Page 291 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes Second, supporting logic development critically evaluates current procedures and practices
with a comprehensive factual analysis to remove perceptual biases. Identification of areas with
improvement potential, as well as those where operations are satisfactory, provides a foundation
to determine the need for strategic adjustment.

Example: It may be apparent that excess inventory is a serious problem and significant
potential exists to reduce cost and improve service.

While the appraisal process frequently confirms that many aspects of the existing system are
more right than wrong, the conclusion should be based on improvement. If supporting logic
affirms the current number and location of distribution centres, subsequent analysis can focus
on streamlining inventory levels without serious risk of sub-optimization. The deliverables of
this evaluation process include classification of planning and evaluation issues prioritized into
primary and secondary categories across short- and long-range planning horizons.
Third, the process of developing supporting logic should include clear statements of potential
redesign alternatives. The statement should include: (1) definition of current procedures and
systems, (2) identification of the most likely system design alternatives based on leading industry
and competitive practices, and (3) suggestion of innovative approaches based on new theory
and technologies. The alternatives should challenge existing practices, but they must also be
practical. The less frequently a re-design project is conducted to re-evaluate current procedures
and designs, the more important it is to identify a range of options for consideration.

Example: Evaluation of a total logistics management system or distribution network
should consider a wider range of options if done every 5 years than if completed every 2 years.
At this point in the planning and design process, it is well worth the effort to construct flow
diagrams and/or outlines illustrating the basic concepts associated with each alternative. The
illustrations frame opportunities for flexible logistics practices, clearly outline value-added and
information flow requirements, and provide a comprehensive overview of the options. Some
refined or segmented logistics practices are difficult to illustrate in a single flow diagram.

Example: Regional variations, product-mix variations, and differential shipment policies
are difficult to depict, although they do form the basis of design alternatives.

When segmental strategies are proposed, it is easier to portray each option independently. A
recommended procedure requires the manager responsible for evaluating the logistical strategy
to develop a logical statement and justification of potential benefits.

Cost/Benefit Estimate
The final feasibility assessment task, the cost/benefit estimate, is an estimate of the potential
benefits of performing a logistics analysis and implementing the recommendations.

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Caution Benefits should be categorized in terms of service improvements, cost reduction,
and cost prevention.
The categories are not mutually exclusive given that an ideal logistics strategy might include
some degree of all three benefits simultaneously.
Service improvement includes results that enhance availability, quality, or capability. Improved
service increases loyalty of existing customers and may also attract new business.

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