1. Organizing for Logistics Effectiveness
Chapter #15
Organizing for Logistics Effectiveness

2. The Logistics System
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3. Overview
We will do an overview of logistics organizational structures/solutions
We will briefly discuss the issue of building an effective logistics organization
We will discuss some of the variables affecting the logistics organization's structure
We will examine the reconciliation of intra- and inter-organizational issues
We will talk about how to achieve the best organizational structure
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4. Overview of Organizations
Three basic choices
Non-integrated, essentially the historical model of logistics in an organization
Each logistics manager, order entry, inventory, etc. in a different department reporting to a different manager
Characterized by little management focus on logistics as a system
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5. Overview of Organizations
Functionally integrated results in close coordination within a operating functions, e.g. a single production facility
All functions under a single manager, but lack of coordination across divisions, product lines, markets, etc.
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6. Overview of Organizations
Divisional Integration implies coordination across divisions/markets
Still no integration with other corporate functions
Competes for resources
Fully integrated organizations have logistics as a primary corporate focus
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7. Overview of Organizations
Different structures for different firms/needs
Depends on
Leadership
Product/services mix with respect to customization & homogeneity
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8. Overview of Organizations
Four basic organizational properties to consider
Centralization/decentralization
Span of control/scope of responsibility
Formalization
Integration
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9. Overview of Organizations
Centralization/decentralization
Two primary issues
Extent to which power is concentrated in the organization
Hierarchical distance between logistics decision makers and strategic decision makers
Customer service issues were discussed earlier
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10. Overview of Organizations
Scope of responsibility/span of control
What activities will be included
How many direct reports
Formalization refers to the degree to which goals, rules, policies, and procedures for logistics activities will be delineated
Greater logistics focus implies more formalization
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11. Overview of Organizations
Integration is a central concept of logistics
Several levels of integration within logistics activities, with other functional areas of the firm itself and/or across the distribution channel
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12. Role of Logistics in the Firm
With respect to Logistics, organizations go through four different stages.
Logistics as an area of cost minimization
Logistics as a profit center
Logistics as a profit center and market segmentation vehicle
Logistics as a central strategic activity of the firm
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13. Role of Logistics in the Firm
Developing a logistics organization requires that we meet the needs of the firm today while maintaining the flexibility to assume a more strategic role in the future
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14. Role of Logistics in the Firm
Recent studies indicate that the logistically excellent firms
Organize with a centralized HQ group…to be near the strategic decision makers
Integrated within the firm
Are beginning to integrate across the distribution channel
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15. Role of Logistics in the Firm
Recent studies indicate that the logistically excellent firms
Are run as profit centers, billing functional areas for services provided
Are integrated into the business units mission statements and goals…and often rewards
Are increasingly outsourcing parts of the logistics function
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16. Role of Logistics in the Firm
While addressing the role of logistics within the firm, management must consider a number of issues regarding relationships with channel members
Formalization, the degree to which explicit SLA agreements are made
Intensity, level of organizational resources invested in the relationship
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17. Role of Logistics in the Firm
While addressing the role of logistics within the firm, management must consider a number of issues regarding relationships with channel members (continued)
Frequency, the amount of contact/interaction
Standardization, the degree to which agreement is made to use “standard” systems, e.g. EDI
Reciprocity, the degree of symmetry with respect to contribution and reward
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18. Variables Influencing Structure
A number of variables can have an impact on the firm’s logistics organization’s effectiveness
Organization size
Corporate structures
Corporate strategy
Corporate emphasis on logistics
Corporate information technology
Environmental uncertainty
Environment heterogeneity
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19. Towards the “Best” Structure
Several overriding and guiding issues
Corporate objectives and strategies
Corporate size and structure
Functional responsibilities
Flexibility
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20. Towards the “Best” Structure
Remember, there is no single structure that is best
Similar companies may require different structures because of management or workforce issues
Any structure will work if the stakeholders want it to work
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