Essay on Logistic management – Executive summary
Supply Chain Management and Logistics Management have become as important for firms as their core activities. In a world of ever more demanding customers and global economy, competition is cut throat and firms have no choice but to look at all aspects of their business both external as well as internal to gain a competitive edge in the market. In case of emergencies, the need of such scrutiny becomes even more significant. Where the difference between a second saved and a cent contributed is the difference between life and death, logistics management no longer remains a profit making activity but a life saver instead.The evolution and thought that goes into logistics management is extraordinary. From basic concepts of moving goods form one point to another, logistics management has evolved to be a major component in determining a products success or failure.
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This article focuses on these very concepts in light of how they can be applied to an NGO’s mission of providing a grief stricken area with emergency supplies as soon as possible in the most efficient and minimal cost way. The execution of such a plan is a tedious task and if successful will prove to be a lifesaver for many.
It discusses concepts like JIT, SCM, Military Logistics, medical logistics and finally what the NGO’s should apply and what it should avoid in order to ensure that its activities run smoothly and help is provided where needed effectively.
Introduction
Logistics started off as distribution techniques that a firm employed to make sure its products reached the intended customer. The management of these channels and processes through which a product has to go after production to reach the customer come under the wing of Logistics management. As the name implies, logistics is the careful assessment and planning of travel of goods from one point to another in a timely, efficient, coordinated and safe fashion so as to ensure that the right amount of product reaches the right place without being damaged on the way at the right time. It can be as simple as delivery of a pizza to a customer’s doorstep and as complicated as delivery of huge amounts raw materials to a manufacturer overseas in time and getting a lot of finished product back on the same vehicle. It is therefore the integration of information, transportation, inventory, warehousing, material handling, and packaging.
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The operating responsibility of logistics is the geographical repositioning of raw materials, work in process, and finished inventories where required at the lowest cost possible. With the advent of Globalization, no wonder it has become increasingly difficult to accomplish any marketing or manufacturing without logistical support. Logistics not only contributes to the ‘place’ factor in marketing activities but also to the ‘price’ factor as well because it contributes to the overall cost of production as well. Furthermore, logistics also has a great hand in determining whether a firm can adapt quickly enough t the changing environment by not only acquiring enough raw materials to produce but also to deliver it to the product. No matter how much advertising is done, it is of no use unless the product is available at stores for the customer to buy. Apart from a visibly external impact, logistic principles are applied within a firm as well. Manufacturing concerns use logistics management extensively (called production logistics) to improve their efficiency and the ability to add value to a product. The purpose of production logistics is to ensure that each machine and workstation is being fed with the right product in the right quantity and quality at the right point in time. The aim is to streamline and control the flow through the value adding processes and eliminate non-value adding ones. Once this is accomplished, only then can a firm be sure to work at its optimum level.
Some argue that Supply Chain Management and Logistics Management can be used interchangeably. This is not so. Logistics strictly pertains to the management of travel of goods. It is mostly concerned with the actual handling of goods from one point to another. Supply Chain Management is the act of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible. Supply chain management ps all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. Supply Chain Management is the strategic planning and constant improvement of a firms supply chain. Logistics is a way of implementing it all. Some experts say that Logistics and SCM can be used interchangeably as they are one and the same. Some do not agree. The reason for this is that boundaries between the two disciplines have blurred over the years. In the past, logistics management were confined to shipping and transporting firms only and manufacturing firms saw their supply chain to exist till the production and deployment of products only. Now, as firms supply chains expanded due to partnerships and alliances with intermediaries and as transportation companies seeing their activities being their core business activities expanded and started offering more, the lines between the two blurred. It can thus be safely said that Supply Chain Management is the monitoring of logistics along with other aspects such as partner relationships, resources, procurement, storage, production, and delivery and after sales services related to it.
Supply chain management addresses the following problems:
§ Distribution Network Configuration: Number and location of suppliers, production facilities, distribution centers, warehouses and customers.
§ Distribution Strategy: Centralized versus decentralized, direct shipment, Cross docking, pull or push strategies, third party logistics.
§ Information: Integrate systems and processes through the supply chain to share valuable information, including demand signals, forecasts, inventory and transportation etc.
§ Inventory Management: Quantity and location of inventory including raw materials, work-in-process and finished goods
Its major components can be seen through this diagram:
This diagram shows the p of SCM. It starts from the suppliers of raw materials, from which a firm buys and proceeds to the production of finished goods. Then onwards these goods are moved to selling points and then enud up to the customers. For our case, we can ignore the production part. We can also ignore the buy part as the NGO already has procured the equipment it has to send. Thus we have to concentrate on the movement of these supplies to the customer.
A diagram depicting the enablers of Supply Chain is as follows:
These enablers are from a business point of view. We can however take a few of these elements and incorporate them in the distribution system of an NGO as well. Take for example eBusiness technologies. These can be vital to coordinate the proper flow of supplies form lets say one check point to another and monitor the location of each package. Shortfalls in supply and increases in demand can be accurately discovered and communicated to that goods can be dispatched as soon as possible.
Corporations nowadays are striving to focus on core competencies and become more flexible. Due to this, they have reduced their ownership of raw materials sources and distribution channels. These functions (along with many other non-core functions) are increasingly being outsourced to other corporations that can perform the activities better and more cost effectively. This has resulted in less control and more supply chain partners and subsequently the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and velocity.
Supply chain activities can be grouped into strategic, tactical, and operational levels of activities. A look at these activities will also reveal what is necessary for the case at hand of the Australian NGO, which needs to deliver supplies to the Caribbean island.
Strategic
§ Strategic network optimization, including the number, location, and size of warehouses, distribution centers and facilities. (Applicable)
§ Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third party logistics. (Partly applicable)
§ Product design coordination, so that new and existing products can be optimally integrated into the supply chain, load management (n/a)
§ Information Technology infrastructure, to support supply chain operations. (Applicable)
§ Where to make and what to make or buy decisions (n/a)
§ Align Overall Organizational Strategy with supply strategy (applicable)
Tactical
§ Sourcing contracts and other purchasing decisions. (n/a)
§ Production decisions, including contracting, locations, scheduling, and planning process definition. (partly applicable)
§ Inventory decisions, including quantity, location, and quality of inventory. (applicable)
§ Transportation strategy, including frequency, routes, and contracting. (applicable)
§ Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise. (applicable)
§ Milestone Payments (n/a)
Operational
§ Daily production and distribution planning, including all nodes in the supply chain. (partly applicable)
§ Production scheduling for each manufacturing facility in the supply chain (minute by minute).
§ Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. (Applicable)
§ Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers. (Partly applicable)
§ Inbound operations, including transportation from suppliers and receiving inventory. (Applicable)
§ Production operations, including the consumption of materials and flow of finished goods. (Applicable)
§ Outbound operations, including all fulfillment activities and transportation to customers. (Applicable)
§ Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers. (Applicable)
§ Performance tracking of all activities (applicable)
At each level, the points are self-explanatory. As explained before, the NGO will not have to procure the good, all it ahs to concentrate on is to supply the goods to the end user of these resources as soon as possible since it is an emergency situation. Some may argue that other enhancers such as Just In Time technologies can also be incorporated to improve the system. This is not so. JIT was developed by the Japanese and mainly revolves around the concept of ordering inventory when needed as opposed to incurring high storage costs and thus adding towards the eventual production cost and subsequently the sale price of a product. JIT I bets applicable where demand is predictable to a certain extent and inventory can be reordered when a predetermined level is reached. An NGO cannot predict the demand for supplies due to the unpredictable nature of fatalities and emergencies. It can however reduce its holding costs by ordering supplies from a place which is near the are of casualty and arranging for methods to get the delivered directly rather than acquiring them first.
Interestingly however, an NGO can look elsewhere for inspiration. Logistics management has been used for a long time in the military. Military logistics are those aspects of military operations that deal with: a. design and development, acquisition, storage, movement, distribution, maintenance, evacuation, and disposition of materiel; b. movement, evacuation, and hospitalization of personnel; acquisition or construction, maintenance, operation and disposition of facilities; and c. acquisition or furnishing of services (DOD Dictionary of Military and Associated Terms n.d.). As with emergency situations, military logistics too need to ensure, that supplies reach the destination in proper working condition and exactly when needed. Too much equipment slows down a battalion’s progress. Too less can spell doom. The idea is to strike the right balance between the two so that all demands, however predictable they may be, are met without burdening the ones transporting and demanding them. Secondly, the battlefield depicts situations similar to what an NGO might face. When natural disasters occur, most of the times the infrastructure of the area is destroyed. This means broken roads, short delivery times and high-pressure situations where many lives are depending on the delivery of goods.
NGO’s can also study logistics approaches applied in the medical field. Medical logistics deals with the logistics of pharmaceuticals, medical and surgical supplies, medical devices and equipment, and other products needed to support doctors, nurses, and other health care providers. Because it’s final ‘customers’ are responsible for the lives and health of their patients, medical logistics is unique in that it seeks to optimize effectiveness rather than efficiency. Equipment has to be handled carefully lest it gets damaged and reaches its destination defected and of no use. NGO’s can study these systems and note how medical supplies can be transported effectively
And then the concept of reverse logistics arises. In business terms, reverse logistics is the concept of receiving products from the customer which are to be returned by them due to complaints. It is the process of removing new or used products from their initial point in a supply chain, such as returns from consumers, over stocked inventory, or outdated merchandise and redistributing them using disposition management rules that will result in maximized value at the end of the items original useful life. (Reverse Logistics Association n.d.) A reverse logistics operation is considerably different from forward logistics. It must establish convenient collection points to receive the used goods from the final customer or remove assets from the supply chain so that more efficient use of inventory / material overall can be achieved. It requires packaging and storage systems that will ensure that most of the value still remaining in the used good is not lost due to careless handling. It often requires the development of a transportation mode that is compatible with existing forward logistic system. Disposition can include returning assets into inventory pools or warehouses for storage, returning goods to the original manufacturer for reimbursement, selling goods on a secondary market, recycling assets, or a combination that will yield maximum value for the assets in question. Simply, “reverse logistics” is all activity associated with a product/service after the point of sale, the ultimate goal to optimize or make more efficient aftermarket activity, thus saving money. Types of activity common with reverse logistics includes: logistics, warehousing, repair, refurbishment, recycling, e-waste, after market call center support, reverse fulfillment, field service and many others.
Seen from a different point of view, reverse logistics is basically the rerouting of a logistics operation. Instead of delivering the product ‘forward’ to the customer, the aim is now to ‘deliver’ the product ‘backward’; from the customer to the supplier of the product. This rerouting can be very essential to NGO’s. If a certain supply is not needed in a specific area, it can be rerouted to another one instead of bringing it back. The system should be adaptive enough to incorporate these sudden changes and have rerouting capabilities as well.
Critical Issues with Inbound and Outbound Logistics
The steps that are made in order to arrange the transportation for the materials those are to be received by the organization. While on the other hand, outbound logistics involves the preparations of the activities in shipping of the good and products to the final destination.
The inbound processing starts with the process of the receptions of goods or products. After that the second process comes of the realization of the demand externally of the goods followed by the shipping notification. Finally the delivery needs to be monitored and then comes the process of managing the yard.
The outbound process involves the issuance of goods with the planning of delivery distribution and processing. After the delivery, it needs to be verified and the value-added services are incorporated in it with the final stage of managing or monitoring the delivery made.
The entire process is extremely extensive and requires plenty of documentation and verification by various sources. These formalities increase the time of the logistics, hence making process longer then required. On the other hand, these two process are dealt separately, where in fact they have to be incorporated together and implemented side by side or together in order to have an effective and efficient result.
Case Study
‘Ten thousand emergency relief kits, five thousand family supply kits and three hundred refrigerated containers are to be sent from Australia to a Caribbean island to help people affected by a natural disaster.’
As it can be seen, the amount of goods to be delivered is huge. Furthermore, the distance makes matters worse. The NGO however will have to take into account a few problems before deciding on which way to approach this problem:
§ Situation at disaster site
§ Infrastructure of destination
§ Transportation Channels available
§ Current situation in terms of extent of disaster, whether its ongoing or has stopped
§ Casualties and survivors
§ Type of needs of victims
§ Transportation choices (air, water, land)
§ Links in area (other NGO’s, contacts etc.)
§ Tracking of goods
§ Assurance of delivery
§ Equipment operators.
§ Instructors to victims
Just the delivery of goods is not important, their effective use is important as well.
Transporting so many goods always comes with problems. The NGO’s is bound to face constraints. They will be in the following areas:
§ Acquiring goods.
§ Storage of goods
§ Delivery of goods
The most significant task will be to deliver the goods. Apart from that, a temporary location might have to be arranged for the storage of goods before delivery. An alternative approach however could be to ensure that all equipment is ready when it is to be transported but remains stored at the suppliers end. On delivery day, goods can be collected form all points and directly deposited at the site from where onwards they will be taken to the Caribbean (it will most probably be transported by sea but the situation can possibly be dire enough to command a quicker means of transport such as air freight). Otherwise, if the location of suppliers is diverse then the NGO will have to arrange fro storage facilities until delivery day.
Upon reaching the island, the mode of transportation then onwards will depend on the availability of roads and vehicles. In case of limited availability, even vehicles of transport will have to be shipped from Australia. This all should be kept in mind and the activity well planned before execution to ensure the smooth running of activities and the timely delivery of goods.
Constraints to Logistics Management
As the scenario under review is a slightly different case than any other normal company business therefore the entire logistics management would face certain constraints or limitations while achieving the ulterior motive. Some of the constraints are as following;
§ Financial Constraints: As it is a Non-Governmental Organization (NGO) and runs solely on the basis of donations, therefore the finds allotted to various sources need to be done with utmost concern. The concern for allocation of money is also required as the NGO is dealing with someone else’s money.
§ Involvement of Sentiments: A slight failure of plan can result in a massive hue and cry from the general public, as they would feel cheated by donating their money to this particular Non-governmental Organizations.
§ Goodwill at Stake: The proper management and transference of resources have become a matter of prestige for the organization. A mistake in the management would result in the lack of trust on behalf of the regular donators to the organizations.
§ Difficulty in Reaching the Destination: Upon reaching the island there is a dearth of vehicles as well therefore the additional shipping of vehicles are also required from Australia to manage things accordingly adding difficulty to the entire process.
Conclusion
NGO’s, in spite of being non-profit organizations still have to cut costs due to the fact that resources are limited and it’s best to utilize them in helping as many people as possible. But they cannot afford to cut costs by using cheap means of transportation and lengthen the delivery time because in doing so, they risk losing lives of injured victims and risk more suffering. The aim should be to strike the right balance between what’s needed and what’s not.
The NGO should also be mindful of the technologies currently available to assist logistics management. By implementing them, planning will become a lot easier and assist in creating scenarios and eliminating loopholes.
References:
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Diagrams:
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