1.3 Logistics, the critical interfaces
If we think about the original definition of logistics - the branch of military science concerned with transportation and supply, and the movement of bodies of troops - we can readily see how the word came to be applied to the modern business of moving and storing raw materials and manufactures.
The classical organisational hierarchy of the 1970s had manufacturing, sales, finance and marketing functions (amongst others) all reporting to the chief executive. Who
then should undertake the role of coordinating activities between these functions to
cost-effectively satisfy customer demand? Whilst the degree of involvement and reporting level varied, this role generally fell to a newly created function called logistics.
The concept of modern business enterprises operating as a series of 'functional silos', with little effective communication or cooperation between functions, is well covered in management texts. They deal extensively with the dysfunctional behaviour this can cause both within the enterprise and with the enterprise's external stakeholders. Imagine then the impact of creating yet another function, which would derive its resources and power, by taking resources and responsibilities from many of the enterprise's existing functions.
In the late 1970s early 1980s, the majority of enterprises established logistics as an 'operational' line-function with the manager in many cases having equal status to those responsible for manufacturing, sales, finance, etc. Thus, many newly appointed logistics managers found their peers resenting their loss of responsibility, status (and power) to a newcomer. Where logistics did not report directly to the chief executive, but through one of the other functional heads, the situation was further exacerbated with decisions being filtered by the functional head to protect his or her own vested interests rather than those of the enterprise as a whole.
A few enterprises (possibly with the foresight to envisage the rapid development of ICTs) established logistics as a coordinating staff-function. In these cases logistics staff utilised evolving ICTs to facilitate the provision of relevant information to functional staffs carrying out logistics related activities, whilst continuing to report to their original functional managers. This approach avoided much of the resentment and 'internecine warfare', which characterised many of the 'operational' line-function structures. However, both structural forms have common critical interfaces. Reading 1.2 provides an early 1990s perspective on the emerging role of the logistics manager.
Reading 1.1
Sutton, D. 1990, 'The role of the logistics manager/director', International Journal of Physical Distribution and Logistics Management , Vol. 20, no. 3, pp.35-37.
Activity 1.1
Produce a top-level organisation chart for the enterprise for which you currently work or one with which you are thoroughly familiar, indicating the reporting relationships of the main logistics elements. Briefly outline the advantages and disadvantages of the structure you have depicted. Indicate how you feel the structure could be improved. Note. We will revisit this exercise in the latter stages of the unit to see if you still hold the same views.
An enterprise's logistics elements affect all functions within the enterprise. Therefore, each function depends upon logistics performing its role for the other functions to be fully successful. Similarly, the logistics function cannot be fully successful unless each of the other functions fulfils its obligations with respect to logistics. This can best be described as a state of interdependence with functions having some goal congruence at the interface. Frequently this mutuality of interest is not reflected in the way functions are measured and can result in less than optimal outcomes from an enterprise perspective.
The transition to the new millenium has been characterised by the emergence of electronic marketing channels, increased global competition in almost every industry sector and the emergence of outsourcing and 3 rd party logistics services in most developed economies. This not only affects manufacturing enterprises, but also, trading enterprises who source their products worldwide. Even the services sector, the fastest growing area of most developed economies, is heavily involved with logistics related activities. The Sydney 2000 Games was a prime example of a major logistics effort.
In later Chapters frequent reference will be made to the need to trade-off costs in one or more logistics related areas in order to achieve the lowest overall logistics cost, consistent with achieving the enterprise's customer service objectives. The ability to do this successfully is predicated on there being congruent goals and objectives between logistics and other enterprise or 3 rd party functions. This needs to be supported by appropriate measurement and remuneration systems, which encourage collaborative behaviour between functions.
Reading 1.2 succinctly summarises a number of useful logistics concepts, which have emerged during the latter decades of the 20 th Century and provides an insight to the customer and quality focus modern logistic operations need to maintain (This is covered in depth in chapter 8 in this course on Mange customer focus and continuous improvement.
Reading 1.2
Manrodt, K. B. and Davis, F. W. 1993, 'The evolution to service response logistics', International Journal of Physical Distribution and Logistics Management , vol. 23, no. 5, pp.56-64.
Activity 1.2
Briefly detail the benefits you wish to derive from completing this unit (apart from passing another subject in your program). You are investing time and money, how will you ensure that you obtain a maximum return on your investment?
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