Organising for effective logistics

GLOBAL LOGISTIC MANAGEMENT LECTURE 9: ORGANISING FOR EFFECTIVE LOGISTICS Agenda 1 Definition of Organisation 2 Traditional Logistics Management 3 Optimal Organizational Forms 4 Organizational Strategies used by Manufacturers 5 Components of Corporate and Logistics Mission Statements 6 Ways of Improving Logistics Organizational Effectiveness 7 Logistics Management Evaluation Measures 8 Summary 1 Definition of Organisation An organisation is a social arrangement which pursues collective goals, controls its own performance, and has a boundary separating it from its environment. Organizational structure is a mainly hierarchical concept of subordination of entities that collaborate and contribute to serve one common aim. 2 Traditional Logistics Management V P M a r k e t i n g V P P r o d u c t i o n V P F i n a n c i a l C E O •Sales service •Channels of distribution •Product returns and warranties •Manufacturing •Purchasing/ procurement •Traffic •Warehousing •Information systems •Budgeting •Inventory •Data processing Responsibilities Objectives Large inventories Low inventories Small and frequent production runs Larger and infrequent production runs Decentralized warehousing Plant warehousing Centralized warehousing Large product assortment Fewer products 2 Traditional Logistics Management •Sales service •Channels of distribution •Product returns and warranties •Manufacturing •Purchasing/ procurement •Traffic •Warehousing •Information systems •Budgeting •Inventory •Data processing Responsibilities Objectives Rapid order processing Inexpensive order processing Generous returned goods policiesFast transportation Expedited shipments More rigid returned goods policies Low cost transportation V P M a r k e t i n g V P P r o d u c t i o n V P F i n a n c i a l C E O Control Exercised By Logistics Executives Over Selected Logistics Functions Transportation Warehousing Inventory control Order processing Packaging Purchasing and procurement 89% 94% 97% 98% 90% 70 93 95 97 88 55 83 81 79 74 43 76 67 61 55 8 70 37 48 39 15 58 44 51 41 Activities 1966 1976 1985 1990 1999 Percent of Reporting Companies 3 Optimal Organizational Forms Hollow corporation ◦A small organization of managers and “idea people” who hire external companies to perform various types of activities, including manufacturing, logistics, distribution, billing, sales, and marketing. Virtual corporation ◦A number of companies come together to develop, produce, sell, and distribute a product or a service of limited scope. 4 Organizational Strategies used by Manufacturers Process- based Market-based Channel- based Process-based Organisation Process-based Organisation is the organisation structured by its business processes. Each process makes up its own requirements for an appropriate structure. Business process may include: Production and Logistic Marketing and Marketing Accounting and Finance Human Resource and Administration Market-based Organisation Market-based Organisation is the organisation geographically structured according to its market. Market-based structure allows the focus of organisational resources on a particular market. Example of Market-based organisation: Honda Vietnam Ford Asia Asia Pacific or North America areas Channel-based Organisation Channel-based Organisation is the organisation structured by its channels in supply chain. Channels can arise from Input- Process or Process-Output. Input-Process: channel of sourcing Process-Output: channel of distribution Organization Design for Logistics as a Function E n g i n e e r i n g M a n u f a c t u r i n g M a r k e t i n g / S a l e s F i n a n c e / A c c o u n t i n g P r e s i d e n t Human Resources Logistics Organization Design for Logistics as a Program President Logistics ManufacturingEngineering HumanResources Marketing/ Sales Finance/ Accounting 5 Components of Corporate and Logistics Mission Statements Targeted customers and markets Principal products/services Geographic domain Core technologies Survival, growth, and profitability Company philosophy Company self-concept Firm’s desired public image 5 Components of an Optimal Logistics Organization Organizational ◦Structure ◦Technology Environmental ◦Internal ◦External • Employee – Organizational attachment – Job performance • Managerial –Macro –Micro 6 Ways of Improving Logistics Organizational Effectiveness Strategic goal setting: e.g increase market share, business expanding Resource acquisition and utilization: e.g access to low cost resources, improvement of resource utilization Performance environment: e.g support working environment for effective and efficient logistic performance. 6 Ways of Improving Logistics Organizational Effectiveness Communication process: e.g improve coordination throughout supply chain Leadership and decision making: e.g right leadership and decisions support logistics Organizational adaptation and innovation: e.g adaption of new technology and management practices in logistics. 7 Logistics Management Evaluation Measures Logistics cost as a percent of sales Cost of specific logistics functions (as a percent of sales or of logistics cost) Performance measure Benchmarking 8 Summary Traditional Logistics Management set up its structure by responsibilities and objectives Manufacturers employ organisational strategy which are process-based, market-based and channel-based. Corporate and Logistics Mission Statements list out its main components in logistic activities 8 Summary (cont) Ways to improve logistic organisational effectiveness include: Strategic goal setting, resource acquisition and utilization, performance environment, communication process, leadership and decision making and organisational adaption and innovation. Logisitics Management must be measure to evaluate its effectiveness and efficiency.