Historically, logistics was defined as the process of moving and positioning inventory to meet customer requirements at the lowest possible total landed cost. Over the decades, logistics moved from a very narrow preoccupation focused on transportation or inventory management to a larger vision embracing not only cost but also quality management and service provision. Large parts of the competitive advantage of an organization are due to the quality of service and especially to the ability of continuously improving and adapting the quality of service to specific needs of customers.
Logistics has to move to challenging new frontiers
Logisticians have a seemingly impossible, but achievable responsibility to design, optimize and permanently re-adjust a global utility function, embracing all of the customers’ major interests, of the functional enterprise’s components and, more generally, of all the stakeholders of the institution they work for.
In these tasks, essential antagonistic issues have to be arbitrated:
• the focus on customer satisfaction and value-added service as perceived by the clients, implies a fight against the entrepreneurs’ natural tendencies to reduce production and distribution costs, thus diminishing quality of service;
• the globalization trends which exacerbate international competition and oblige the firm to develop competitive advantages have to be weighed against local contingencies that the company has to face in it’s daily operations;
• the information technology and communication commodities apparently reduce direct transaction costs but induce other costly needs in order to master the quantity, the diversity and the complexity of available information; from B to B, B to C concepts, the company has to move towards K to K concepts (for Key to Knowledge);
• the nature of the relationships between suppliers and customers is changing and becoming more interactive and collaborative; consequently an enterprise is more extended and has to interactively redefine its core business and the competencies which should be developed within its frontiers as opposed those which should be outsourced or captured in the outside world;
• in a world characterized by accelerating change, the innovation process of production, service or an organizational structure is permanent. However constant change can be disruptive and result in a loss of momentum; innovation can be realized either by continuous, incremental phases or by drastic, disruptive steps. The challenge consists in sorting, selecting and implementing significant changes, conscious of the relationships that must be built in order to exchange cross-organizational information between partners;
• the organization structure becomes flatter, enlarging the span of control and allowing more dynamic interactions between the hierarchy’s levels and the company’s members. This flatter organization also renders the information exchange system more complex since many parallel and often simultaneous channels of communication and decision are competing;
• the market has to be constantly appraised, evaluated, interpreted and even courted; in this quest, similarity and diversity are powerful sources, and both have a significant role to play. However similarity and diversity are often seen as extremes that compete with each other; for instance the CRM strategy can take two polarized positions. The first one argues that since markets are global, the customers’ relationships can be standardized and based upon generic concepts, while the second argues that CRM should be customized according to the specificity of each market and to particular consumers’ habits; the best practice is usually revealed by an eclectic combination of both strategies;
• the mass customization is a broadly developed notion today that emphasizes the apparent contradiction of being able to simultaneously produce efficiently standardized products or services in a large quantity; each of these services have to be adapted to the particular customers’ requirements.
Globalization implies extended lead times, as the end-to-end pipeline time may increase as a result of focused factories, centralized distribution and off-shore sourcing and manufacturing.
Increased customer orientation signifies meeting local requirements, through the ability to customize products and marketing, and to reduce complexity without reducing variety.
The growth of outsourcing and the need for value-added information exchange make relationship management critical and increase the need for value chain integration.
Information technology reduces the transaction costs but increases the need for more sophisticated knowledge management.
Logistics: a holistic approach
The structure of the IML pedagogy is built upon the “Dual Loop Methodology of Logistics.” Such a methodology consists of opposing in a mirror Operation and Strategy, Tangibles and Intangibles, Supply Chain Management (SCM) and Management of Information System (MIS) in the same holistic, inquiring approach.
The present book is built upon this conceptual frame, which can be represented by the Dual Loop Methodology picture. All stakes and themes of inbound and outbound logistics should be visualized through a systematic binary combination. It consists in analyzing problems and their solutions from the operational and simultaneously, from the strategic sides, taking into consideration both the optimization of tangible as well as intangible resources, and designing the physical flow in harmony with the informational flow. As in a simplex optimization model, the primal definition of the problem cannot be dissociated from its dual. But both approaches bring essential, complementary information.
A vision defining a company’s future has to be projected in successive operational phases. There should be no vision without implementation.
The value of intangible resources can be of paramount importance with respect to tangible resources. These aspects are sometimes forgotten by analysts: the values of “hidden” resources are only discovered once they have disappeared! It is the ambition of this book to provide methodologies and tools that allow the reader to appraise intangible resources with the same ability as tangibles, thus becoming aware that the organizational structure and the human resources forging the organization’s culture have a fundamental influence upon the value of the project, that the quality of the network of customers, suppliers, providers, and partners interacting at fuzzy and moving boundaries of the enterprise is more important than the intrinsic value of the company. The hints developed in this book should help the entrepreneur to better sense, track and monitor innovation and launch new projects.
The value of Supply Chain Management (SCM) is directly dependent upon the efficiency of the Management Information System (MIS).
Both dimensions in the proposed methodology have to be combined in an interactive process:
• methods and instruments which bring an efficient leverage for improving and optimizing the supply chain;
• experimentations and applications which enrich the process through concrete examples and professional references.
As the mathematician Benoit Mandelbrot mentioned once “The scientists who dare to be nomads are essential to the traditional disciplines.” A logistician by essence is one of these nomads, whose responsibility is to move through the organization in order to make its parts function as an organic entity. To do this he needs adapted tools and instruments, and he has to test these instruments in diversified contexts. Wherever he will be located in the organization, it is important to check that the solution he proposes is not too narrow and that he is not victim of the so called “anchorage bias.”
In another words, the material provided in this book should protect the analyst against the danger illustrated by the epistemologist Jean Piaget when describing the behavior of somebody who has lost his keys in the dark. The first place he looks for them is directly below the lamppost, where the information is directly available, although probably insignificant…