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Logistics And Supply Chain Management To Espouse Business Essay

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Published: Mon, 5 Dec 2016

A lot of researches have been conducted in the subject area of logistics and supply chain management to espouse the need for organisations to regard their logistics and supply chain as a strategic capability. This has been partly attributed to the fact that they depict a critical success factor for corporate performance that needs to be managed accordingly. Many authors have published books and journals to wholly or partly cover the subject area for use in the academia as well as for organisations to be abreast on current logistics and supply chain management trends and practices.

An in-depth knowledge and understanding of the rudiments of strategic logistics and supply chain management undoubtedly, serves as leverage for logistics and supply chain researchers and practitioners to make sound analysis in achieving research and business objectives (Merminod et al; 2007) . Although most of the research works in this subject area are focused on the business sector, the results are as well suitable and applicable to non-profit making organisations such as the military.

The focus of this thesis is on logistics and supply chain management practices in a military organisation. Although the military recognizes logistics as crucial to the success of all operations, it has not placed much emphasis on its utilization for financial benefits. This is so because the core function of the military happens to be provision of a public service that bother mostly on national interests (Rutner et al 2012). In order to take advantage of the financial avenue that the United Nations peace support operations has opened up for troop contributing countries, it has become another imperative for the military of most countries to blend their logistics operations with business logistics. This is a possible way for them to maintain credibility and be competitive as a consequence in their participation in UN peace support missions.

This chapter will therefore review the concepts of logistics and supply chain management in the business setting and briefly highlight on the importance of military logistics as well as UN logistics. It will dovetail into strategic logistics management planning and implementation since they are the fundamental driving force for all successful business undertakings. Finally a review of literature on logistics and supply chain performance measures would be carried out.

2.1 LOGISTICS MANAGEMENT

Quite a number of terms have been used by individuals when referring to logistics. Langley et al (2009) lists eight (8) terms which are used to describe logistics. These are logistics management, integrated logistics management, business logistics management, marketing logistics, physical distribution management, materials management, industrial logistics and distribution. Langley et al (2009) argues that logistics management is the most widely accepted term and indicates that it encompass logistics not only in the private sector but also in the public/government and nonprofit sectors.

Whilst Martin Christopher (2011) defines logistics as the process of strategically managing the procurement, movement and storage of materials, parts, and finished inventory and the related information flows through the organisation and its marketing channels in such a way that current and future profitability are maximised through the cost-effective fulfillment of orders, Longley et al (2009) views logistics from a more customer perspective. Longley el al (2009) defines logistics as the process of anticipating customer needs and wants; acquiring capital, materials, people, technologies, and information necessary to meet those needs and wants; optimising the goods or service producing network to fulfill customer requests; and utilising the network to fulfill customer requests in a timely manner.

Logistics management has also been defined by the Council for Supply Chain Management (CSCMP) as that part of supply chain management that deals with the planning, implementation and control of the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer requirement (CSCMP, 2006). This definition apart from its customer focus also identified reverse flows in addition to forward flows as mentioned in the above definitions. It was also emphatic on logistics management as being part of supply chain management.

Rushton et al (2007) deduced the commonality in all the above definitions to be cost effectiveness and customer service. Rushton et al (2007) asserts that logistics concerns of industries were the efficient transfer of goods from the source of supply through the place of manufacture to the point of consumption in a cost-effective way whilst providing an acceptable service to the customer.

It has as well been pointed out that logistics owes its origin to the military that have long recognised the importance of logistical activities in national defense (Coyle et al 2003). It has also been suggested that logistics should be viewed as part of management and should have the following four subdivisions (Coyle et al 2003):

Business Logistics. Business logistics as explained by Coyle et al (2003) is that part of the supply chain process that plans, implement, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of use or consumption in order to meet customer requirements.

Military Logistics. Coyle et al (2003) explains military logistics as the design and integration of all aspects of support for the operational capability of the military forces and their equipment to ensure readiness, reliability, and efficiency.

Event Logistics. Event logistics is the network of activities, facilities, and personnel required to organize, schedule, and deploy the resources for an event to take place and to efficiently withdraw after the event (Coyle et al (2003).

Service Logistics. Coyle et al (2003) explains service logistics as the acquisition, scheduling, and management of facilities/assets, personnel, and materials to support and sustain a service operation or business.

Coyle et al (2003) further highlights some common characteristics in the four subdivisions as forecasting, scheduling, and transportation but indicated that they have some differences in terms of their primary purpose. Coyle et al (2003) further argues that all the four subdivisions could be viewed in a supply chain context; implying that upstream and downstream, there are other organisations that play a role in their overall success and long-run viability.

“The process of anticipating customer needs and wants; acquiring the capital, materials, people, technologies, and information necessary to meet those needs and wants; optimising the goods or service producing network to fulfill customer requests; and utilizing the network to fulfill customer request in a timely way” therefore appears to be a general definition for logistics that encompass all the four disciplines (Coyle et al, 2003).

Logistics again is said to have a micro perspective dimension which examines the relationship between logistics and other functional areas in an organisation such as marketing, manufacturing/operations, finances and accounting and others. This implies that logistics actually focuses upon processes that cut across traditional functional areas with particular emphasis upon the supply chain (Coyle et al 2003). This therefore suggests that logistics management should be viewed in the context of supply chain management (SCM).

2.2 SUPPLY CHAIN MANAGEMENT AS A WIDER CONCEPT

Although industry and academia have investigated the concept of SCM for the last decade, there is still no consistent definition of the concept. As a result, there is generally a lack of consistency in meaning and clarity across the diverse definitions of SCM available in the literature.

Considering definitions of SCM and logistics management, the definitions made by the Council of Supply Chain Management Professionals, CSCMP (former Council of Logistics Management, CLM), are one of the most cited sources. In a document on their homepage, SCM is defined as follows: “Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also included coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies” (www.cscmp.org).

Mentzer et al. (2001) make an invaluable contribution to the understanding of SCM by arguing that authors try to include two different things within the same definition and claimed it was the reason for the confusion and many definitions of SCM. In order to sort out the somewhat unclear definition, Mentzer et al. (2001) distinguish between SCM as a management philosophy on the one hand, and the actions undertaken to realise the philosophy on the other. It is suggested that the management philosophy, called supply chain orientation (SCO) is a prerequisite for SCM, which should be interpreted as actions undertaken by actors in a supply chain in order to realise the SCO. SCO is defined as “the recognition by an organisation of the systemic, strategic implications of the tactical activities involved in managing the various flows in a supply chain” (Mentzer et al., 2001). SCM in turn, is defined as “the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole” (Mentzer et al. 2001).

As stated in the two definitions of SCM above, all kinds of business functions in a company can be included in the SCM expression. Following these definitions, one part (as clearly stated in the definition from CSCMP) of SCM is logistics management.

The CSCMP definition for logistics management clearly point to the fact that SCM is considered as a broader concept. The definition stressed that fact the logistics management is that 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 between point of origin and the point of consumption in order to meet customer’s requirements (www.cscmp.org).

Although the CSCMP definition for logistics management points out that it is parts of SCM, the relationship between the two concepts is however not always easily understood. The issue is that different opinions exist about what they actually encompass. Sometimes SCM and Logistics management are interpreted in the same way and are therefore often used interchangeably in literature. Min and Menzer (2004) argued that in defining SCM, it is common to relate it to logistics to better understand the approach, since the concept of SCM started in the logistics literature.

Halldorsson and Larson (2004) show that SCM relative to logistics can be viewed in four different ways; from the views of the Traditionalist, Re-labelling, Unionist and Intersectionist. They proposed that one reason for these multiple perspective is that SCM has not been transparent by one universal definition. According to the Traditionalists view, the logistics function hires “supply chain analysts” to focus on cross-functional and inter-organisational issues. Some authors do not distinguish between SCM and logistics. They just change the name. The Unionists view SCM as more than simply logistics, but rather also as purchasing, operations, and marketing. While the Intersectionists, describe it as a staff function or internal consultants (Halldorsson and Larson, 2004).

For the SCM in the context of Ghana Armed Forces international peacekeeping operations, the most suitable definition would be that of the Unionist view of SCM. The reason for the Unionist view is that peace keeping logistics covers all decisions along the flow of materials (purchasing, logistics, and customer service). Martin Christopher’s (1998) definition for SCM is a typical example of such views. Martin Christopher (1998) defines SCM as an extension of logistics. Christopher (2011) argues that logistics is essentially a planning orientation and framework that seeks to create a single plan for the flow of products and information through a business while SCM builds upon this framework and seeks to achieve linkage and coordination between processes of other entities in the pipeline. Schary (1998) also sees supply chain as more than logistics. Supply chain includes the flow of materials and products to the customers and more than that; it also includes the organisations that are part of these processes, crossing organisational boundaries to link their internal operations as part of this system. The supply chain recognises that there are cooperative arrangements that tie firms to each other and in that way tie their success to the chain as a whole. The scope of SCM therefore spans the entire set of organisations from procurement of materials and product components to delivery of the completed product to the final customer (Schary, 1998).

The work of logistics in a firm’s supply chain is to move and geographically position inventory. This work of logistics is what creates value through timing and positioning of inventory. Logistics coverage basically integrates such activities such as order management, inventory, transportation, warehousing, materials handling, and packaging throughout a firm’s facility network. This is therefore essential for effective supply chain connectivity as it synchronizes all activities in a continuous process. The operating framework within which logistics is performed is therefore established by a supply chain strategy.

This thesis will therefore look at logistical performances holistically from a SCM perspective. Although in instances where the focus is organisation specific, an integrated logistics management of all the logistics activities would be stressed amidst the entire supply chain.

2.3 LOGISTICS AND SUPPLY CHAIN MANAGEMENT PROCESSES

Mentzer (2001) classifies SCM in three categories as; a management philosophy, implementation of a management philosophy and as a set of management processes. Cooper et al (1997) in their presentation entitled “Supply Chain Management, More Than a New Name for Logistics” also indicates that the SCM framework encompasses the combination of three closely inter-related elements; the structure of the supply chain, the supply chain business processes and the supply chain components.

In their explanation for SCM as a set of management processes, Mentzer (2001) indicates that the implementation of the SCM framework is carried through by three primary elements; the supply chain network structure, the supply chain process and the management component which are supportive of that of Cooper et al (1997) SCM framework.

The implementation of SCM strategy therefore involves identifying the critical supply chain members that need to be linked, the essential processes to link with each of these key members, and the type or level of integration that is applicable to each process link. It is worth noting that maximising competitiveness and profitability for the company as well as the whole supply chain network including the end customer is the objective of SCM (Lambert et al, 1998).

2.3.1 Supply Chain Management Processes

The Global Supply Chain Forum identified eight (8) key processes that make up the core of SCM. These processes are customer relationship management, customer service management, demand management, order fulfillment, manufacturing flow management, procurement, product development and commercialisation, and returns management (Cooper et al, 1997).

The eight (8) key business processes run along the supply chain and cut across firms and functional silos within each firm. Functional silos include marketing, research and development, finance, production, purchasing and logistics.

The activities in the processes reside inside a functional silo, but the entire process will not be contained within a function. While management teams of all the firms in each supply chain should consider these processes. However the relative importance of each process and specific activities included may vary.

Tier 2

Supplier

Tier 1

Supplier

Manufacturer

Customer

End User

R&D

Logistics

Finance

M&S

Production

Purchasing

INFORMATION FLOW

PRODUCT FLOW

Returns Management

Product Development and Commercialization

Procurement

Manufacturing Flow Management

Order Fulfilment

Demand Management

Customer Service Management

Customer Relationship ManagementFigure 2.1

A discussion on each of the processes is as follows:

Customer Relationship Management. The objective of customer relationship management at the strategic level is to identify customer segments, provide criteria for categorising customers, provide customer teams with guidelines for customizing the product and service offer develop a framework for metrics and provide guidelines for the sharing of process improvement benefits with the customers. Meanwhile, at the operational level, CRM process deals with writing and implementing the Product and Service Offers (PSOs). The customer relationship management process provides the structure for how the relationship with the customer is developed and maintained. Customer teams tailor PSO to meet the needs of customer according to market segmentation. Teams work with key accounts to improve on current processes, smoothen demand variability and eliminate demand variability. (Croxton et al, 2001).

Customer Service Management. The customer service management process is the firm’s face to the customer. It provides the single source of customer information, such as product availability, shipping dates and order status. The objective of customer service management at the strategic level is to develop the necessary infrastructure and coordination means for implementing the PSO and providing a key point of contact to the customer. At the operational level, the CSM process is responsible for responding to both internal and external events. (Croxton, et al, 2001)

Order Fulfillment. A key to effective supply chain management is to meet customer requirements in terms of order fulfillment. Effective order fulfillment requires integration of the firm’s manufacturing, logistics and marketing plans. The process defines the specific steps regarding how customer orders are: generated, communicated, entered, processed, documented, picked, delivered and handled post delivery (Croxton et al, 2001). According to Croxton and Keely, the design and operation of the network has a significant influence on the cost and performance of the system.

Manufacturing Flow Management. The manufacturing flow process deals with making the products and establishing the manufacturing flexibility needed to serve the target markets. The process includes all activities necessary for managing the product flow through the manufacturing facilities and for obtaining, implementing and managing flexibility. This could be categorised into Strategic Sub-Processes which are determine degree of manufacturing flexibility, determine push-pull boundaries, identify manufacturing constrains, determine, manufacturing capabilities and Operational Sub-Processes including developing a master production schedule and last but not least synchronised capacity and demand (Croxton et al, 2001).

Supplier Relationship Management. Supplier relationship management is the process that determines how a company interacts with its suppliers. It is a mirror image of customer relationship management. Just as a company needs to develop relationships with its customers, it needs to foster relationships with its suppliers too. At the strategic level, the output of the process is an understanding of the levels of relationships the firm will maintain, and the process for segmenting the suppliers and working with them to develop appropriate PSOs. Once the process team determines the criteria for categorisation of suppliers and the levels of customisation, the operational supplier relationship management process develops and manages the PSOs.

Product Development and Commercialisation. Developing new products quickly and getting them to the marketplace in an efficient manner is a major component of corporate success. Time to market is a critical objective of this process. As product life cycles shorten, the right products must be developed and successfully launched in ever-shorter timeframes in order to remain competitive. This includes the sub-processes of establish new product project guidelines, develop product rollout issues and constraints, design and build prototypes, make/buy decision, determine product distribution channels and etc. (Croxton et al, 2001).

Returns Management. Effective returns management is a critical part of supply chain management. While many firms neglect the returns process because management does not believe it is important, this process can assist the firm in achieving a sustainable competitive advantage. Effective management of the returns process enables the firm to identify productivity improvement opportunities and breakthrough projects (Croxton, et al, 2001). At the operational level, the returns management process is about managing the day-to-day returns activities, initiated by a customer. The subsequent sub-processes including analyses of the return and select appropriate dispositions and post-return credit management.

2.3.2 Logistics Management Activities

Langley et al (2009) deduced a comprehensive list of logistics activities from the definitions of logistics for which they presumed logistics managers might be responsible. The activities listed includes transportation, warehousing and storage, industrial packaging, materials management, inventory control, order fulfillment, demand forecasting, production planning/scheduling, procurement, customer service, facility location, return goods handling, parts and service support and salvage and scrap disposal.

At a glance, it could be said with certainty that almost all the logistics activities mentioned above are contained in the SCM processes enumerated by Croxton et al (2001). It is further advocated that organisations with well-developed logistics departments might not place responsibility for all these activities within the logistics area and hence decisions regarding these areas must utilize the systems view that is critical to logistics management (Langley et al, 2009).

2.4 UNITED NATIONS CONCEPT OF LOGISTICS

2.4.1 UN Logistics Defined

Logistics is defined as the science of planning and carrying out the administration, movement and maintenance of forces and materials needed on a UN mission, and includes activities related to communications, engineering and aviation services (UNITAR POCI 2002). In its most fundamental sense, logistics is the art of transporting, housing, supplying and providing technical support to military troops. However, in the context of UN operations, because support is often required for non-military personnel and circumstances, this definition is broadened. Thus the UN definition of logistics covers not only the needs of military and police units, but also of related civilian personnel originating from 189 different countries and widely diverse cultures (UNITAR POCI 2002) UN logistics covers all aspects of the needs and physical support for missions to be carried out. This covers finances, supplies, transportation, technical support and housing needs, as well as administrative, communications, engineering and aviation services (UNITAR POCI 2002).

2.4.2 Principles of UN Logistics

Logistics for all UN missions according to the UNITAR POCI (2002) have common principles, as all UN missions require mobility, flexibility and is a multination venture. The principles of UN logistics are therefore discussed as follows:

Responsibility. Contributing member states and the UN have a collective responsibility to ensure that forces deployed on any UN operation are fully equipped and supported. This may be achieved either through national or cooperative arrangements, but must be clearly agreed upon prior to deployment. Member states and the UN have a collective responsibility for the care, custody and safeguarding of UN and contributing member states assets (UNITAR POCI, 2002).

Foresight. The administrative and logistic planning for any mission begins well before the commencement of any operation. This includes first identifying resources within or close to the deployment area and obtaining information regarding the infrastructure of the site concerned. Consideration is given to any special on-site requirements such as, clothing, munitions, accommodation and mobility. Contingency planning for strategic movement should begin at the earliest opportunity. Such a logistic reconnaissance is an important step in preparing for a mission (UNITAR POCI, 2002).

Flexibility. Flexibility in the field of logistics means the ability to conform to operational plans that will almost inevitably be subject to frequent change, particularly in the early stages of any operation. In conditions where lines of communication are liable to be disrupted, it may be necessary to deviate from pre-set procedures and to modify standard methods of operation to meet unexpected events (UNITAR POCI, 2002).

Economy. On any mission, resources are rarely plentiful and must be used effectively, efficiently and economically. Early integration of all available assets provided by the contributing member states is therefore a main goal. When possible, this integration should be planned prior to deployment to avoid duplication of resources at the mission site. Notwithstanding a desire to rationalise logistic assets at the earliest opportunity, there is likely to be a surge of operational requirements to assist with the initial deployment of any UN force and this may, in the short term, create a duplication of some resources (COE Manual, 2011).

Simplicity. The simpler the logistic plan, the easier it is to understand. The greater the understanding of the plan, the more effective will be the cooperation between contributing nations and the speed with which an original plan can be adapted to meet changing circumstances (COE Manual, 2011).

Cooperation. Cooperation will always be the key to producing a workable logistic structure for a UN mission. Levels and standards of support differ by nations. Often, there are a variety of nationalities with different languages, cultural requirements and capabilities. In order to achieve a workable logistic end product, cooperation is necessary (COE Manual, 2011).

Sufficiency. The levels and distribution of logistic resources must be sufficient to meet the sustainability and mobility needs of the operational plan. Stock levels should take into account the expected nature and duration of the mission and consumption pattern (UNITAR POCI 2002).

Accountability. Accurate accounts must be kept for all assets that are purchased and issued to contingents for the support of a mission. This includes any equipment classified as Contingent Owned Equipment (UNITAR POCI 2002).

Visibility. Logistic assets are vital to an operation and represent huge sums of money. It is important that a full audit trail is available for all assets dispatched to, in and from the mission site. This can be achieved using a number of methods ranging from barcode, satellite tracking, or basic card systems (UNITAR POCI 2002).

2.4.3 Basic Concepts of UN Logistic Support

Logistic support according to UNITAR POCI (2002) needs to be tailored to a specific mission as UN missions can vary in size from a small group of observers, who may be civilian, police, military or a mixture of personnel types, to a combined operation of land, sea and air assets involving tens of thousands of personnel. Because there are a wide range of possible missions, there is also a wide range of logistic concepts. Logistic support is tailored according to the task required, space and time considerations, manpower, material, environment, climate, onsite infrastructure and availability of resources. The support system may be mobile or static, civilian or military, have on-site warehousing or national resupply lines or, in most cases, is a combination of all of the above. A number of such concepts have proven to be workable and valuable, and includes the Self-Reliance Concept, Lead Member State Concept, The Force Logistic Support Group (FLSG) Concept and the Civilian Contract Support Concept (UNITAR POCI, 2002).

2.4.4 Types of UN Logistics Support

Logistics activities in the UN are grouped by the function they serve:

Administrative services include all managerial, administrative and clerical support services provided where required, at all levels of the mission.

Supply support requires obtaining needed goods and materials and to continue to supply them throughout the mission. These include food provisions, furniture, office supplies, cleaning materials, clothing, military equipment as well as recreational materials, and whatever else is required for a particular mission.

Transportation logistics include supplying transport as needed.

Equipment maintenance requires that all vehicles and equipment be maintained in working order. This includes communications and land based equipment.

Technical support covers training and upkeep for field or construction engineering and technical requirements. This includes the provision of water and accommodation, which at times needs to be constructed for particular missions.

Aviation support requires the provision of aviation and air services, including maintenance of aircraft and flight safety procedures.

Communications logistics covers provision of signals and communications needs, including postal and courier services for all those involved in a mission.

Personnel needs are a logistic concern. Logistics cover the administration of personnel, which may require choosing personnel or assigning them to tasks. Services also cover all needs of personnel, such as overall welfare needs, recreational needs, and the provision of amenities as much as is possible on a particular mission.

Security services include establishing and maintaining military police for military missions and the provision and upkeep of all security services.

Accounting services provide budgeting and financial services. A mission is required to keep accounts of all expenses incurred, and also to keep track of whether the expense is incurred by the UN, the contributing country, the host country, or another source.

Medical services require the logistic provision of all health services, including dental needs.

Procurement services procure all material and services required for all aspects of a mission.

General services provide mail, courier, travel and traffic services, and office supplies.

2.4.5 Contingent Owned Equipment (COE)

Contingent Owned Equipment is a major concern


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