Effective Logistics and Operations Performance - Essay Example

?The Impact of Non-Production Departments on Effective Logistics and Operations Performance Effective Logistics: Introduction This study aims at discussing the effect of the non-production departments on effective logistics and operational management performance in the organizations. In order to conduct a comprehensive analysis of the impact and identify solutions for the same, the concept of effective logistics would have to be understood first. Perception of operation management performance would be studied with respect to effective logistics. The non-production departments would be identified and their impact on effective logistics would be discussed; that would assist in not only identifying the problem, but also finding a solution for it. The process by which acquisition movements and other functions such as storage of parts, materials, and finished inventory are strategically managed through the utilization of proper marketing channel, which is the future objective of generating revenue and profit, is called effective logistics (Blecken 134-137). It also includes the objective of effectively fulfilling the orders by minimizing the cost. In case of effective logistics, the focus is on efficient system and attention is paid towards movement, which is the backbone of the system. Instead of distribution, finance, production, and purchase, logistics deals with a flow of information and materials. According to the concept of logistics, every segment in an organization should work together, and the marketing manager should be prepared to consider lower performance or lower level of service while preparing activity framework, so that the lag times are also considered. This would give the project manager a proper estimate of time, which is most important in logistics (Burg “5 Logistics and Shipping Mistakes Small Businesses Make"). Operations Management Performance and Effective Logistics Effective logistics is a part of operations management and the performance of the enterprise depends on logistics and other aspects of operations management. Operations management involves management of design and productive systems, along with control, and planning of daily operations within the transcorporate networks and company. Supply chain network is an integral part of operations management. In small enterprises, the operational management, such as daily productions, etc is usually handled by the human beings. Operations management and logistics are considered an area of concern by the stakeholders of the company. In order to measure the performance of operational management process and logistics system, appropriate performance indicators should be selected in such a way that it stands in line with the objectives of the business. The performance measures would assist in evaluating the objectives and degree to which those are attained (Charantimath 440-443). The operational management performance of the company can be accessed by examining certain areas such as cost, flexibility of process, delivery, and quality of products. Logistics system of any organization influences the objectives of the company through the above mentioned areas. This also indicates that logistics affect the performance of any organization significantly. Considering the four areas of logistics which are considered in operations management, the quality of process, and product should meet the high demand standards. The cost of the inventory and the work process should be lower. The objective would be to have high capacity, and low cost of administration. Delivery rate should be high and accurate, and lead time has to be short. Finally flexibility in terms of achievement of customer benefit, maintenance of relationship with partners should be of high degree (Deepen 14-16). Non-Production Departments In order to identify the impact of non-production department on logistics and operations management performance of organizations, first the non-production overheads have to be identified, and discussed why they are considered such. The non-production overheads are basically those departments which do not directly contribute to the production of goods. These are the administration, human resources or finance department. Non-production cost also includes the employee cost of the company. These are costs that are incurred by the company for functions other than production, such as for the smooth flow of operational functions. The cost of moving the materials, such as transferring raw materials from the warehouse to the production department, payment of office rent for the purpose of organisational activities, etc are a few examples of non-production cost. The impact of such non-production department cost on effective logistics and operations management performance of organisation has been discussed below (Frazzon 55-57). Impact of Non-Production Department on Effective Logistics As can be understood from the previous section, non-production costs are those which are incurred for the non-production departments, or departments which directly do not contribute in production process. This signifies that non-production cost can be also called indirect cost. In logistics and operation management, non-production departments have a significant role to play, and the cost incurred for such department is significant. For example, office rent paid for organizational activities, cost for material movement, transfer of raw materials, administration costs, interest that is paid for raising funds for production activities are the non-production expenses. However these expenses are closely related to logistics and operational functions of the organization. Although it is the choice of the management to decide whether they want to consider these non-production cost in calculating the product cost or not, they might include it for full recovery cost through the product price. The impact of these non-production departments can be better explained by discussing the elements of non-production costs and departments (Parashkevova 29-38). The administration department, sales and distribution, financial department are those which affect the operational functions. Administration department is where the paperwork for transportation, storage, and distribution are done, and without them the logistics functions cannot move forward. Similarly distribution of finished goods is another function for sales of goods. Similarly the finance department does not contribute to the production process, but it is the department, through which the business gets its life blood that is capital daily funds for production, and operations. The operational managers monitor their areas of responsibility for performance assessment and measurement in sales, finance, and administration departments. The human resource department directly impacts the logistics functions because human resources are drivers of every resource (Ross 40-42). In operations management and logistics there are several functions that need to be done such as order management, management of service and freight cost, procurement and production, scheduling, transportation, warehouse management, etc. All these functions require combined assistance of paperwork, smooth flow of funds, proper distribution plan and a correct supply chain structure. Effective logistics not only means transportation of material, but something more than that. Logistics is distribution, procurement, transportation, and supply. It is defined by a chain of various processes which is done by these non-production departments. Companies like DHL, UPS would not have been major players in the logistics industry if they did not maintain a regulated framework for non-production department. They do not produce any product but have an effective transportation and distribution system in place. This is possible because the non-production departments in these companies are effective enough to handle and control every function. In manufacturing companies such as P&G, Nestle etc distribution and supply of goods in warehouses and inventory management functions are skilfully administered by supply chain, only with the help of their administration, sales and finance departments (Schonsleben 3-5). Steps to Improve Performance Effective logistics operations play a vital role for organisations and in order to stay ahead of the competitors, companies must ensure that logistics and operational functions are planned and developed. Just having a good logistics framework is not enough, but organisation must have logistic framework which is cost-effective and runs smoothly. In the previous section, the discussion was on the impact of non-production departments and cost on the effective logistics. However, this section will assist in understanding how performance of operational functions and logistics can be improved and drive the company to growth. Ways by which companies can enhance their performance in context of logistics and operations have been discussed below. Companies generally consider logistics to be a cost, but by considering it as a customer service activity companies can achieve competitive advantage. Logistics in a manufacturing company should be taken seriously and supply chain should be designed in such a way that efficiency and cost effectiveness is achieved at the same time. Logistics is not just transportation of goods, and this should be kept in mind. It is a means to serve customers better and increase revenue. For example, cost minimisation procedure can be applied with every delivery (Vallespir and Thecle 195-197). Stock in pipeline has to be reduced and inventory needs to be decreased. Rising stock level indicates increased cost and time of delivery. Instead of filling orders the company would see a surplus of unwanted products. Having too much stock can be even worse than having little stock. Performance can be only ascertained if it is measured effectively, and this is possible by monitoring the performance metrics regularly. Nowadays companies install IT integrated logistics and operations management system for real time performance monitoring, which ensures effective transportation, inventory management, controls delivery time, measures lag time, and ascertains the efficiency of the human resources involved in this function, as well as the mode of transportation. The above mentioned ways are a few examples of how companies can move from logistics to effective logistics. However, for improvement a basic framework has to be developed. The operations management framework should be built on strategies, logistics plans and metrics hierarchy. A multi-dimensional analysis needs to be done and alerts, status and performance improvements have to be assessed. The non-production department have an immense contribution in improvement and enhancement of logistics performance. Tools such as data warehousing, spreadsheets, documents, ERP, SCM etc assist obstacle-free transportation and procurement activity (Ross 40-42). Conclusion This study was based on the theme of effective logistics in organisations and operations management. The aim of this study was to discuss and evaluate the impact of the non-production departments in the operational functions, and logistics functions. It has been indentified that logistics is not only transporting materials, but there are various other functions within the domain of logistics and non-production departments such as administration, finance, sales and marketing, distribution, etc that have an effective role to play in assisting the logistics and supply chain department to reduce cost, eliminate lag-time, and increase competence. The non-production departments are those that do not directly contribute to production, so it depends on the manufacturers whether they wish to consider these costs while pricing their products or not. However, as far as logistics in companies are concerned, without proper IT tools, paperwork, financial plan, sales and distribution plan, logistics would be a burden for the company. Work Cited Blecken, Alexander. Humanitarian logistics: Modelling supply chain processes of humanitarian organisations. Berlin: Haupt Verlag AG, 2010. Print. Burg, Natalie. “5 Logistics and Shipping Mistakes Small Businesses Make." Forbes. Forbes.com LLC. 12 Oct 2012. Web. 28 May 2013. Charantimath, Poorinma M. Total quality management. 2nd ed. Noida: Pearson Education India, 2011. Print. Deepen, Jan M. Logistics outsourcing relationships [electronic resource]: measurements, antecedents, and effects of logistics outsourcing performance. Berlin: Springer, 2007. Print. Frazzon, Enzo Morosini. Sustainability and effectiveness in global logistics systems. Berlin: GITO mbH Verlag, 2009. Print. Parashkevova, Loretta. “Logistics Outsourcing – A Means of Assuring the Competitive Advantage for an Organization.” Adyba / Management 2.15 (2007): 29-38. Web. 28 May 2013. Ross, David F. Distribution: Planning and control: Managing in the era of supply chain management. 2nd ed. Berlin: Springer, 2004. Print. Schonsleben, Paul. Integral logistics management: Operations and supply chain management in comprehensive value-added networks. 3rd ed. Florida: CRC Press, 2010. Print. Vallespir, Bruno, and Thecle Alix. Advances in production management systems: New challenges, new approaches. Berlin: Springer, 2010. Print. Read More