CHAPTER 15

Organizing for
Effective Logistics
 15-2 a
Traditional Logistics Management
C E O

V P M a r k e t in g V P P r o d u c t io n V P F in a n c ia l

•Sales service •Manufacturing •Information systems

Responsibilities •Channels of •Purchasing/ •Budgeting
distribution procurement
•Product returns •Inventory
and warranties •Traffic
•Data processing
•Warehousing

Objectives
Large inventories Low inventories
Small and frequent Larger and infrequent
production runs production runs
Decentralized Centralized
Plant warehousing
warehousing warehousing
Large product Fewer products
assortment
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 15-3
15-2bb
Traditional Logistics Management cont.
C E O

V P M a r k e t in g V P P r o d u c t io n V P F in a n c ia l

•Sales service •Manufacturing •Information systems

Responsibilities •Channels of •Purchasing/ •Budgeting
distribution procurement
•Inventory
•Product returns •Traffic
and warranties •Data processing
•Warehousing
Rapid order Inexpensive order
Objectives processing processing
Generous returned More rigid returned
goods policies goods policies
Fast transportation Low cost transportation

Expedited shipments
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 15-4
Control Exercised By Logistics 15-3

Executives Over Selected Logistics

Functions
Percent of Reporting Companies
Activities 1966 1976 1985 1990 1999

Transportation 89% 94% 97% 98% 90%

Warehousing 70 93 95 97 88
Inventory control 55 83 81 79 74
Order processing 43 76 67 61 55
Packaging 8 70 37 48 39
Purchasing and procurement 15 58 44 51 41

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 15-5
15-4
Optimal Organizational Forms

• Hollow corporation
– A small organization of managers and “idea
people” who hire external companies to perform
various types of activities, including
manufacturing, logistics, distribution, billing,
sales, and marketing.
• Virtual corporation
– A number of companies come together to
develop, produce, sell, and distribute a product or
a service of limited scope.

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 Organizational Strategies used by 15-6
15-5

Manufacturers

• Process-based
• Market-based
• Channel-based

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 15-7
15-6
Organization Design for Logistics
as a Function
P re s id e n t

E n g in e e rin g M a n u fa c tu rin g M a rk e tin g /S a le s F in a n c e /A c c o u n tin g

Human Resources Logistics

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 15-8
Organization Design for Logistics 15-7

as a Program

President

Logistics

Human Marketing/ Finance/

Engineering Manufacturing
Resources Sales Accounting

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 15-9
Components of Corporate and 15-8 a

Logistics Mission Statements

• Targeted customers and markets

• Principal products/services
• Geographic domain
• Core technologies

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 15-10
Components of Corporate and 15-8 bb

Logistics Mission Statements (cont.)

• Survival, growth, and profitability

• Company philosophy
• Company self-concept
• Firm’s desired public image

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 15-11
Components of an Optimal 15-9

Logistics Organization

• Organizational • Employee
– Structure – Organizational
– Technology attachment
– Job performance
• Environmental
– Internal • Managerial
– External – Macro
– Micro

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 15-12
Ways of Improving Logistics 15-10

Organizational Effectiveness
• Strategic goal setting
• Resource acquisition and utilization
• Performance environment
• Communication process
• Leadership and decision making
• Organizational adaptation and
innovation

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 15-13
15-11
Logistics Management
Evaluation Measures

• Logistics cost as a percent of sales

• Cost of specific logistics functions
(as a percent of sales or of logistics cost)
• Performance

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