Logistics activity is literally thousands of years old, dating back to the earliest form so organized trade. As an area of study, however, it first began to gain attention in the year 1900s in the distribution of farm products1. Considering logistics is a broad, far-reaching function that has a major impact on a society’s standard of living, logistics competencies are difficult to master.
In the current day and age, we just take it for granted that when we go to our favorite shopping center we will find our favorite food, clothes, and other items conveniently. This won’t be possible without the logistical systems in place and the people with the right logistics competencies. In recent years, effective logistics management has been recognized as a key opportunity to improve both profitability and competitive performance of organisations. It is also one of the key expenditures in the Profit & Loss statement as support cost.
Logistics people not just perform material or information transitions but also support marketing function, product development, price promotion, and bringing new ideas to provide customer service. They ensure that firm should provide fast, accurate, and quality service. Competent logistics professionals drive increased revenue, create opportunities for major cost savings in operations, and simplify the complexity of the distribution network. To make all this happens, they acquire or should acquire the following logistics competencies to perform their job function at the highest level.
1. Distribution Design, Sourcing, and Management
Distribution Design, Sourcing & Management is the knowledge of best practices involved in setting up and managing distribution centers and networks including value-added services such as kitting and reverse logistics. This logistics competency includes the ability to analyze and design new distribution networks and optimize existing networks.
This logistics competency also required benchmarking best practices on how to run a warehouse. To help you with this issue, we have designed Warehouse Operations Assessment
This Self-Assessment type Warehouse Audit Tool also:
- Encourages employee’s involvement and responsibility in driving warehouse improvement.
- Encourages staff to reflect on their role and contribution to the key warehouse processes.
- Allows staff to see and reflect on their peers’ assessment of their contribution.
- Focuses on the development of employees’ judgment skills
- Develops specifications for warehouse management systems appropriate for varying businesses.
- Works with distribution partners to establish a distribution center and network.
- Designs business processes with distribution partners that support the SIOP process.
- Provides distribution-oriented analytical support for projects and new business opportunities and proposals.
- Maintains adequate inventory levels in distribution channels.
2. Global Trade Compliance
Global Trade Compliance is the knowledge of the physical movement of products and the process by which goods enter and leave a country in compliance with all laws and regulations in order to manage and mitigate the risks of international business. The competency includes the basic understanding of the duties and responsibilities within the area of import/export for an organization and the role of the government in mandating trade compliance
- Works closely with internal teams, third-party logistics providers, brokers, freight forwarders, and trade advisory consultants to ensure global trade compliance.
- Optimizes the logistics network to affect a controlled flow of goods in an efficient manner.
- Ascertains the correct application of duties and tariffs and country of origin.
- Analyzes the impact of security requirements and regulatory trade compliance on the movement of global goods and on business costs.
In my personal experience, this is the most difficult competency to acquire out of these 6 logistics competencies. As this is requirement changes country by country and with political circumstances!
3. Sourcing and Supplier Selection/Management
Sourcing and Supplier Selection/Management is the knowledge of commercial purchasing practices including foreign currency fluctuations, duties and tariffs, quality standards, legal/regulatory requirements, and cultural differences that affect the commodity purchase transaction. This competency includes the ability to effectively source supplier products and services as well as manage the performance of the selected supplier
- Demonstrates an understanding of the factors and key influences affecting sourcing activities and supplier management.
- Understands and utilizes the supplier management processes and measures during the sourcing process.
- Interacts with key customers (internal and external) and understands their requirements that affect sourcing activities.
- Develops strategic sourcing and savings plans.
- Describes the major features of selected supply markets and channels.
4. Supply Chain Continuity Planning
Supply Chain Continuity Planning is a structured and synergetic process that seeks to optimize supply chain strategy, processes, human resources, technology, and knowledge. Supply Chain Continuity Planning controls, monitors, and evaluates supply chain risk, which serves to safeguard against new uncertainties that may emerge affecting profitability.
- Assesses supplier continuity risk along with other risks and mitigation alternatives in the standard sourcing product development and manufacturing processes.
- Develops and determines mitigation plans for high commodity risks, products, parts, and supplier processes.
- Identifies affected high-risk events, products, and/or parts.
- Leads and coordinates supply chain actions based upon mitigation plans at the time of an event that impacts continuous operations.
5. Transportation Sourcing & Management
Transportation Sourcing & Management is the knowledge and ability to streamline the flow of goods and to select timely and cost-efficient modes of transportation for all incoming and outgoing shipments as well as storage of goods.
- Demonstrates an understanding of the factors and key influences affecting transportation sourcing activities at a high level of accomplishment.
- Interacts with key customers (internal and external) and understands their requirements that affect sourcing activities.
- Monitors contract compliance of carriers and logistics service providers.
- Evaluates trade-offs between transportation costs, inventory costs, and service levels to design collaborative transportation solutions that are efficient and effective.
- Provides transportation-oriented analytical support for projects, new business opportunities and proposals.
6. Contract Management
Contract Management is the knowledge of solid and consistent architecture of supply chain contracts and agreements including terms, timing, and language. It includes the ability to develop complex business arrangements and to manage major company purchasing contracts.
- Resolves most contractual problems and is fully familiar with firms’ terms and conditions.
- Develops complex high-value contracts for key suppliers on a national and global basis.
- Implements and monitors contracts on a local, regional, or national basis within firms’ ethics policy.
- Works with law department or supply chain liaison to accomplish tasks.
Like most things in life, no one expects supply chains folks to be super good in all of these logistics competencies. And Of course, like anything, these competencies can be taken too far. Those who overuse it are in danger of focusing exclusively on the logistics elements and don’t see the full supply chain picture and at times unintentionally demotivate their teams. So while you are focusing on these logistics competencies, you need to make sure other supply chain competencies should be acquired over time.
Creating the new and different, although crucial, is balanced by the other competencies of focusing on action and outcomes and inspiring others. Together these competencies are crucial for Supply Chain Professionals who are being asked to do more and contribute more, not only in terms of the supply chain agenda but to drive change across the organization.
Which Supply Chain competency is your favorite of the above?
Or do you want to add any more technical Supply Chain competencies I have missed?
John F. Crowell. Report of the Industrial Commission on the Distribution of Farm Products, vol. 6 (Washington DC: U.S. Government Printing Office, 1901)
Supplementary Supply Chain Best Practice Content You Should have in your SCM PlayBook.
- Stocktaking: The Ultimate Guide (Stocktaking Procedure)
- Excess and Obsolete Inventory Policy Guide – Revised & Updated
- The Ultimate Guide to Inventory Planning Methods
- Cycle Counting Procedure Made Simple: A Step-by-Step Guide
- The Ultimate Guide to Demand Forecasting
- The Complete Guide to Plan-For-Every-Part (PFEP)
Supply Chain Self Assessment Tools to Identify Area of Improvements:
- Materials Management Competencies Assessment
- Sales and Operations Planning Process – Self-Assessment
- Best Warehouse Audit Tool to Improve Performance
- 5S – Kaizen Guide: Organizing the Workplace for Flow
- Warehouse Safety Audit Tool- Beware of Accident and Injuries
If you choose to download these materials, you’ll be added to my mailing list. You can unsubscribe at any time, but I hope you’ll stick around
Great blog. I have been a subscriber for some time and find your articles very relevant!
Keep it up!
Just a comment to perhaps expand on one of your competencies needed by our logistics brethren…
Under number 5 (“Transportation Sourcing & Management”), you show as one of the the “Skills Required”: “Demonstrates an understanding of the factors and key influences affecting transportation sourcing activities at a high level of accomplishment.”
I totally agree with you that this is needed, but I find that very few understand the complexities and nuances of our business that can really uncover cost savings. For instance, the airlines and parcel companies (DHL, FedEx, UPS) charge on the greater of actual weight or dimensional weight, but very few of us know how to calculate dimensional weight, which could lead to enormous savings if they could reduce the size of the packaging to save money.
In short, from a shipper-perspective, we may be doing ourselves an injustice by not knowing the details of the rate structures applied by the airlines, ocean carriers and truckers.
If we know that, we can make adjustments in our processes and packaging to save costs.
Just my 2 cents, as we say!
Hi Lenny, I think you have a very valid point when you say “we may be doing ourselves an injustice by not knowing the details of the rate structures applied by the airlines, ocean carriers and truckers.”
Do you know any tool or method to make this information available live or latest rate updates?
Excellent Article, I couldn’t agree more on the need to acquire familiarity of each of these core competencies. I believe this also highlights the need for team collaboration, because as you so well state. No one person can be an expert in each of these areas. I find there is often not enough of collaboration within the logistics/supply chain team to insure we are optimizing our savings.
I am 65 years young and a supply chain professional in India, and interested in a learning basics + latest trends in “Ware house Management” Please suggest a good short term course or study.
You might find the courses I have mentioned in this blog http://muddassirism.com/12-great-online-supply-chain-management-courses/ , useful!
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