LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work


President LTD Management

Logistics, perhaps more than any other function, impacts and interacts with many different departmentsin a company. Consider five key issues with logistics

Scope. These issues touch almost all parts of a company. Logistics likely has worked with all of themat one time or another. Accounting. Finance. Engineering. MIS. Marketing. Sales. Manufacturing. Customer Service and Purchasing (if they are not already a part of the logistics organization). Some ofthese departments work daily with Logistics, some less frequently.

There are also external elements to the supply chain with vendors, customers, carriers, warehouses andother organizations. If the supply chain includes imports and exports, the scope of the logistics pipelineis extensive. With the global activity, the logistics pipeline is very significant. No other function hasthis scope of responsibilities and interfaces. There are service issues. Cost issues. Operational issues. Strategic issues.

Logistics must deliver products to a customer at the time, method and cost to satisfy that particularcustomer's requirements. Responsiveness is needed, the quicker the better, the smoother the better. Flexibility is needed to meet the quickly changing market and customer demands.

Usually each customer has different requirements on how he wants his orders handled. So as the numberof customers increases, so do the demands to meet the unique requirements of each customer. Take thisresponsibility back through the supply chain, through to the various vendors who supply parts andservices and the scope of interaction becomes very significant and complex.

Teamwork. Logistics effectiveness is a process, an ongoing process. It is not a quick fix, not a 90-daywonder. It does not occur because someone holds a meeting or writes a memo. It takes teamwork to beeffective. The problem may seem to be excessive inventory or high freight costs or slow order cycletimes or some other problem. Yet often these are not problems, they are symptoms. It takes teamwork,the diverse functions of a company and the external organizations working together. With a teamperspective, root causes and bigger issues can begin to be recognized and addressed.

Teamwork presents opportunities to look at how best to serve your customers, how to best conductbusiness. To make all this work, and work effectively, requires the positive, active participation ofdiverse functions, diverse outside companies. It takes teamwork--real teamwork, both internal andexternal. It takes information to communicate between and among the various internal and externalelements. The teamwork and information should then be integrated

This can be easier said than done. Look around at sports teams or at other companies. Not all teams aresuccessful. Some are downright terrible, both at playing and at organization. They are teams in nameonly. They don't work together. Yet others are highly successful. They win. And they continue to win,year in and year out. They do this because they work together. Self-serving agendas and other negativesget in the way. Teamwork means everyone working together because it's good for the company. Itmeans sales, growth, profitability, jobs and a sense of feeling good.

The team must be cross-functional. It cannot just be members of the logistics organization. This is noteffective. It must include Sales, Manufacturing, Purchasing, MIS, Accounting, Logistics and whoeverelse is needed to achieve results. They must work together to analyze the needs, issues and concerns,whether they are meeting the needs of customers and/or taking a blank sheet of paper to reengineer theirentire process.

The team may tackle broad issues involving changing customer and market demands, service, cost,quality, the company network of suppliers, plants, warehouses and territories. These are significantissues, vital to the future of the company. The team may, in reality, be agents of change.

There is a problem with achieving teamwork--it's the organization chart. Organization charts show whoreports to who. Who has what functions? These can become a barrier to teamwork. They can operateas functional silos. Silos are vertical, teamwork is horizontal. These create turf wars.

Departments squabble about whose budget will be hurt. They hinder integration and working together. It can get in the way of cross-functional endeavors, especially on an ongoing basis.

Now when you expand the team to be a global team, reflecting the global scope of the logistics pipeline,the team issues must also include cultural issues. They must also recognize the goals of the outsidecompanies, which may be different than your company. The outside company is not wrong with theirown goals. But this should be recognized. Cost and service goals can conflict. Short term goals canconflict with developing an ongoing, dynamic and effective logistics process.

With the external organizations, we are talking about partnerships, not a buyer-seller relationships. Theexternal elements must be made part, an integral part, of the team. They are not just given orders by theircounterpart in the other organizations. They are a very vital part of the team. They must provide theparts and services necessary for the supply chain to properly function.

The outsiders must be made insiders. Everyone must share respective department and companyinformation and plans. They must understand each other's operations and requirements. They must beactive participants in the team. All the internal work may fail, without the participation of all the keyplayers, including those outside the company. Think of how much of the logistics pipeline actually takesplace outside of the company. It is quite a lot, perhaps even more than takes place within the companyitself. It will produce good results where functions work with their counterparts at the customer orvendors with the cross-functional teams.

Not every vendor, customer or service provider may develop into a key relationship. This reflects thecomplexity, scope and priority that each has the supply chain. But you must look at the entire chain. Ifyou do not, you will not achieve the necessary effectiveness. Where the relationship is vital, then themutual synergies and interaction must be developed into the team.

Information and Technology. To be responsive to customer needs, you must be able analyze yourpresent operation. Plans and information must be shared by and among the team members. Good data,detailed, is necessary, as are methods to take the data and transform it into information. You must be ableto communicate the needs and plans effectively throughout the supply chain. This is true whether youare talking about external elements, customers, vendors, carriers, forwarders, warehouses and more. Itmay be even more true internally, both as to communication and activity.

With mutual sharing of information, everyone must understand what is required and his role in meetingthe requirements. With this understanding, the supply chain can work. It can work, even when there isa problem, when something does not quite go as planned. There is flexibility. But it requiresinformation to make it all happen.

Technology is a key factor today. Personal computers, E-mail, EDI, bar-coding, and more. These arenot optional. Many customers place their orders via EDI; they want ASN's. Bar-coding is vital toinventory management, order management, information systems for logistics segments, manufacturing,accounting and other groups within a company. Most systems have a focus, whether designated primaryor implicit. It may be accounting. It may be manufacturing. But remember, no other function in acompany interacts with as many groups as does logistics. If the system is not sufficiently focused onlogistics, it will not achieve its maximum results. Systems create information which can create value-added, both for your internal operations and for external, especially with customers.

Integration. Integration brings the team an information together. It must occur within your company,between you and your customers and between you and your vendors. All the elements of the teamand the information must come together into an integrated effort. This is absolutely necessary forlogistics effectiveness and success. You are forging a supply chain, and each link must be strong.

Consider a situation where you must make 10,000 of a product for a promotion or key customer. Youget your team together. You discuss and find out you can manufacture 2,000 per day. Further there isone very critical component needed. The vendor is located overseas. You talk with him. He discusseshis available capacity, stock status and ability to manufacture. Together you agree that he can make aspecial run for you. His production rate will be 4,000 per day. Now with this information, the team canreview alternatives, such as have the vendor hold all production until he has 10,000 made. Or they candecide not to hold but instead to ship his production each day, creating a pipeline of inventory intransitand onhand.

With the short timing required, the teams decides to air freight the components. Your team also includesyour air forwarder and customs broker. The forwarder tells you that there is a space shortage. You workout a program with him to schedule, prioritize and move the components. You also work with theforwarder, your customs broker and the trucker on what everyone must do so the shipments are notdelayed upon arrival. Teamwork.

Or a major customer sends you his new requirements and procedures. These involve bar-coding ofcartons and shipments and require EDI receipt of his orders and your transmission of advanced shipnotices and invoices. The team gets together. MIS reviews what must be done to receive the orders andwhat must be done to transmit the ASN's and invoices. They also analyze the current system to automateit to facilitate ASN's and to better manage the warehouse, using the bar-code internally to prepare bar-code labels, and to track inventory and orders. Purchasing is given the carton bar code requirements anddiscusses with their box vendor what must be done. Customer Service reviews how they will handleorders coming in EDI as opposed to faxes. Accounts Receivable and Accounting review how they willtrack receivables and book the sales using the EDI transmission. Sales heads up a cross-functional teamto meet with their respective counterparts at the customer. Teamwork.

Conclusion. No man is an island, and certainly no department is, especially Logistics. To have logisticseffectiveness requires internal and external teamwork. Cross-functional teams must worktogether to handle the ever dynamic and complex requirements of doing business.