Page 294 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 13: Logistics Design and Operational Planning

All design constraints serve to limit the scope of the plan. However, as one executive stated, Notes
“Why study things we don’t plan to do anything about?” Unless there is a reasonable chance that
management will be inclined to accept recommendations to significantly change logistics strategy
or operations, their limitations may best be treated as a study constraint.
The purpose of developing a statement of constraints is to have a well-defined starting point and
overall perspective for the planning effort. If computerized analysis techniques are used, major
constraints may be reconsidered later. In contrast to the situation assessment the statement of
constraints defines specific organizational elements, buildings, systems, procedures, and/or
practices to be retained from the existing logistical system.

Measurement Standards

The feasibility assessment often highlights the need for development of managerial performance
standards. Such standards direct the project by identifying cost structures and performance
penalties and by providing a means to assess success. Management must stipulate measurement
standards and objectives for each category as a prerequisite to plan formulation. It is important
that the standards adequately reflect total system performance rather than a limited, suboptimal
focus on logistics functions. Once formulated, such standards must be monitored and tracked
throughout system development to allow benchmarking the result of the changes. Although
considerable managerial discretion exists in the formulation of standards, care must be exercised
not to dilute the validity of the analysis and subsequent results by setting impractical goals.

An important measurement requirement is to quantify a list of assumptions that underlie or
provide the logic supporting the standards. These assumptions should receive top-management
approval because they can significantly shape the results of the strategic plan.

Example: A relatively small variation in the standard cost and procedure for evaluating
inventory can create major variations in the strategic plan.
Measurement standards should include definitions of how cost components such as
transportation, inventory, and order processing are calculated, including detailed financial
account references. The standards must also include specification of relevant customer service
measures and methods for calculation.

Analysis Technique

Once the critical issues and alternatives are defined, the appropriate analysis technique should
be determined. Analysis techniques range from simple manual analysis to elaborate
computerized decision support tools.

Example: Models incorporating optimization or simulation algorithms are common
when evaluating and comparing alternative logistics warehouse networks.
However, many planning and design projects can be effectively completed using only manual
or spreadsheet-based analyses. Once the project objectives and constraints are defined, project
planning must identify alternative solution techniques and select the best approach. Accenture
annually publishes information regarding software applications for logistics decision support.
Selection of an analysis technique must consider the information necessary to evaluate the
project issues and options. Specifically, critical performance measures and logistics system scope
must be identified and evaluated. Technique selection must also consider the availability and
format of required data.

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