The Effectivity of Logistics System and Its Implementation in Uzbekistan

Abstract

The purpose of this research paper is to investigate the most considerable factors that can influence the effectiveness of logistics system and how those criteria are implemented and work in Uzbekistan. The efficiency and effectiveness of proper planning, developing strong internal relationships, improving the quality, transportation and warehouse management are required to ensure the high level of competitive advantage. The company information management should also be in the integrated logistics system as a glue that holds all the components together.

Findings within this research turned out that well- organized management of logistics system can increase overall functioning of the entire organization. Management must always monitor customer satisfaction (end goal of logistics) and continuously work on it.

Conclusion. If you want to have a competitive advantage, you have to adjust the up-to-date technology and new strategy.

Introduction

A logistics system can be defined as a network of people, specific activities, data, assets and organizations, engaged in the physical flow of products from provider to customer (Logistics Operations and Management, 2011). Components of Logistics system: customer service, inventory management, transportation, warehouse management and materials handling, packaging, information processing, forecasting, production planning, purchasing, facility location and etc. What unites all of these activities is their capacity to influence and improve customer satisfaction. Via integrating and coordinating the functions into a customer-oriented logistics system, the firm can create competitive advantage that is hard to be repeated by competitors.

Efficient management is the key to success. There are various factors involved in effective logistics management, for example, automation and coordination. Moreover, the managers should be ready for the upcoming future changes and be able to deal with them. When your business is growing, you should find ways to create efficient logistics planning processes for improving output.

Criteria for Effective and Integrated Logistics System:

Planning

To maximize the value in a logistics system, a large variety of planning decisions have to be made, beginning with the simple warehouse choice of which item to pick based on the customer order, to the corporate-level decision to build a new manufacturing plant. Logistics planning supports the full range of those decisions related to the design and operation of logistics system. The main objective is to accomplish maximum work at the least possible time in order to achieve profit maximization. Another important function of wise planning is that it can be used as a tool for managing unpredicted circumstances as the product and transportation unavailability or internal problems in organization. That’s why if you want to avoid any failure in logistics system there should be a plan.

Logistics automation

Nowadays many companies are beginning to realize that the use of hardware and software technologies to form a consolidated logistics network has become an inevitable trend. Automation being one of the key tips of any optimization process and technology plays a vital role. Nowadays there are several software programs that track the movement of goods and provide detailed information regarding: products dispatching from the point of origin, managing the goods at warehouses and lastly delivering to the final destination. This saves a plenty of time and provides more accurate information while helping to improve the overall process of organization. Therefore, without technology implementation the logistics firm may be inefficient in terms of productivity. Logistics automation systems comprise a variety of hardware and software components: automated storage, conveyors, industrial robots, integration software, operational control software and etc. The good example can be electronic data interchange (EDI) - the processed information flows without any human intervention as quickly as cargo.

Develop relationships in organization (internal customers)

The focus on developing effective internal customer service helps organizations cut costs, increase productivity, improve communication and cooperation, align goals, harmonize processes and procedures and deliver better service to the external customer. Excellent service to the external customer is dependent upon healthy internal customer service practices. The team is an important part of an organization which is accountable for the development. Each person should be ideal in their own area of work. For this, you should invest in appropriate training of the workers. Repeated trainings maintain the workers modernized with the newest patterns in the logistics industry. This will help in increased effectiveness and satisfaction of the clients. Also, logistics manager with interpersonal abilities is vital for the organization.

Warehouse Management

Warehouse management refers to the various processes related to maintaining and controlling a business’ warehouse. It goes through every step of the process, from the beginning to the end. Starting from incoming freight and moving on to asset tracking and logistics. Warehouse management is the central link in supply chain management. It’s the all-important bridge between producing a product and delivering it to customers. Warehouse management helps organize products to make sure that they’re shipped to the right customer at the right time. This is the most important effect on the supply chain. The logistics organization should strive for developing the warehouse inventory in a way so there is a least amount of wastage of goods. Moreover, maximize the storage space of the warehouse. Effective functioning of the computer software for sequencing the goods is essential since the delays should be eliminated while locating the manufactured goods when the order is set. The warehouse employees should be well-trained for the warehouse operations.

Efficient Transportation

With well-functioning transportation frameworks, logistics can bring its benefits into complete play. What is more, a good quality transportation system in logistics activities could offer improved logistics efficiency, decrease operational cost, and enhanced service quality. A well-operated logistics system could rise both the competitiveness of the administration and ventures. It impacts two other logistics - transfer of data and incorporation within and among providers, clients and carriers as well.

Inventory management

The function of inventory management decides the proficiency of safekeeping of goods. Inventories improve service level, reduce overall logistics cost, cope with the randomness in customer demand and lead times, speculate on price patterns and overcomes inefficiencies in managing the logistics system. Inventory management takes an essential role in the logistics manipulation. Investigating the present condition, a well-built system requests a clear logistics frame and a right inventory tools and methods to connect the producing actions. Weak management of inventory will be the reason of losing customers, increased number of back-orders, periodical shortage of cargo space, fixed number of back-orders with increasing investment in inventory and etc.

Measure

Logistics arrangement optimization is unfinished without measurement integration, analysis, plus feedbacks. At the time you organize new techniques in the system, you are required to determine the output. This is vital as it associates the success or failure of the strategy. You have to know how good your plan is working. Measurement instruments and computer software should be incorporated that determines and classifies the data. Your upcoming plan needs measured data. Examine the measurements linked to several operations.

Provide quality logistics services

Managers should provide their internal and external customers qualitative services. But determining exactly what quality service means for them is very difficult. Managers should base on both internal and external views of quality concepts. Quality service from internal view: focus on more internal processes through TQM (total quality management). Emphasis on the importance of planning, proper implementing, checking the process, getting the feedback and reducing the errors of the plan. Also, leadership, cooperation, learning, employee empowerment and outcomes, training, process management and etc. External view: customers interpret the quality as value for use. Due to the different customer expectations managers should learn what the customer expects from service and should try to provide service without any damage and continuously improve the process, because customer demand changes fast.

Logistics In Uzbekistan

In Uzbekistan logistics is seen as a certain suite of functions connected only with the moving of products. At the same time, the practice of performing business in countries that are developed appears that logistics plays a significant function in the organization of business flow. Currently Uzbekistan is in 117th place in the Logistics Performance Index of World Bank {refer to Table 1}. In the following statements, it will be analyzed to what extent Uzbekistan's logistics system meets the key criteria previously described.

Poor Logistics Information and Communication Systems

These can be further categorized into two parts:

1. Poor internal communication. Effective communication is a vital component to a successful supply chain management, yet logistics companies in the country have no official communication plan to guide their employees. On top of this, supply chain managers are rarely trained in communication. In fact, most successful logistics companies in other countries have their own software applications or web systems for internal communication between employees. However, in Uzbekistan, most logistics companies use old-fashioned ways such as calling, messaging which are very time-consuming and inconvenient for this purpose.
2. Electronic Data Interchange (EDI). There is no doubt that documents are an integral part of any industry including logistics. Interchanging them is a more complex issue as it directly reflects on accuracy and costs. In Uzbekistan, for these purposes, the providers simply use local messengers what is highly inefficient and insecure. Overall the pace of implementation of modern logistic information technologies in the practice of organization and management of cargo traffic is still insufficient.

No automation

The warehousing system, materials handling mainly rely on human labor. It can be explained by low-cost and plentiful labor force which makes them attractive, but this is one of the challenges for logistics industries in Uzbekistan. Within the country in question, most logistics providers use manual systems or partially automated systems. The problem with manual systems is that they require fairly wide aisles, which are waste of space, and are not time-efficient. The use of forklifts, barcoding tools can be found in large companies, but still main tasks like picking up and storing goods are dependent on human labor. Logistics equipment in the country is rarely available or even if they are, they cannot meet the customers’ requirements, due to which, logistics companies have to import technologies at high cost. Moreover, these manual systems require more time and lead to even higher logistics costs than was saved by utilizing low labor costs, this eventually leads to the low customer satisfaction level.

Transportation

Uzbekistan’s rail and road infrastructure has declined due to low investment and poor maintenance. Now, the country has too much dependence on road and rail networks. Rail network accounts for 51% of freight movement (ton-km). Poor quality of roads reduces the speed, reliability, and load capacity of trucks shipments in, specially, rural areas and other regions of Uzbekistan, which surely contributes to extended transit times which have to be covered by higher inventory levels incurred by service users. The government of Uzbekistan attaches great importance to the development of international corridors passing through the territory of the Republic, the renewal of highways, as well as the improvement of the transport infrastructure of Uzbekistan. Today it is necessary to begin active work on the quality of services provided by transport and logistics companies of Uzbekistan in order to gain a competitive advantage.

External Customers

In every country whether it is poor or wealthy, certain group of customers are more profitable than others. For keeping profitability, businesses must be able to segment its customers using appropriate methods (ABC analysis). A customer segmentation model allows for the effective allocation of marketing resources and the maximization of selling opportunities. Yet, it cannot be claimed that this model constitutes the strategy of logistics companies in Uzbekistan. Instead, what they do is simply use costs of production while setting a price for customers, and provide the same service to different income groups of customers, which is an inefficient approach for maximizing a profit. Thus, they most of the time fail to satisfy customers.

Lack of logistics professionals

Not enough specialists in Uzbekistan to develop a logistics system. Many enterprises still pay not enough attention to logistics department; warehouse management, transportation department and purchasing divisions are usually standalone, they do not operate as a single unit under the supervision of logistics manager, which is to say they lack collaboration, not to mention integration. Thus, significance of logistics is often neglected leading to prevention of it from striving to be competitive.

Warehouses

Currently, of the existing warehouse terminals in Uzbekistan, only a small number meets the modern requirements and they are usually specialized and export-oriented or created to provide freight transportation and service of specialized free economic and industrial zones “Navoi”, “Angren”, “Jizzakh”.

Conclusion

To conclude the paper, it follows that the organization should look at all logistic functions like “one” with no prioritizing. The goal of efficient logistics managing is to make better the effectiveness of the operations, guaranteeing customer satisfaction, and improve the productivity. With regard to Uzbekistan, we can say that the development of logistics is in the early stages. There are problems with insufficient number of professionals in this field and with the use of innovative technologies. That is why the whole process of logistics is operated manually. It is worth noting that there is a need to improve quality, transport and trade infrastructure, which include the creation of modern warehouses for storage, processing, warehousing and distribution of import and export.