ORGANIZATION for EFFECTIVE LOGISTICS PERFORMANCE Flashcards
Logistics significance is highlighted by the following concepts:
Structural Compression
Centralization/Decentralization
Structural Compression
The role of the chief logistics executive is changing and this ignites the motivation for logistical structural compression. An environment with restricted head count as well as intensive control of assets has enabled the senior logistics manager to emerge as an important part of the firm’s continuous move towards gaining and maintaining customer loyalty.
Centralization/Decentralization
An enterprise is considered decentralized if their basis of function is autonomous. Every unit would be responsible for their own logistical planning as well as its execution. A centralized organization has the opposite policy. A central headquarters group directs logistical planning and execution. In today’s organization, which is information-intense, the distinction between centralization and decentralization is becoming hazy. Recent trends have seen a shift towards centralized organizations. But with the recent developments in distributed information processing, a
centralized logistics organization is no longer required for efficient data processing. Logistical responsibility gets pushed down the organization, as a result. Basically, there is a direct relationship between the desired degree of centralization and the complete nature of business operations. Customers who desire a host of products sold by different business units of a conglomerate have encouraged many cross-divisional or various business units. The availability of information technology is considered a major benefit of decentralization.
Stages of Functional Aggregation in an Organization
Stage I Organization
Stage 2 Organization
Stage 3 Organization
Stage I Organization
During the late 1950s and 1960s an initial attempt at grouping logistical activities had emerged. Organizations with even minimal degree of formal unification have emerged only after the senior management has become committed to the belief that improved logistics is the result. Two or more logistics functions have emerged, which can be operationally grouped without changing the overall organizational hierarchy to a great extent. Such an aggregation initially has occurred both at the staff as well as line levels of the organization. During this initial development stage, organization units were rarely engaged in the purchasing and physical distribution integration.
Stage 2 Organization
This stage of organization has begun to evolve with the overall enterprise gaining operational
experience with logistics and cost benefits. The position of logistics has been elevated to that of a
higher organization authority and responsibility. Positioning logistics at a higher organizational level has
increased the likelihood of strategic impact. Logistics has been managed as a core competency due to
the independent status given to logistics. The stage 2 organizations have been established as it was
necessary to reassign functions and position newly created organization at a higher level within the
overall enterprise structure. Though logistics has been given a lot of importance, the concept of a fully
integrated system has not yet been achieved. An important factor for this is the lack of cross-functional
logistics information systems. Another feature here is that the integrated physical and material
management has begun to be accepted among the financial, manufacturing, and marketing
counterparts.
Stage 3 Organization
Emerged in the 1980s with the beginning of logistical renaissance. Grouping many logistical planning
and operational functions under a single authority and responsibility is the feature of this organization.
Every area of logistics – purchasing, manufacture and physical distribution is given the structure of a
separate line operation. Operational responsibilities are well defined and thus it is possible to establish
manufacturing support as a unit of operation similar to the purchasing and physical distribution.
Logistical resource planning covers the full potential of management information to plan and co-ordinate
operations. Logistical resource planning facilitates integration.
Overall planning and controllership exist at the highest level of the organization. This organization
serves as a single source for guiding the efficient application of financial and human resources right from sourcing of materials to customer delivery.
GENERALIZATION
The evolution in information is making logistics managers reconsider the traditional organizational logic. The idea of middle managers serving as guardians of information has been replaced with a frontline workforce having access to the entire information. A continuous redesign and re-engineering of the basic nature of work has made hierarchical organizations modified to accommodate networking of
information and self-directed work teams.
