The increased number of senior executives suggests an even greater logistics input into corporate decision making and planning. Kearney in 1983, 1985, and 1987 demonstrated a continuing trend. Procurement is the material flow loop that extends from the point of vendor location to the point of first manufacture or perhaps reprocessing or simply repackaging. Now, some firms regard logistics as a strategic function on a par with other major departments such as production, finance, product development, and marketing. Over 40 percent indicated they used the computer in warehouse selection and customer service. Kearney study found distribution logistics departments transitioned through three stages: Stage One: Management views its mission as controlling finished goods transportation and warehousing.
Thus, structural changes in business organization and a new focus on bringing value to the customer have created a range of adaptive behavior on the part of business firms. In a book on the Gulf War, it is noted on the first page that U. Several forces contributed to this transformation in organization and management. They manage the entire life cycle of a product, which includes how a product is acquired, allocated, and delivered. Data processing caused some breakdown in the traditional departmentalization within firms and paved the way for integrated distribution management, which, of course, cuts across departmental lines just as data do.
There was a fundamental shift away from a day-to-day, transaction-to-transaction relationship to a longer term, contractual relationship. The supply chain concept is related to the cycle-time concept in that the firms that develop a continuous flow inventory system frequently do so with a limited number of primary accounts, often using third-party logistics support agencies. Thus, by the mid-1950s, businesspeople were in a situation where production technology was well advanced and marketing costs were steadily increasing. There were three reasons why the integration process started with finished goods. Evolution of Integrated Logistics Management There are many factors that impact how a firm uses its resources to focus on strategic opportunities in the marketplace. These activities may include production and inventory control, purchasing, traffic, materials handling and receiving. The disadvantage of the physical distribution stage is identical to its primary advantage; it soon became obvious that managing finished goods dealt with only 40% of the total inventory commitment.
As markets constantly expanded during the 1950s and 1960s, emphasis was on increased sales. Organizational structures among leading-edge firms are being redefined to focus on cycle-time reductions and process step eliminations. These firms gained acceptance as shippers attempted to limit their investment in noncore businesses or acquired needed logistics expertise in areas like carrier selection, rate negotiation, or freight payment. Four primary factors shaped the development of distribution thinking during this period: scientific management, data processing technology, a customer focus, and profit leverage. To capitalize on these opportunities the logistics manager must stand ready to build a boundary spanning consensus across the traditional functional stovepipe alignments of the firm. Some logisticians travel to manufacturing plants or distribution centers.
Thus, inventory flow was thought to be a process that involved horizontal movement of inventory and measurement of inventory from the time the raw material was delivered until an accounts receivable was recorded by the firm a sale made and the product shipped. The scope of customer service extended beyond the domestic market to address the issues faced in a global supply chain. They coordinate, plan, and direct the activities used to create a wide range of goods, such as cars, computer equipment, or paper products. Applied logistics probably began when early cultures found that, because of a refined expertise, one community produced excess quantities of certain goods such as arrowheads and another community downstream could make better goods of another sort, such as pottery, because of access to better materials. Many firms restructured during the 1980s to gain a competitive advantage and to avoid hostile takeovers. Carriers had to position themselves to be in the smaller set of carriers selected by specific shippers. The broadening of scope is demonstrated well by the changes in functional responsibility for international distribution.
Usually, these managers design, develop, and maintain a set of relationships both within and outside the firm between the firm and vendors, third parties, and customers capable of executing the overall corporate strategy. Figure 1-3 Logistics Department Responsibility for Material Flow Activities Source: Adapted from the annual Ohio State University Survey of Career Patterns in Logistics studies by permission of the Council of Logistics Management. Among them are external issues such as technology, globalization, and competition. Thus, structural changes in business organization and a new focus on bringing value to the customer have created a range of adaptive behavior on the part of business firms. In a more contemporary context, the industrial revolution and the advent of the mass production and mass consumption economy heralded the beginning of mass distribution in the industrialized countries of the world. As organizational restructuring continues, traditional logistics organizations will evolve into organizations that design and manage internal and external supply chains. Most logisticians work full time during regular business hours.
³¹³² A 1972 Traffic Management survey found that 45% of its respondents held titles that had not existed in 1962. For forward-looking companies, integrated logistics management as a dominant material flow strategy emerged during the last half of the 1980s and the first half of the 1990s. ² Physical distribution thus included functions like freight, warehousing, materials handling, protective packaging, order processing, demand forecasting, inventory control, and customer service. Logistics did not necessarily reflect an organizational change within the firm, but rather a change in the way the firm thought about value linkages across the three internal material flow loops. Internal Integration 1980s Logistics organizations had experienced a decided shift in the positioning of distribution and materials management functions by the early 1980s. The Ohio State University Survey of Career Patterns in Logistics detected substantial changes occurring during the last half of the 1970s, with these trends stabilizing by 1981.
There are also internal factors, which include management style, culture, human resources, and facilities. The importance of transporting products from their point of production to their point of consumption is also well documented in historical files. The future will undoubtedly present a range of opportunities, both domestic and global, that will challenge the energy and creativity of even the most progressive firms and the most intrepid logistics executives. ²³ Many firms saw integration as a means to correct this deficiency. Second, because of its proximity, visibility, and frequent contact with customers, finished goods distribution most directly impacts customer service expectations and performance.
Four primary factors shaped the development of distribution thinking during this period: scientific management, data processing technology, a customer focus, and profit leverage. However, most executives did not have specific college course work or an academic major field in distribution. The single distribution manager had responsibility for the efficient, cost-effective flow of outbound material. Subsequent studies performed by A. However, history indicates that the proponents of integration overcame these arguments because of the problems associated with fragmented management. Yet, even in this short time there has been a maturing process in the discipline, and this maturing process promises to continue and perhaps accelerate into the twenty-first century. Supply chain management presents a whole new range of career options for individuals who select logistics as the foundation of their management careers.