on goods distribution.
For instance, oil prices increase resulting in high fuel costs. Demand begins to weaken. Stock prices started dropping, depression fears arise and recession occurs. These turbulence and uncertainty throughout the global economic, cause consumers to slow down cutting back on what they buy. This as a result, ripples back throughout the global economic and impacts the manufacturers, retailers and wholesalers who are contracting what they make, purchase and carry in inventory.
The effect of slowing down will then affect the logistics service providers, 3PLs, forwarders, ocean carriers, truckers and warehouses or storage operators. Who are facing higher costs, particularly fuel, and sinking revenues. As the carrier and forwarders try to take hold of the declining volumes, tax and duty begin to soften. New ship orders are cancelled. However, reducing rate does not generate business as the volume is not there. The lack of freight does not fix overcapacity. Ocean carriers take more capacity than usual, which result in an impact in lack of ships and space.
Inflation is also as critical to an organization and the logistic. The particular impact depends on the type of business, inventory valuation methods, age of business and assets, composition of expenditures and capital structure. Inflation is part and parcel of a growing economy. The Logistics segment in particular can respond to the growing inflation by taking on a range of cost saving measures and streamlining operations. Route-management, focusing on upcoming projects and order aggregation are some of the methods that Logistics companies can adopt to lower the Logistics costs.
Competitive pressure has been ever-increasing from many sources in the business world. Companies are force by the environment regardless of its position or prime market base to think about the rest of the world in their competitive strategy. Organisations cannot isolate themselves from the competitive situation in other countries. They have to be alert and consider adopting integrated worldwide strategies. Most organisations are likely to look for less expensive manufacturing, distribution centres, materials and components, depots, and logistics.
For instance, a company can choose to develop a product in United States, manufacture it in China and sells it in Europe. Organisations have to learn to change their methods of managing their operations and logistic activities. This enables them to maintain...
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