Define Logistics Management and explain how logistics productivity improvement affects the economy as a whole as well as the position of individual consumer. The definition of logistics management (LM) varies from company to company but the most comprehensive definition is given by Council of Supply Chain Management Professionals (CSCMP) as “logistics management is the part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information from the point-of-origin to the point-of-consumption in order to meet customer’s requirements” (“Council of Supply Chain Management Professionals,” n.d.)

Logistics Productivity Improvement and the Economy

Logistics has become an enormously important component of the gross domestic product (GDP) of industrialized nations and thus affects the rate of inflation, interest rates, productivity, energy costs and its availability and other aspects of the economy as well. Ever changing business environment due to globalization, lead time reductions, customer orientation, and outsourcing has contributed to the interest in logistics (Hertz & Alfredsson, 2003). The increase in global production sharing, the shortening of product life cycles, and the increase of global competition all underline logistics as a strategic source of competitive advantage (Arvis, Mustra, Panzer, Ojala, & Naula, 2007). Moreover, in order to remain in competitive marketplace and earn reasonable profits, organizations interest in logistics has been increased. Logistics operations have become more efficient due to technological advancements which make it possible to deliver goods on time while reducing the cost involved.

Global market access has been improved over the time with the advancement in technology and trade liberalization resulting in the economic growth and development of the countries. Patterns in the market competition situation are continuously dictating the supply chain flows (i.e. product, price and information flows) in a predictable, timely and cost-effective way. Global firm’s corporate decisions regarding which country to locate in, which suppliers to buy from and which consumer markets to enter are largely based on logistics costs, quality and service level. Therefore, the countries with higher overall logistics costs are more likely to miss the opportunity of globalization.

Nearly every sphere of human activity is affected, directly or indirectly, by the logistics process. Certainly, the improved logistics is expected to have important economic effects. Lower logistics costs and services affect positively in production, distribution and trade and/or retail activities of the firms. Reduced/minimum logistics costs enable a production or distribution facility to serve a wider market area, with potential gains from economies of scale. It also means that a firm can draw supplies from a wider area with potential gains in terms of the cost and/or quality of parts and materials. Logistics costs include transportation costs, costs of owning and operating warehouses, ordering costs, and carrying c