The Structure of the E-Consignment System from the Standpoint of the Process Logistics Strategy - Essay Example

Introduction For the last forty year a great number of studies on the of logistics effectivesness has been performed and a variety of research tools has been introduced into general use. Such an intensity of the reseach activity can be easily explained by the fact that well-tuned and efficient logistics system creates the competitive advantage for the company. An organisation wishing to implement integrated business logistics management, faces many great challenges, but can potentially reap considerable benefits. A well-designed and integrated business logistics management strategy ought to result in a sustainable competitive advantage. (Integrated logistics and supply chain management, 2004.) Stank, Keller, and Closs (2001) state that logistics performance is conceptualized as the ability of the firm to deliver specified value levels in a timely manner and to do so consistently. This results in cost effective yet unique and customer-valued product/service offerings that competitors cannot effectively match. The approaches to the optimization of the logistics system differ. Bowersox et al. (1989) examined the concept of logistics strategy in their evaluation of leading edge firms. The three types of logistics strategy included process, market, and channel. The distinction between the strategies is the context of the logistics effort. Process logistics strategy deals internally within a single organization, requiring logistics managers to work closely with other functional areas within a single firm to ensure logistics efficiencies are achieved. Market strategy calls for logistics managers to consider other business units and their logistics activities to make decisions that benefit the entire corporation and present a more unified "face" to the customer. Channel strategy expands the logistics managers scope and entails coordination with other supply chain members. (Rodrigues A et al. 2004) In this report I will analyze the structure of the e-consignment system from the standpoint of the process logistics strategy. Body. Patrick Tasmania system structure and processes analysis In order to analyze advantages and shortcomings of the existing Patrick Tasmania e-consignment system we need to identify the processes and model the structure of the system, considering interdependence, interaction and integration of its elements. For the simplicity of presentation and understanding of the system’s functioning, the use of diagrams for process and system modeling is essential. Modeling techniques are extremely useful in tackling the complexity, which is found when attempting to analyze and understand a system. Models are also extremely useful communication tools; i.e.: complex ideas and concepts can be captured on paper and can be shown to users and clients for clarification and feedback; or for distribution to other professionals, team members, contractors etc. (Drewry, T, 2001) In this case the system description and recommendation should be presented to the senior management. For the purpose of analysis I will use in this report two types of diagrams: the Data Flow Diagrams and the Use Case Diagrams. Data Flow Diagrams, as the name suggests, illustrates the flow of information in a system. They demonstrate the information and how it flows between specific processes in a system. The Data Flow Diagram modeling is a top-down decomposition technique, which results in process descriptions. To create the Data Flow Diagram we will undertake the following steps: define the target system, identify the main processes and activities (sub-systems) within the system, decompose each of the subsystems into constituent sub-systems or processes until the set of diagrams for the system which cannot be decomposed further is obtained. This set of non-decomposable diagrams will be the ultimate model of the system. Our target system is Patrick Tasmania e-consignment system. The most aggregate level of the Data Flow Diagram, the Context Diagram appears as shown in Figure 1: Figure 1. Patrick Tasmania e-consignment system context diagram The same diagram can be presented in different way, concentrating attention at the input and output properties and, therefore, including duplicated objects, as shown in Figure 2: Booking Figure 2. Patrick Tasmania e-consignment system context diagram, variant 2 The customer is an external entity in consideration to the system analyzed. The major data stores are the VLO system, providing interface to the customers and the Road Runner System. They both store computerized data, so I will mark them as D-type. The major processes are: internal transmission of the data to the Road Runner System, development of the route and identifying the legs, providing the information to the customer and invoicing of the consignment. The Level 0 diagram appears as follows: Booking Figure 3. Patrick Tasmania e-consignment system Level 0 Data Flow diagram However, each of the major processes performed in the system framework and identified at the Level 0 diagram are the subsystems in themselves and include a row of lower level processes. To understand how the system functions in more detailed way, it is necessary to construct the diagrams addressing the particular stage. For example, Level 1 diagram, that corresponds to the process, numbered 1 at the Level 0 diagram, namely “transmit the data” will include the following separate actions (the way processes can be referred to): checking the consumer profile for special requirements; indicating changes, if necessary; inputting the data into Road Runner System, generating e-consignment reference number and providing the customer with it. This way we will get the diagrams that show a group of related sets. While Context Diagram is the highest level and represents the overall system and its interaction with its environment, all the rest are numerated: Level 0 Diagram: This shows the major subsystems and their interactions Level x Diagram: Shows the processes that make up each of the major subsystems Level x.y Diagram: Shows detail of the above diagrams Saufer, V (2005) describes it as follows: “Each bubble on one level gets "exploded" to show the detail at another level. These pairs are referred to as parent-child pairs. It is important to keep balance between the individual parents and their children. Numbering: Each process in Level 0 gets a number. Each child inherits the number. Bubbles on the child maintain that number, and begin their numbering as a number after the decimal point. These are unique numbers”. The diagram is demonstrated in Figure 4. Accordingly, other processes can be separated into stages. Process “Develop route and legs” includes identification of the pick-up point, leg or legs, and delivery point; input into another data store – electronic fleet controller’s diary; registering the order in the Road Runner System for the purpose of the possible lost revenue check through the creation of monthly exception report with indicated unbilled consignments; making the data available to the customer through the web-interface. Figure 4. Patrick Tasmania e-consignment system Level 1 Data Flow diagram The level 2 Data Flow diagram can be constructed based on the identified processes: Figure 4. Patrick Tasmania e-consignment system Level 1 Data Flow diagram Another process “Provide access to the customer” includes identifying customer’s reference number, providing login and password for the web-interface access, inputting the pick-up, legs and delivery point information, as well as the data about the consignment included in the internal data stores; proof of delivery creation, etc. For the purpose of better understanding of the way the given system functions, I will consider studying it from another standpoint and will use The Use Case diagram. A use case diagram captures the functional aspects of a system. More specifically, it captures the business processes carried out in the system and demonstrates clearly significant characteristics of the system modelled. To create a Use Case diagram it is necessary to identify the primary elements and processes that form the system. For the Patrick Tasmania e-consignment system the primary element, referred to as “actor” is the customer. The cases will include pick-up point, delivery point, reference number (generated by the system for trace ability), customer reference, number the time and date of new booking, the dates of the legs of the journey, status history of the consignment, etc. The processes in which the customer is involved is booking, accessing the delivery and legs points, getting the delivery proof report, accessing the information from the status consignment history etc. The Use Case diagram is shown in the Figure 5. Figure 5. The Use Case diagram Shortcomings identification and recommendations While the operating Patrick Tasmania e-consignment system in its actual condition has a number of advantages, including electronic trace ability, which is valuable for both the customer and the company itself, accountability, assuring no lost profit for the company, and significant reduction of the paperwork, it has also areas, where improvements can be made. The case text states that “the cost to Patrick of picking up a pallet is similar to that of picking up a carton and smaller packages may be more economically transported by overnight freight organizations such as Australia Post “. Adressing the issues of costs, economy of scale and customers satisfaction, the simple revision of the charge rates is not a solution. Especially, taking into account the fact that the charge rate are at low level. The accumulation of small orders to one destination point, and therefore increasing the size of shipment and reducing marginal costs can be worth consideration. Bowersox, Closs, and Stank (1999) noted, that a good way of increasing efficiency of a logistics system is to create value by synchronizing logistical activities among participants to reduce costs associated with duplication of effort. So, I will define the first area of possible improvement the absence of effective order combining mechanism. Second, the current structure of the e-consignment system provides existence of two separate data storage systems – the Road Runner System and the VLO interface (off-line and on-line). The integration of the two systems will create another structure of business processes and simplify the internal flow of information. This concept has been reflected in the contemporary research works. For example, Spencer,D (2004) states that order management accuracy and profitability can be maximized by integrating systems in the order fulfillment process. The creation of the intergrated universal system is another area to be considered. The third shortcoming that could be identified is the absence of the beforehand order placement service. The special feature developed may not only create a competitive advantage for the company while giving an opportunity of better customer service, but also to help effectively plan, analyze and alocate resources. It should be noted that world-class firms expand the integrative concept by placing significant emphasis on collaborative planning and operations with selected customers and suppliers to extend the effective control of the enterprise (Stank, Keller, and Daugherty 2001). The forth area to be discussed and explored for the improvement possibilities is the factor of the personal contact. While automatization and computerization make the information flow faster and easier, people at the same time enjoy working and communicating with people, not electronic equipment all the time. The notion of good customer service includes posibility of the interaction and feedback. Hence, while access to consignment data through the web is an excellent and quick way of obtaining the information, creating the opportunity of interconnection of the fleet manager with the customer will enhance the quality of service offered. To address the issue of effective order combining mechanism and explore the possibility of reducing the costs in combination with providing quality service to a larger number of customers, the manager would have to analyze the number, size and weight of the consignments maid per period from and to a certain destination point. Also necessary to consider the number of orders not placed because of small shipment size and correspondingly high costs and the turnover of the carriers offering the lower rates for small cargos. For ultimate creation of the integrated system for both internal and external data transmission the characteristics of both systems should be explored and the opportunity of alteration of the business process itself taken into consideration. To provide customers with convenient option of before-hand booking, the management team should investigate the possibilities of the system, the demand level for such type of service and planning opportunities. And to make a good supplier-customer relations the possibility of personalization of the communication process should be created. Conclusion In the contemporary very fast changing business world the flexibility and readiness for change of the company is of great importance. As the logistics deals with the inflow and outflow of goods, services and information, it is the first “fort” of the organization that comes in touch with the changing environment. Therefore, the value of effectively structured, customer and market-suited with the potential for growth logistics chain can hardly be underestimated. Under the modern market conditions not only do the customer preferences and desires change, causing the inevitable change in the goods developes and service providers, but the demand and supply level becomes more dynamic. Boerema, R (2003) argues that logistics chains transform into a supply network as more suppliers and clients can plug into networks. The product flows in these networks become more dynamic. New distribution channels (e-commerce) result in increased fluctuations between actual and forecastdemand patterns. The logistics network should also be able to accommodate these more dynamic and difficult to forecast product flows. For the Patrick Tasmania company the importance of logistics system optimization is even higher due to the fact, that it is not one of the departments in the company. The logistics creates a core business for the company and advantages and disadvantages of the system in use influence its competitiveness and market position. In this report I analyzed the structure of the system currently in use and the processes being carried on in the course of its functioning. Besides the characteristics and advantages of the e-consignment system a few areas of improvement were defined. The recommendation include considering the possibility of separate internal and external systems integration, enhancing planning and customers grouping while reducing associated costs and paying close attention to the personal factor in the company-consumer relations. Bibliography: Rodrigues, A, Stank, T & Lynch, D 2004, ‘Linking strategy, structure, process, and performance in integrated logistics’, Journal of Business Logistics, viewed 15 May, 2005 Bowersox, D, Daugherty P, Droge C, Rogers D & Wardlow D,1989, Leading Edge Logistics: Competitive Positioning for the 1990s, Council of Logistics Management, Oak Brook, IL. Stank, T, Keller S & Daugherty P, 2001, ‘Supply Chain Collaboration and Logistical Service Performance,’ Journal of Business Logistics, Vol. 22, No. 1, pp. 29-48. Stank, T, Keller S, & Closs D, 2001, ‘Performance Benefits of Supply Chain Logistical Integration,’ Transportation Journal, Vol. 41, No. 2/3, pp. 32-46. Boerema R, 2003, Successful European Logistics Concepts in Information-driven Supply Networks, viewed 15 May, 2005 Integrated logistics and supply chain management, 2004, University of South Africa, viewed 15 May, 2004, Spencer D, 2004, ‘Order Management: SRM and CRM Unleashed’, viewed 15 May, 2005 Drewry, T, 2001, ‘System development, methodologies an modeling’, viewed 15 May, 2005, < http://www.cems.uwe.ac.uk/~tdrewry/modeling.htm> Saufer, V, 2005,’Data Flow Diagrams’, University of Missouri – St. Louis, viewed 15 May, 2005, < http://www.umsl.edu/~sauter/analysis/dfd/dfd.htm> Read More