Logistics Design

On completion of this initial phase of the business planning process it should be possible to identify corporate strategy and objectives, and to determine a specific competitive strategy. The next task is to prepare appropriate functional strategic plans.

There are several important issues concerning the development of a suitable logistics strategy. The first is the need to link the logistics or distribution plan directly with the corporate plan. This is best achieved by ensuring that logistics is an integral part of the corporate plan and that factors related to these functions are used as inputs in the overall planning process.

The second point concerns the extent or coverage of the logistics strategic plan. This will clearly vary from one company to another. It may well just be a ‘distribution’ functional plan. It is most likely that it will be necessary to incorporate elements from other functions (marketing, production, etc) to represent the fully integrated nature of logistics or the supply chain.

The third, and in many ways most important, issue is whether or not a company has a structured logistics plan at all. Many still don’t, so a first and major step may be to ensure that such a plan is developed, based of course on the company’s business and competitive strategic plans.

Traditionally, logistics planning and design have evolved around the structure of the logistics network, such as depot numbers and location, but it is now recognized that, as well as these physical logistics elements, there are other factors that also need to be considered. These are the design of logistics processes, logistics information systems and logistics organizational structure.

Logistics process design is concerned with ensuring that business methods are aligned and organized so that they operate across the traditional company functions and become supply-chain-oriented. Thus, they should be streamlined and should not be affected or delayed because they cross functional boundaries. A typical logistics process is order fulfillment, designed to ensure that customers’ order requirements are satisfied with the minimum of time and the maximum of accuracy. The process should be designed as a seamless operation from the receipt of the order to the delivery of the goods and not as a series of different operations that occur each time a different internal function is involved – sales department, credit control, stock control, warehouse, transport. Other logistics processes that might be considered are information management, new product introduction, returns or spare part provision. Processes might need to be differentiated for variations in customer type, customer service requirements, product group, etc.

Logistics network design refers to the more traditional elements of logistics strategy. These include aspects related to the physical flow of the product through a company’s operation, such as the manufacturing location from which a product should be sourced, the inventory that should be held, the number and location of depots, the use of stockless depots and final product delivery. One key to the determination of an appropriate physical design is the use of trade-off s between logistics components and between the different company functions.

Logistics information system design should include all of those information-related factors that are vital to support the processes and the physical structure of the operation. As well as these, however, it is important to recognize that there are also enterprise-wide information systems (enterprise resource planning or ERP systems), which may have a direct influence on logistics process and network design. Typical information systems that may support logistics process and network design might be electronic point of sale (EPOS), electronic data interchange (EDI) between companies, warehouse management systems, vehicle routing and scheduling and many more.

The final design element is that of the logistics organizational structure. It is the experience of many companies that an inadequate organizational structure can lead to substantial problems. These include issues such as sub-optimization whereby functions tend to concentrate on their own operation in isolation from the rest of the company, or even worse examples where different functions and their managers compete against one another and develop antagonistic attitudes, oft en styled as a ‘blame culture’. These types of attitude work against the company but are also detrimental to customers and customer service.

Each one of these different factors needs to be planned in association with the others. It is inappropriate to concentrate on any one without understanding and taking into account the influence of the others. For different companies it may be any one of the other factors that plays the most dominant role. For example, a company that has introduced an enterprise-wide information system may find that this has a primary influence on how logistics strategy is formulated. Equally, a company may feel that it is necessary to put a workable logistics organizational structure in place before it attempts to redesign its logistics processes and physical operations.