Osman …

IMPLEMENTING THE STRATEGY

Aims of the chapter Relating strategy to lower decisions Areas for decisions in implementation Managing change Case study-Passenger interchange.

AIMS OF THE CHAPTER

After listening us you should be able to:■ SEE how a logistics strategy fits into an

organisation’s broader decisions■ OUTLINE the strategic importance of logistics■ DEFINE a logistics strategy and DISCUSS its

focus■ DISCUSS alternative logistics strategies■ APPROACH the design of a logistics strategy

STRATEGY IMPLEMENTATION

Is the process that turns strategies and plans into action in order to achieve strategic objectives and goals

RELATING STRATEGY TO LOWER DECISIONS

Strategies only become effective when they are implemented. This means that the long term aims are translated into lower decision ,and the work is carried out to achieve them.

Strategic are concerned with more detailed tactical and operational decisions. The distinction between strategic ,tactical and operational decision are not really this clear.

When we talk about implementing a logistic strategy we mean making the lower decision, and translating the general aims of the strategy positive action. We actually do what is necessary to achieve the aims of the strategy.

Difficulties with implementation

It can be difficult to translate a logistic strategy into lower decision. This is obviously true when the strategy is poorly designed, and lower managers have to translate vague concepts like ‘‘global leadership’’ into actual operations.

There are two options at this point;

First; managers can say that the strategy has been carefully designed, and everyone must work harder or find new, innovative ways of achieving the target.

Second; managers can say that the practical difficulties are too great, and that there was a mistake in setting unrealistic target.

Some common problem with implementing logistic strategy

Strategies are badly designed,perhaps with the wrong aims or focus

They ignore key factors, or emphasise the wrong feature.

People who design the strategies are not responsible for their implementation

İt is imposible, or very difficult to implement them properly

How we do solve these problem?

An organisational structure that is flexible and allows innovation

Developing an organisational culture that supports the strategy

Open communication which encourage the free exchange of ideas

Effective systems to distribute information and support management decision.

BEST SOLUTION

Having the right skill in the right place at the right time.

AREAS FOR DECISIONS IN IMPLEMENTATION

- Types of decision

- Structure of the supply chain

- Location of facilities

- Ownership and outsourcing

- Enabling practices

- Capacity

Types of Decision

Implementation is convenient to describe two types of strategic decision:

1- Sets out the principles we work with

2- Shows how the organisation will achieve these principles

- These decisions have “Long Term” consequences.

- The first decision type is concerned with “aims and designs”

- The second decision type is concerned with “practicalities and implementation”

Levels of decision in logistics

Traditional Views

Ballou says that; When moving to the implementation of a strategy,

we need to concentrate on four areas:- Customer Service- Facility Location- Inventory Policy- Trasnsport

Helming and Zonnenberg suggest decisions in five areas:

- Supply Chain Configuration

- Enabling Practices

- Strategic Relationships

- Application of Information Technology

-Organisation

“ Companies hurl staggering sums of money and human resource at their supply chain infrastructure, only to fail at implementing their supply chain strategy.”

A BROADER VIEW

A broader view of implementation says that;

we should consider decisions in every function of logistics from procurement through to final delivery.

Structure of The Supply Chain

The supply chain for a product consists of tiers of suppliers feeding materials from original sources into its operations, and then tiers of customers moving materials out to the final customers.

Structure of a supply chain

Some supply chains have few tiers of customers and suppliers,while others have many; some chains have very simple flows of materials, while others have complex and convoluted networks.

Building Sand & Dvd Player

-Product value-Bulk-Perishability-Availability so on….

-has low value-bulky-readily available

Some factors that affect the structure of supply chain:

- Type of customer demand- Economic climate- Availability of logistics services- Culture- Rate of innovation- Competition

- Market and financial arrangements

Supply chain length;

is the number of tiers or intermediaries, that materials flow through between source and destination.

Example: Exportes might use a series of logistics centres, transport operators, agents, freight forwarders, brokers and agents to move materials through different parts of their journey.

Supply chain breadth;

is the number of parallel routes that materials can flow through.

Example: Thornton’s has a narrower chain, and most of their chocolate sells through their own shops; Pigalle rt Fils has a very narrow chain and they only sell their chocolate in two shops in Belgium.

Different shapes of supply chain

The best choice of length and breadth depends on;

- The amount of control that an organization wants over its logistics

- The quality of the service- The cost

Broadening the chain gives high customer service, but it increases costs and reduces the manufacturer’s control.

Making the supply chain long and narrow can use intermediaries to reduce costs, but the manufacturer loses some control and the customer service does not improve.

We can illustrate some of the options for a supply chain with a basic product, such as shoes.

LOCATION OF FACILITIES

Best location for facilities;

For example Warehouse;

-areas with development grants

-factories

-customers

-transport

Location effect on logistics performance ;

Fast delivery →→use local warehouses Low cost →→stocks in large,centralised

warehouses Import and export →→warehouses near to

ports or rail terminals Manufactures goods →→stock of finished

products near the factory

Qestions of location?

It should be tackled very carefully,as they have a considerable impact over the long term.

Once a facility is open it is difficult to close it down or move it.

Location is not an isolated decision.WHY?

It leads to a series of related decisions about the work done in each location,

For example;

- size of each facility

- level of technology used

- layout of resources

- customers to serve from each location…

Ownership and Outsourcing

One organisation does not have to own a supply chain to get the benefits of integration. Suppliers and customers can get mutual benefits by working together, typically in a strategic alliance.

Supplier–customer partnerships →→ easiest to imagine and they have most effect on the supply chain.

A similar arrangement can cover a whole range of services,such as:

-electricity supply,banking service and office cleaning

A common form of partnership for logistics has a specialised company looking after all of an organisation’s transport.

This arrangement has the advantages of an efficient and experienced specialist to look after the transport, while the organisation can concentrate on its core operations.

Why stop at transport

An organisation can form partnerships with other companies to look after warehousing, purchase of materials, materials handling, and many of the other functions of logistics.

When one company uses other companies to run its logistics, it is called third party or contract logistics.

The use of third party logistics is a special type of ‘make-or-buy’ decision

A fuller list of potential benefits includes:

Lower fixed costs, with customers only paying for services they use

Specialist suppliers who have expertise and use the best systems and practices

Suppliers can combine work from several customers to get economies of scale

Guaranteed high, and agreed, levels of customer service Flexible capacity, dealing effectively with peaks and

troughs in demand Lower exposure to risk from, say, varying demand Increased geographical coverage and local knowledge A convenient way of entering new markets

Rowley summarises the benefits by saying

‘The results of successful outsourcing are service improvement, cost reduction and quality enhancement’

There are disadvantages:

Reduced control Inability to respond to unusual circumstances More complicated communications Conflicting objectives, Less control over costs…

European contract logistics

Huge business in Europe Total cost of logistics was $ 150 billion in 1999

(26%→third party suppliers) 4 years later it’s increase 30% higher

Germany (28%)- France(20%)- UK(17%) Because each of the economies has developed differently,

and different logistics requirements, the use of third parties varies quite widely.

Germany, France and the UK each spend about $10 billion a year on third party logistics(grow at 8%)

But growth will be faster in Italy and Spain but low levels of outsourcing.

Enabling Practices

Enabling practices are the activities associated with the supply chain that allow it to work efficiently

For example; reliable information processing is an enabling practice that allows logistics to function properly

Organisation has designed the structure of its supply chain, and found the best locations for facilities

For example; use just-in-time methods to reduce stocks, EDI (Electronic Data Interchange) to link with partners, or procurement via websites

The idea of the enabling practices as supporters of logistics can be important

If we look at ; series of organisations in the same business → envolved in similar ways

(whisky distillers or detergent manufacturers)

Capacity

The capacity of a supply chain is the largest amount of materials that can flow through it in a given time.

(lorry→25 tonnes, airline→450 passengers etc.)

Bottleneck → not all parts of a chain have the same capacity, so the overall capacity is set by the part with the smallest individual capacity

If wholesaling forms the bottleneck with a capacity of 200 units of a product an hour, this sets the capacity of the whole supply chain – even if other parts have a much higher capacity

The only way of increasing the capacity of the supply chain is to increase the capacity of the bottleneck; adding more resources elsewhere has no effect, it only increases the amount of spare facilities and reduces the utilisation.

The solution:

To get a smooth flow of materials through the supply chain, we have to make sure that each part has an appropriate capacity. This means that the overall capacity matches total demand, and the capacity of each part is matched, so that there are no restrictive bottlenecks

Ralston Energy Systems(RES)

affiliate of Eveready Battery Company (EBC) manufacturing plants in America, Europe and Asia leading brand range of batteries and torches Until 1998 RES ran two warehouses within the Czech

Republic

-The first was a bonded warehouse used to store imported materials-second warehouse was a ‘sales warehouse’ run by RES on its main site

Two other trucking companies were involved in export and import operations.The sales warehouse was about three times the size of the bonded warehouse

Summary of logistics at Ralston Energy Systems s.r.o.

This structure had a number of weaknesses:

The sales warehouse was leased from a competitor of RES.It was not appropriate to store finished goods in a competitor’s facilities.

The sales warehouse had become too small The sales warehouse had poor arrangements for

loading and unloading trucks All goods imported into the Czech republic were

sent to the bonded warehouse, moved by weekly Local distributors charged high rates for each

truck load delivered.

Their solution was to outsource logistics to a third party.

RES effectively closed its sales warehouse, and moved these activities to the new operator.

The new service brought the following benefits:

Flexible warehousing space Variable warehousing costs Variable distribution costs Increased service quality Associated services from the operator Saving overhead costs of management in the

warehouse Extending opening times from 0700 to 1900 Removing the conflict of interest with a competitor-

owned warehouse Managing remote stock in Slovenia from the same

facilities

MANAGING CHANGE

You’ll never get me up on one of

those butterfly things!

Without accepting the fact that evrything changes,we can not find perfect compusure.But unfortunately, altough it is true,it is diffucult for us to accept it.Because we cannot accept the truth of transience we suffer.(Shunryu Suzuki)

CHANGE IS INEVITABLE(kaçınılmaz)

CHANGE;

Everywhere, it is constantly changing. To survive organizations need to decide,not

whether to change,but when and how to make it occurs most succesfully.

Change management tools are poorly understood and/or hard to implement

To manage change, manage yourself first, influence others later

As the strategy evolves, the operations of the whole logistics function must adjust and move forward. New practices affect everyone. Unfortunately, this presents a problem, as most of us do not really like changes.

To manage change, manage yourself first, influence others later.

What We Know About Change

Change will not stop- it will only go faster

No matter how well planned, it will not be trouble free

Each of us is accountable to making change acceptable

Complex change is typically accepted if enough time is allowed

Rapid change can occur if it’s a small adjustment

Most people initially resist rapid, complex change

People Respond to Change….

At different rates

At multiple levels: personally, professionally, socially and organizationally

By seeing it as opportunity or danger

Successfully, by being resilient

Many organisations prefer to stick to their old practices. Unfortunately, this allows more flexible competitors to gain an advantage, and their performance inevitably declines.

Some signs that an organisation is not changing to meet new circumstances include:

low sales and falling market share, as old products are overtaken by competitors

old-fashioned attitudes and operations poor communications within the

organisation and with trading partners too much inflexible top management with

no new appointments

Change Can Be Perceived As Positive or Negative

Change is a normal part of business and if we do not respond we will fall behind competitors.

To be more positive, we should welcome change as it creates opportunities, improves work conditions, gives better practices and performance, and more interesting, better-paid and more secure jobs.

This new attitude does not happen by chance, but it needs careful management

Organisations typically move through a series of stages:

1. Denial – where employees deny that there is a need for change

2. Defence – defending the current way of doing things and criticising new proposals

3. Discarding – beginning to move away from the old ways and towards the new ones

4. Adoption – using the new ways and accepting that they are beneficial

5. Integration – assuming the new ways are normal and using them naturally.

RATE OF CHANGE

Rate of change is important .because some organizations change very quickly , such as Intel which works at the frontiers of technology and is continually developing new products.

Others change very slowly, and even make a virtue out of stability, such as Morgan sports cars whose basic design originated in the 1930s.

Say It Once, Say It Twice, and Say It Again

THE ANSWER..

SUMMARY

Hasan Celal KÖK

The logistics strategy sets the overall direction for logistics. Implementing the strategy translates this into a series of lower decisions and actions.

Unless the strategy is designed properly, implementation can be difficult or impossible.To avoid these problems, managers should consider implementation during the design of the strategy

Some strategic decisions are concerned with principles, the first of these are considered more in the design of a strategy, second are considered more in the implementation.

The supply chain must continually evolve to keep up with changing conditions.

An important question concerns the rate of change.Business process re-engineering looks for more radical changes.

CASE STUDY PASSENGER INTERCHANGE

Congestion is increase on the roads, especially in major cities. Some of this is due to commerical vehicles, but by far the majority is due to private cars.

What is these?

Public transport

•These services must be attractive for people because, amount of crowding will decrease, it more safely than private cars.

Buses are the most flexible from of public transport so many people use the bus for go to another city

But there are some difficulties items with the time for a journey these are:

Joining time Waiting time Journey time Leaving time

In practise, most major cities such as London, Paris have sucessful interchanges, and they are spreading into smaller towns.

As a result there has been an increase in the use of public transport a reduction in the number of cars in the town centre and improved air quality.

QUESTIONS OF CASE STUDY

What are the benefits of integrated public transport systems?

Are the problems of moving people significantly different from the problems of moving goods or services?

What are the benefits of public transport over private transport? Should public transport be encouraged and, if so, how?