The Impact of Logistical Performance on Organization Performance - Research Proposal Example

THE IMPACT OF LOGISTICAL PERFORMANCE ON ORGANIZATION PERFORMANCE TABLE OF CONTENTS Introduction……………………………………………………………4 2. Problem Definition…………………………………………………...4 3. Literature Review……………………………………………………..4 4. Processes Involved In Logistics…………………………………..5 5. Role Of Logistics In An Organization……………………………..6 6. Measuring Logistics and Performance Based Logistics………7 6.1 Internal Performance………………………………………..8 6.2 Competitive Performance…………………………………..8 6.3 Role of Logistics In Reducing Costs……………………..8 7. Logistics in Military……………………………………………………9 7.1 Military Logistical Performance……………………………9 7.2 Problems Created By Lack of Logistics Planning………11 8. Advantages of Automated Logistics Maintenance……………….11 8.1 Use of Barcodes and RFIDs…………………………………11 8.2 Improved Decision Making………………………………….12 8.3 Improved Capabilities of Military Organization………….12 8.4 Improved Transparency……………………………………..12 8.5 Accurate Forecasting………………………………………...13 8.6 Role of eCommerce…………………………………………..13 9. Conclusion……………………………………………………………….13 8. References……………………………………………………………….15 Abstract The main aim of the proposal is to analyze the significance of logistics in an organization, specifically the military, and establish a link between logistical performance and the performance of an organization. The paper will also attempt to find how lack of logistical planning creates negative impact on the immediate availability of on-hand supply and find out the advantages of using technologically advanced methodologies for logistic planning. 1. Introduction Management of supply chain requires a completely new focus and new methodologies (Lambert et al., 1998) and a unionist perspective exists between supply chain management and logistics (Larson and Halldorsson, 2004). The term logistics was first developed during the 18th and 19th century, which mainly referred to the military logistics. Both internal and external business activities can be integrated throughout supply chain which helps to enhance customer satisfaction and performance of individual supply chain members (Cophen and Roussel, 2005). 2. Problem Definition Logistics is defined as the part of supply chain process which plans, controls and implements the forwards flow, the reverse flow, and storage of goods, services and information from the point of origin and point of consumption to meet the requirements of the organization (Council of Logistics Management, 1991). Logistics gets the input from suppliers and subsequently the movement of material takes place for various operations in the organization. In an organization, a single product goes through a series of processes and logistics is based on time relational positioning, while supply chain is the sequence of events which are performed to satisfy the customer. The logistics performance of an organization reflects its abilities to deliver services and goods on time, and in precise quantities. 3. Literature Review The ultimate goal of an organization is to get long term sustainable superior performance (Kluyver and Pearce, 2006, p.4) and this type of superior performance can be attained by a manufacturing organization by becoming a fully integrated partner of the supply chain (Cooper et al., 1997). Wisner (2003) found a positive link between logistics strategy and organization performance but he did not get any data collection related to logistics strategy measurement. Schramm-Klein and Morschett (2006) tried to establish relationship between logistics quality and performance of the organization in the retail sector. Logistics is an important component of supply chain management (Stank et al., 2005) and Stank et al. (2002) and Lin (2006) explained about the importance of integration of logistics related activities and other supply chain partners to serve better and to meet the needs of customers. Logistics is an important function of any organization and Christopher (1986) supports the claims that logistics is the central feature of all the economic activities, while, Shapiro and Heskett (1985) found there are only a few human activities which are not dependent on flow of goods from the point of origin to the point of consumption. Shao and Ji (2006, p.64) found logistics to be the key for getting and maintaining customers, and Schramm-Klein and Morschett (2006) found logistic performance was very important for marketing performance as it created place, time, space value and quantity which is needed for customer satisfaction (Novack et al., 1992; Sheen and Tai, 2006). Bowesox et al. (2000) incorporated performance metrics which involved the delivery speed, customer satisfaction, delivery dependability and flexibility. Rabinovich and Knemeyer (2006) studied the new breed of logistics which provides service through internet based supply chains. Logistics service providers establish relationship with the third-party logistics, the internet sellers, the selling processes and the flow processes throughout the supply chain. 4. Processes Involved In Logistics Activities in logistics management includes 1. Procurement 2. Inward transport 3. Receiving 4. Warehousing 5. Stock control 6. Material handling 7. Order picking 8. Packaging wraps 9. Outwards transport 10. Physical distribution 11. Recycling 12. Location 13. Communication 5. Role Of Logistics In An Organization The components of logistics are logistics services, information systems and infrastructure systems which are closely linked, and it controls the movement of material and products from the source to costumers, while it is also linked to the waste disposal and reverse flow of materials. Performance depends on the organization systems, processes, capabilities, and it includes logistics, production systems, marketing systems, production capacity, internal communication, organizational performance and attention is paid to customer satisfaction (Tracey, 1998). Logistics performance not only affects the marketing performance, but contributes to the success of an organization and also increases its competitive performance. Every organization moves materials from one place to another or from one department to another, and military organization gets stationary from suppliers, retail shops and wholesalers. An entertainment channel collects material in the forms of news or programs from various regions and it can be thus inferred that logistics is responsible for movement of products and services. The operations in a military organization are manufacturing, transporting, serving, training, selling etc. The functions in the any organization are operations which are required for creating and delivering products, and these operations need many types of inputs which can be converted into output. The input can be raw material components, parts, people, information, equipments, money and other resources. 6. Measuring Logistics and Performance Based Logistics Measuring logistics helps to identify the area where improvement is required in asset management. It can help to attract and retain customers which help to reduce cost and get service improvement, and it can also be used to increase returns on shareholder investment, while the value of a firm also has a positive impact on the performance or firm’s logistics. The performance of an organization is determined by the following: 1. Operational availability - The material should be available on time 2. Operational reliability- The material should be able to meet the mission objectives. In military based organizations, the weapon system should be capable and effective to achieve mission. 3. Cost per unit usage- The operating cost can be divided into various units which give the measurements of weapon systems, which depends on various factors. 4. Logistics footprints and response time- The time for logistic demand signal to satisfaction is the response time and the footprints refer to the measurable elements such as equipments, inventory, personnel, facilities, assets etc. Logistic performance is measured through logistic metrics which can be internal and external. It can be a measure of the performance of logistics function, focusing on time, cost, availability, quality or reliability. It can also be financial or non-financial. Logistics can be measured in terms of critical success factors for various levels of organization. The internal metrics of logistics can be measured in the form of components such as warehouse, transportation equipments, while the external metrics is measured from the external entities such as customers, government, stock markets and the third party agencies. There are two types of metrics - Strategic and Operational. 1. Strategic metrics focuses on the overall system level performance and operational metrics focuses mainly on the unit level or machine level performance. For example-the percentage of full load can be measured for the single machine or for all the machines. 2. Internal functional level logistical metrics is related to the transportation, warehousing, production, maintenance or selection. 3. Customer service includes the quality and time (lead time and cost per unit) 6.1 Internal Performance Irrespective of internal performance, organizations can solve the future and current issues devoid of external collaboration (Lambert et al., 1998; Gimenez and Ventura, 2005). There exists direct and indirect impact on organization’s performance which helps to increase logistics efficiency, competitive and marketing performances (Holmstrom, Smaros, Disney & Towill, 2003). 6.2 Competitive Performance Studies have found that the increase in competitive performance of organizations is due to effective logistic performance. An effective logistics performance improves the reliability of delivery process and accuracy of data (Lages, Lages & Lages, 2005). Hence, the organization having a good competitive performance relies on information exchange through the supply chain, collaboration and joint target development (Cavusgil and Zou, 1994). 6.3 Role of Logistics In Reducing Costs Logistics is important for each organization but its costs is not calculated in the normal accounting conventions as the logistics costs are separately mentioned with the other operating expenses and always there remains a disagreement regarding the logical activities. Every organization focuses on its own buying and selling targets without a trading partnership (Kerdpitak, et al, 2009). However, supply chain management studies have shown that there exist many non-value added activities which existed in the supply chain system which the organization should take care of and resolve. 7. Logistics in Military Before businesses started the development of coordinated supply chain processes, the military was working through coordinated logistics activities and during World War II, the military required the most competitive planned logistic operations. The logistics involved in military is not similar to the areas of customer service requirement but the similarities existed in the experience base of logistics during its developmental years. The military maintains inventories of arms and ammunition, and for many, war logistics support provides the crucial support. Hence, it is evident that good logistics is the main source of competitive advantage in a military organization. 7.1 Military Logistical Performance The logistical performance is the performance of managerial processes, including transportation and storage of raw materials and products for supply. The main goal of logistics performance is profitability, sales growth, cost efficiency, job security, customer satisfaction, products availability, work conditions, job security, on time delivery, keeping promises, less damage, flexibility and fair price (Chow, Heaver, Henrikson, 1994). Organizations must respond to the orders with shortest time delivery and on responsive basis with a low cost (Sheridan, 1993; Moskal, 1995). Tracy, Lim, and Vonderembse (2005) found logistics performance helped in increasing marketing performance which increased the competitive performance and success of the organization. Military logistics is a process involving calculation, constraints and cooperation within the organization which provides services to achieve the goals. Logistics planning in the military involves supplying products and transportation of assets and resources. Moreover, the logistics planning function in the military should be defined to achieve logistics goals such as deploying force elements, sustaining operations (such as fuel, water, food, storage, medical support, arms, ammunitions etc.).The logistics support is achieved by getting in contact with several organizations which may be geographically distributed. It also requires a centralized control of these organizations to operate effectively. 7.2 Problems Created By Lack of Logistics Planning In an Organization Some of the major hindrances caused by faulty logistic planning include the following: 1. Problem of data availability and data redundancy 2. Non- Measurable reporting 3. Inaccurate and inefficient calculations and interpretation of data 4. Poor quality of measure (accuracy, internal comparability and action-ability) 5. Delays in decision making 6. Work disruptions In the current scenario, military organizations encounter a number of problems due to poor planning and management of logistical performance. Some of the issues that military organizations need to cope with include: 1. Lack of visibility between the retail levels and wholesale, which results in retention of redundant inventory. 2. User has to wait for items to be purchased from the manufacturer. 3. Poor communications which causes retention of extra inventory and hence it requires expenses on maintenance and reducing damages. 4. The decision of wholesale and retails are made independently and these are not based on reducing the overall expenses on the army. 5. Credit rates and policies are implemented for various items. 6. Poor flexibility and poor integration of maintenance capabilities raises the overall expenses on logistics. There can be two methods to measure and improve performance of logistics - Manual and Automated 1. In Manual System - The data is recorded in papers. Time measurement is taken for logistics processes and financial document analysis is rendered. 2. In Automated System - Information systems such as DB analysis or ERP takes care of all the logistic functions. The system tracks methods and dedicated software can be used for handling logistics. 8. Advantages of Automated Logistics Maintenance Automated logistics increases productivity, speeds up transactions, enhances data and information exchange, business process reengineering, process automation and brings about positive organization changes. Three revolutionary methods are presently giving competitive advantage to businesses, and the methods are having a substantial impact on the purchasing and supply strategies in the manufacturing sector (Ho, 1997). These are: 1. Globalization of trade 2. The new era of information technology 3. Increasing demand of the consumers and changing consumer preferences 8.1 Use of Barcodes and RFIDs Modern technology has provided techniques for utilizing bar codes, smart cards, laser cards, radio frequency tags and satellite tracking, which can be used to track products and can have real time monitoring of assets and products. The visibility of assets and goods in storage, in transit and during the implementation process, helps to reduce the inventory level, order and shipping times, and it also improves the overall responsiveness to the customers. The best practice in any global organization is provided through an effective information system having real time assets and activity visibility. Moreover, best practices are required for military logistics to get high efficiency and accuracy. The introduction of RFID system helps to sense the amount of goods through the tags automatically and it immediately pushes the trolley through the exit (Carroll, 2004). 8.2 Improved Decision Making Success mainly depends on the way an organization such as the military can adapt to the changing patterns of a battlefield and the military can take advantage of changes and advantages of the information processing systems for fast decision making which is also required in military organizations because forces need to quickly react to certain wartime strikes and the reaction time is reduced by using automated logistics. This helps to improve the process of intelligence which ensures improved management of information in the real time and handling dense waves of data. Hence, the process of data collection, processing and management has been reduced from weeks, days to minutes and the decision makers can make use of the trained information systems to take risky decisions based on accurate information which is provided rapidly and continuously by the automated logistics. 8.3 Improved Capabilities of Military Organization Information and technology development has a profound impact on the capabilities of a military organization. Technology provides the advantages to detect enemy forces, fire with improved effectiveness and use military logistics support with enhanced efficiency. Furthermore, technology provides improved capabilities to penetrate, manipulate or deny the adversary’s battle space awareness which is of utmost importance. 8.4 Improved Transparency The transactions are transparent across the organization and every transaction is visible to the administrator which enhances efficiency. 8.5 Accurate Forecasting The suppliers can control inventory and manage the forecasting through automated systems which helps to improve the inventory rotation. Additionally, suppliers can get most accurate forecasting which improves production scheduling and reduces the overall operational costs. 8.6 Role of eCommerce In Improving Logistical Performance Internet is being widely used for online ordering and purchasing, and electronic catalogs are used for streamlining the order cycle times, reducing administrative costs and for speeding up product delivery to the customer. E-commerce facilitates improved sharing of information within the organization and it facilitated vendor management, paperless contracting, improved workflow management and collaborative forecasting. It provides the capabilities to supply products which reduced cycle time throughout the supply chain. It also provides low cost transportation, storage, easy distribution procurement and re-supplies system which can be delivered through the standard web browsers. Some of ecommerce features which are useful in enhancing logistics performance are: 1. E-commerce helps to expand the market to provide goal benefit as compared to regional benefits. 2. E-Commerce uses electronic techniques instead of paper works to promote industry efficiency and competitiveness. 3. E-commerce reduces the number warehouses and stock costs. 8.7 Enhanced Competitiveness and Better Consumer Response The main role of logistics development is to enhance competitiveness and to promote growth of international goods transportation. There have been changes in the production strategies of international business activities which raises the need for international cooperation. Globalization is raising worldwide competition and adoption of international standards for logistics maintenance is becoming imperative. It results in increasing the consumer’s response in the intense global market and helps to provide better customer service. 9. Conclusion The proposal will attempt to show how organizational performance is linked to logistics performance in an organization. The proposal will also attempt to prove that better logistical performance enhances the supply chain management of an organization, and in turn, they have a positive impact in the marketing as well as the financial performance of an organization. In a military organization, vertical management and improved visibility of inventory will be discussed to demonstrate how they provide improved flexibility and thus help to integrate the maintenance capabilities from the depots to the installation of logistics and reduce the overall expenses on logistic maintenance. The paper will analyze how logistics performance has a positive impact on the supply chain management strategy and how it influences the marketing performance positively which in turn helps in enhancing the financial performance of an organization. Logistics is clearly a function of supply chain management which links the manufacturer to the customers. The paper will detail how a strong relationship between these departments enhances the strength of supply chain function which involves selling, purchasing and logistics. Hence, it will be proved how the efficiency of an organization is indirectly dependent on logistics and how it can have severe impact on the performance. We will also find how the use of technological advancements helps in effectively managing logistics, what’s more, how technological advancements in logistics help to save time and resources. 10. References Bowersox, D.J., Closs, D.J., Stank, T.P. and Keller, S.B. (2000), “How Supply Chain Competency Leads To Business Success”, Supply Chain Management Review, Vol. 4 No. 4,pp. 70-8. Carroll, A. B. (2004). Managing Ethically With Global Stakeholders: A Present and Future Challenge, Academy of Management Executive, 18[2], p. 114-120 Cavusgil, S.T., and Zou, S. (1994). 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