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Lecture 15
Strategic Integrated Logistics Management
1. Introduction
Firm must manage the movement of goods to, through, and from a
manufacturer. It is the integrated logistics management. It seeks the continuous
flow of goods from the raw material source to the final customer and the cost
efficient fulfillment of service needs.
It is
“The process of anticipating customer needs and wants; acquiring the capital,
materials, people, technologies, and information necessary to meet those needs
and wants, optimizing the goods –or service – producing a network to fulfill
customer requests; and utilizing the network to fulfill customer request in a
timely way.”
Any changes in the priority of the addressed issues will certainly affect all
aspects of logistics from supply management to customer service.
Network Design
It addresses the no. and types of facilities a firm will operate, where they be
will located, and how they will operate. Its choices depend on the resources of
the firm eg. Capital, HR, relationships, etc. Decisions also depend on what
customers want, what competitors do, and what governments and regulatory
agencies will allow.
Eg. The low costs of manufacture may create a competitive advantage, but the
higher distribution costs may offset those advantages.
Human Resources
Hiring, training, and placing people can make or break an organization. The
availability of labour will affect network design and organizational
relationships. IL managers must decide whether to hire people with
experience, or to hire people with little or no experience and train them. But
decision must be strategic.
Organizational Relationships
A perfect logistics strategy will fail if it does not fit the organization’s broad
strategy. For example, if a firm’s goals involve lowest possible costs, then
adopting a high-service, high-cost logistics strategy will not work or vice-versa.
People work toward what is measured. Managers must first choose what to
measure, set standards on those measurements, and then establish goals.
Though no organization can measure every aspect of work behaviour,
quantification and measurement can help define desirable behaviour and limit
undesirable behaviour.
For this reason, establishing measures for control is also a step in the SILM
model.
Planning
SILM is the set of decisions that deploys assets with current and future
operations and decisions in mind. This prepares the organization for future
decisions, allowing them to be made quickly and without disrupting daily
activities. Planning is the first step in SILM.
9. Strategy
Strategy is a set of specific actions aimed at fulfilling the objectives and goals
established by the firm. Firms develop strategies for many reasons:
A. Situation Analysis
Mission Statement
It justifies the existence of the IL function. It delineates the role of IL in the firm and
ties it to the firm’s mission. The IL mission statement should at least address whom
will be served, how IL will serve them, and what service IL will provide.
Categories include:
The IL function must incorporate information from other functions in the firm.
External Environment
It evaluates the external variables that the firm cannot control. Eg technological
advances, EDI, new inventory software packages, new packaging methods, political
and legal decisions (trade pacts), regulatory considerations (deregulation, self-
regulation), competition (customer service), and economic conditions (inflation,
recession, unemployment).
This stage is to choose specific strategies to meet the previous step. They may arise
from creative strategy development sessions, formal or informal brainstorming, or
other sources. Group strategy development results in more solutions and more
distinctive solutions than individual strategizing
D. Strategy Selection
After management evaluates and ranks the strategies, specific strategies must be
selected for implementation. The most critical concerns should be listed in sequence.
The IL manager must choose strategies that will accomplish the stated goals.
Strategies not chosen but retained for later use are called contingency strategies
This step is to implement the selected strategies. A tactical plan specifies the
operations, steps, or processes that a firm must perform to execute the strategy. The
IL manager now writes a step-by-step procedure explaining how to implement the
strategies. This document breaks down tasks into simple steps.
F. Strategy Integration
Before implementing all strategies and tactics, the IL manager should let all involved
in operations related to the strategies knows what to do. It can avoid much confusion
and overcome numerous problems. It is essential that each of the staff a part of the
strategy from the beginning.
An audit team must be formed to set control standards, evaluate performance, and
provide feedback. It must at least 1 member who is not IL member. The best choice
would be an outside consultant which helps avoid conflicts of interest and increases
the validity and reliability of the audit procedure.
Measurable standards must be set for their strategies. These can come from
publications, firm’s history and records. Evaluation of the SILM process compares
the performance of IL operations to the performance standard. Strategy needs to be
altered if performance is too far from standard.
Feedback is the final phase of the SILM process audit. Audit finding should be
reported to all relevant parties. A written report should discuss each step in the SILM
process and evaluate the firm’s performance on the mission, objectives, goals,
strategies, and tactics.
The firm emphasizes providing the best comparative net value for the customer
based on customization, flexibility, innovation, and responsiveness. It is driven
by management, workers, customers, and suppliers working toward a common
goal of providing added value to the firm and its customers.
The organizations did not change their priorities to truly adopt the quality
concept.
Set goals
Plan improvements
Implement
Following these steps can help the IL manager to superior performance and to
reap the following benefits:
Selecting the right firm to benchmark against is important. One can benchmark
against direct competitors or the best firm in the industry.
1. What is strategic integrated logistics management and what are the steps
involved in working through the strategic integrated logistics management
model?