LOGISTICS IN OPERATION MANAGEMENT AND CONTEMPORARY BUSINESS
Fast paced business world has increased immense pressure on organizations to increase agility and the adaptability of business operations. Along with understanding of changing market demand and customer trends, to remain competitive organizations are to remain on toes to meet the challenges posed by the managing operations of business. Therefore, operations of the organizations in the contemporary business world are constantly looking for the business practices that would enable them to manage business with more connectivity and coordination. Therefore, in order to address these factors successfully various management functions are constantly being evolved for greater coordination (Stevenson & Hojati, 2002). Among functions, Logistics Management is an important function and hence has been made the focus of the underlying discussion.
Logistics management refers to the art and science of managing entire supply chain with respect to flow of resources across the entire point of business initiation to the final consumption. Logistic management is about flow of goods, services, information, energy and other related and concerned resources across various destinations of business operations. Movement of resources from point of resource initiation to the point of consumption as and when required. Hence, for the purpose logistics management includes integration of resources including information, material handling from inventory to point of process, packaging, warehouse as well as transportation across the board. The art of developing integrated operations with logistics of procuring, maintaining and transporting resources includes material, human resource power and other facilities. Successful organizations such as Wal-Mart, DHL, Tesco, and Emirates etc have achieved the height of efficiency in operations by employing various strategies, tools and techniques of logistic management in the overall operations management (Gourdin, 2001).
OBJECTIVES OF LOGISTICS MANAGEMENT
With every day need of increasing efficiency in business operations every function has developed into more detailed components. However, all the integrated details are aimed and directed to small set of objectives being the core of the domain. In accordance with mentioned theme the entire logistics management has been designed around the following core themes and theories (Brewer, Button, & Hensher, 2001):
- Forecasting and Planning
- Cost management
- Quality maintenance
Achievement of these four factors is the litmus test of the successful logistics management activities around the entire business operations. Forecasting and planning includes designing the entire mechanism by planner at each point of activity in business. Combination of simple to complex and sophisticated network of real-time systems are designed and planned to integrate greater coordination; hence, achieving the requirement of each unit of business activity (Bowersox, Closs, & Stank, 1999).
Forecasting for the demand trend of customer and fulfillment of the respective products on-time on shelves are key to success; as explored in a recent survey from RSR (a retail consulting firm) (Sherman, 2012). The similar survey states that retailers that have gained success have invested heavily on achieving accuracy in forecasting as observable from the given below results:
Fulfillment of the needs of business operation such as material, information as well as personnel is the key to ensure smoothness in operations. For instance, "Kanban," (Japanese approach) also referred as JIT (Just In Time) is being employed at various manufacturing as well as retail firms to ensure the timely presence of the resource on manufacturing or assembly lines (in former kind of firms) or on shelves on latter kind of firms to facilitate business operations on time. Increasing profitability margins by serving market at competitive prices is attained by achieving cost management function in every activity of managing logistics. However, despite cost containment being among the core function of logistics management in managing entire supply chain of business with efficiency; it is not inclined to be achieved at quality compromise. Therefore, quality control mechanisms are alongside being set up and hence made the core objective of logistics management (Helms, Ettkin, & Chapman, 2000).
Wal-Mart is the leading retailer of US and it has managed to achieve competitive advantage over competitor by developing strongly coordinated logistics mechanism for its entire operations of business (SCDigest, 2012). Business operations of the Wal-Mart have gained the competitive advantage by facilitating customers with low cost of product, reduced time required for responding to customer and delivering the facilitated product and huge variety of products within each category (Ivey, 2006). Therefore, for achieving mentioned objectives Wal-Mart devised business operations categorization as follow:
(Graen and Shaw, 2002)
Hence, for achieving these functions efficiently while alongside managing business objectives of cost effectiveness are attained by managing the entire logistics with efficiency that does not allow any delays in the processes. For instance, cost is incurred in maintaining inventory levels incurring such cost can hamper achieving Wal-Mart’s business objective of low cost products. Therefore, Wal-Mart has developed coordinated operations with suppliers. Coordination of P&G and Wal-Mart is among the best suited examples in this regards. Wal-Mart and P&G share inventory information with EDI mechanism. EDI enable both companies to share critical information and business documents providing retailer with resources to achieve successfully the changing demand pattern and respective requirement (Graen and Shaw, 2002). Hence, such shared information reduces the stock out chances as well as cost incurred with piled up inventory ensuring the controlled cost operations. Further, constant replenishment of material at frequent intervals also ensure the fresh qualities available to customers. Constant replenishment of products for customers on the basis of whenever they are required was formed the centerpiece of Wal-Mart’s core strategy of providing customer low pricing every day (Gilmore, 2012). Based on the collaboration with suppliers Wal-Mart employed cross docking technique in logistics management of products. Cross docking logistics techniques allows supplies from suppliers’ point of sale to Wal-Mart’s warehouse and then without resting long at Wal-Mart warehouse goods are moved to the points of Wal-Mart houses based on their required already forecasted without any delays. This accuracy in distribution is also supported by Wall Mart’s own fleet of trucks results that replenishes shelves twice a week in contrast to industry average of replenishing shelve once in every two weeks. Further, the logistics of personnel is also facilitated to truck fleet with experienced drivers that have managed to drive 300,000 miles without reporting any road accident as well as no major traffic rules violations (Chandran, 2003). Moreover, the planning is being done with addressing minute details such as empty truck returned to dock to report only on durations that does not have any loadings scheduled (Chandran, 2003). Hence, the logistics in collaborations with suppliers are finely tuned to the need of Wall Mart Centers and so customers. To mention, Wal-Mart logistics have been designed similarly with detailed planning across the board. Further, such collaborative mechanism in Wal-Mart’s logistics allows it to facilitate customers at low cost alongside positive impact on financials and profit ratios (Heying and Sanzero, 2009).
Successful logistic management require coordination not only between various points of activity across the business but at the same time full fledge benefit can only be gained from consistency in the management across various levels of business. Further, going to top all these have to align to the mission of business while translated as visible activities at bottom level of efficiency in customer facilitations (Ketchen & Hult, 2007).
Logistics management at strategic level requires optimization of business network at strategic level such as decision related to the number, size and location of the distribution centers, warehousing as well as point of sales. Further, at same level logistics planning pertaining to the make or buy decision from wide variety of possible options and suppliers. It also includes decisions related to adding product to the offering that blends will in overall product portfolio in network design. Comprehensive and sophistic information technologies are integrated to add concreteness of the overall design (Cooper, Lambert, & Pagh, 1997).
Upon the successful strategic logistics plan, tactical level designs the logistics plan that translates the decision of strategy formulators. Tactical level develop company specific planning pertaining to the contracts with sourcing options and makes decision related to the location, scheduling, routing and delivery frequencies etc. Hence, at tactical level the entire logistics plan is detailed incorporating science of tools and techniques such as RFID, EDI and other linking mechanism etc (Bhattacharya, Chu, & Mullen, 2007).
Finally the operational level conducts the implementation of planned tool and techniques such as coordinating with supplier and developing daily report for productions or distribution etc. Operational level also develops reports related to alignment of actual operation in relevance to plan developed for the respective activity (Bowersox, Closs, & Cooper, 2002).
Continuity and alignment of logistics across board both vertically as well as horizontally is critical for the success organizational operations. Reflection of logistics planning conducted at Wal-Mart across level of business that brings business competitive advantage over competitor is developed as follows:
(Adapted from: Chandran, 2003)
Hence research based logistics plan with support from technological tools has assured Wal-Mart to gain competitive advantage over competitors thereby facilitating customers with lower price every day.
LOGISTICS MANAGEMENT AND RECENT CHALLENGES
In addition to constantly driving efficiency in logistics management businesses are facing growing challenges to be met. Among the recent challenges mainly posed to the operations of business is the need of adaptability with sustainability.
Sustainability and responsibility in logistics management require businesses to reduce their carbon emission, reduced landfills, utilization of renewable energy etc. Logistics of the firm, for instance, require develop mechanism that ensures reduced wastes, transporting products especially perishable products to point of sales at lowest possible time to retain their freshness etc. Businesses at the same time require managing optimal mechanism for renewable energy consumption in frequent transportation of goods from one activity point to another, hence, striking the green balance that benefits all society, community, customers and firm itself and all stake holders; directly indirectly (Christopher, 2005).
Worldwide businesses are now striving to add value to their offerings based on the sustainable business operation. Referring back to the performance of international retailer Wal-Mart, the Global Responsibility Report (GRR) 2012 of Wal-Mart provided 10 achievements that firm made in developing sustainable, green and responsible business operations. Achievements directly related to logistics management of Wal-Mart is its efforts to move to zero waste to landfill in 2011 saved 11.8 million metric tons of CO2 emissions. Further, China and Brazil also diverted 52% of waste from landfills reducing carbon emission. Wal-Mart is also pursuing goal of locally produce and sell to reduce spread of logistics operations expansion need essentially costing energy resources. GRR 2012 reports increase of locally produce and sold product by 97% within single recent year and noted 10% of its contribution in all the products sold outside US. In addition to this, 1.1 billion kWh of renewable energy ranked Wal-Mart on second position among onsite green power generator in US by EPA Green Power Partnership program of US (Wal-Mart, n.d).
Operation management has taken expanded importance since competitiveness in business operations has taken lead. Logistics management across the business operations from procurement to point of sale and consumption has forced strongly coordinated mechanism both vertically as well as horizontally. The report emphasizing the core of logistics management has also discussed operations of Wal-Mart in similar respect that enabled firm to achieve competitive advantage. Further, the report has asserted the growing challenges of sustainability in understudy respect.
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