Logistics, an Essential Key of Business Sector

            The smooth operation of production line is originated from the combination of several steps, such as the raw material appropriation, production and packaging. After that, the important things, to help that product functioned to its purpose, to create the value to the product and to return the capital to the producer, are the transportation and distribution, moving the goods from the production source, inventory in the warehouse. These processes are called “Logistics” which is essential in a part of an activity connecting between the production process and consumption, and help the production and consumption cycle complete.

The logistics activity covers many parts and each part is consistent and affects each other. The logistics activity operation needs to use the experiences and knowledge in many fields. When the logistics directly relates to the flow of business process and makes the incomes for the manufacturers, the logistics affects to the national level in the revenue sector, building the ability to compete in the agricultural and industrial sector for leading to both domestic and international commerce. Therefore, the logistics importance is not limited to the private entrepreneurs only. Each person gives the importance to the logistics differently. Then, do we know and understand the logistics well?

ia news Thailandhad an opportunity to interview Dr, Pongchai Athikomrattanakul, Director of Center for Logistics Excellence, King Mongkut’s University of Technology Thonburi, regarding the origin of logistics which came into Thailand, he said “In Thailand, the logistics trend has played its role for 30 years. One part was born from the massive foreign company investing in Thailand, after that, there was an idea that the government sector should improve a structure of logistics structure, such as the modern port, non-crowded airport, transport the imported products quickly. In the process of manufacturing and assembling or export those products, there are the convenience and cost saving so Thailand can compete to the export with the international countries. In 2003, Thai government started to emphasize the logistics system. From a concept to develop the country of Michael E. Potter, the famous economist from Harvard University, has focused on the logistics system, leading to the idea that Thailand should develop that system. In addition, at that time, 2 universities like Chulalongkorn University and King Mongkut’s University of Technology Thonburi had established the logistics course. Therefore, we see that the easy origin happened from 3 directions from the direction of private sector demand, vision of government and teaching of university. After the people awareness, the magazines and newspapers started to be headlined the logistics more. The government began to write the National’s logistics strategic plan until it’s declared to use in 2007 – 2011.”

In the part of its importance, Dr. Pongchai told us “if we managed the logistics effectively, we would receive the advantages as followed: the first aspect, our current competition has several product and service costs. In the past, our country might have an advantage in terms of cheap labor cost, but recently it has had the pressure regarding this issue and the logistics cost is very high. Back to 10 years ago, Thai logistics cost was just 20 – 21% per product’s value, for example, the pork price in front of the slaughter was 75 Baht/kg., but it came to us at 150 Baht/kg. It showed that there’re the charges for moving, storage, compilation and distribution which are the logistics. If it’s the new developing country, the cost would be at 10% which is cheaper than us twice. Therefore, if we had the good management system in the logistics, it could reduce these costs.”

            The second aspect, if the logistics system was good, the delivery would be faster, better, more impressive, unbroken, able to deliver at the appointed time and date, enable adjusting the delivery speed according to the customer demand. Those can satisfy the customers because sometime we can not compete with the price only, but we have to compete with the service as well. Sometime the price is cheap, but it is broken on the way or before reaching the hands of customer or took the long time, so the customer might change the mind to buy a little more expensive goods, but it has the good service. In case of logistics, if we administrate and manage well, deliver faster or build the impression to the consumers, it’s the same as we armed the weapons to our own products to boost its selling point and difference in the competition, and no need to worry about a price issue only. Since some customer is willing to pay a little more expensive for the better item. In this case, it makes the goods compete well also.    

            The third aspect, it is very important in this present. If the logistics system was good, we could penetrate or expand the market. For example, if we had the good logistics, like the CocaCola or Pepsi, we could deliver the goods to approximately 200,000 stores easily. It’s because the logistics system is good so it’s no need to sell through the distributors. If they hadn’t the good potentiality or mechanism to penetrate the market, the product penetration failed and might make the business halt. Thus, these 3 aspects make the logistics system more importance and gradually become the strategy of company which has to give the importance. For the organization’s executives, they should pay attention and look at the logistics intelligently how we should proceed and how we would use it covering an expense.

            Then, is the Thai logistics business growing in leap forward? Dr. Pongchai gave an attitude that “from 10 years ago, I deem it has been growing leap forward. Formerly, it had to be the foreign company or massive company to understand the logistics. But today, many companies start to understand the logistics more, especially in these 3-4 years ago, there are the restructuring of company, establishing the logistics department, adjusting the logistics job, and importantly, hiring more logistics-graduated employees to help to administer and manage the logistics so it’s called that it’s begun to enter the system like the foreign country.”

However, Dr. Pongchai concluded that “Currently, there is the trade liberalization, so the logistics business trend will grow continuously for 20 years. That means that the logistics system can build a capacity to compete for the country. The government must develop the logistics system in accordance with the planned strategy. The private sector should pay attention to the logistics system seriously, especially in the present with the high competition. Therefore, we should understand, plan, administer and manage the logistics system, including the restructuring of organization to keep pace with the competitors who always walk leading us.”