The article identifies the essential dimensions in relation to outsourced logistic management, through a study of the outsourcing process of a large Brazilian wholesaler distributor’s logistic activities.
By Tania Regina Brasileiro A. Teixeira and Márcio Lopes Pimenta
Abstract
The article
identifies the essential dimensions in relation to outsourced logistic
management, through a study of the outsourcing process of a large Brazilian wholesaler
distributor’s logistic activities. The author has developed a management tool
able to guide and direct the outsourcing operators of integrated logistic
services so as to allow them to organize their management system. The author
proposes a logistic architecture based on models which will facilitate the
managerial work and transform the logistic system into a strategic skill, thus
leveraging its ability to compete in the market. This idea is focused on the
client, and is capable of integrating and managing all the interface elements
of the logistic system, connecting and joining all of them in order to perform
more organized and structured logistic activities. Therefore, the logistic
architecture based on models represents the nature and structure of a logistic
system as well as determines the way for it to operate.
Keywords: Logistic
Architecture, Management Models, Logistic Operators
1.
Introduction
A selected
bibliographical research and a study of the outsourcing process of the logistic
activities inside a large Brazilian wholesaler distributor have brought, as a
main consequence, the development of an architecture for logistic organization
inside the company based on models. Actually, this architecture is an
interesting tool, which aims to guide companies outsourcing logistic services
in designing their structure, planning and strategic management of their
logistic systems.
The main
reason for designing such architecture was the study of this case done by the
author and the new awareness that it has raised. The companies included in the
study were going through a transition period, in a complex scenario, which
involved a decision by the wholesaler to outsource or not its logistic
activities with a logistic operator. There was a series of concerns related to
this decision, specially the potential impact that it would have on the
internal elements of both organizations.
On one side,
the wholesaler distributor would disassemble its logistic managerial and
operational structure; on the other hand, the logistic operator would have to
work hard to realign the structure, strategy and culture of the logistic processes―both
managerial and operational―and also the roles of the different areas and
individuals, through a logistic process which would answer the following
questions: Where and how to begin? What should be done to structure the key
areas with minimum costs? Was there a way to set apart the strategy of the
logistic operator to restructure the company’s system?
With these
questions in mind, the author tried to find a way to structure the key areas of
the logistic operator. Thus, there came the idea of designing a logistic
architecture based on models, which, in its essence, could represent the nature
and structure of a logistic system, as well as establish a way for them to
operate.
2. Logistic
Architecture Based on Models
The logistic
architecture designed by the author consists of a group of systematically
structured models, with defined objectives which characterize the logistic
service life cycle. Under this perspective, the following premises were
considered when designing the architecture:
The approach
to design the architecture is systemic, meaning that the various parts are
closely related and that any action relating to one component must take into
consideration all the others.
The
architecture must be built based on a competitive strategy developed by the
logistic operator.
The logistic
architecture encompasses tow large areas: processing the business intelligence
and supporting the logistic needs of the company’s operations.
It’s possible
for the models to become a reality since they were thought of within the
humanistic perspective, once man is the center of the whole structure. The
architecture exists, therefore, to serve the needs and expectations of
logistic services. Besides, man is the one who operates the architecture, and
he’s the origin of all the solutions to problems which come to be processed,
not only that, but also all the benefits from this kind of organization turn
to him.
The logistic
service life cycle originates in the need of the client, who demands an
efficient structure from the company. The company must turn the need into a
desirable solution, and therefore needs an intelligent model to process
logistic responses capable of answering the needs and demands. The cycle ends
when the satisfied customer receives the service as ordered and in order to
achieve such result the company has to have an information structure capable of
helping it measure, point out and manage the level of services rendered to the
client. Only then will the company be able to to know its performance in terms
of responding to orders and re-feeding the system so as to improve its processes
continuously. The sequence is well explained in Picture
1 .
Therefore, the
logistic architecture based on modules is developed as a tool to be used in the
strategic management of logistic operators, based on theory and the case study,
and with these suppositions guiding the author’s reasoning. In this sense, the
architecture can be used by operators as an ideal to be reached, or as a
reference for all of them when looking for management practices for their
logistic systems.
The idea is
that the architecture, besides incorporating the previous suppositions, be
based on two other aspects. It’s believed that in order for a company to
achieve good results in a long term, and consequently increase its businesses
and market share and also provide its shareholders with good revenue, it must
have a well established business strategy and an efficient operation.
Based on
studies by several authors [1]
- [3]
, we can consider an strategy to be a group of formulations, rules and plans
which guide the behavior of an organization to reach a particular goal; a sight
reflecting the image of what the people in a company expects it to become; a
mission, translated in the need of the client, the value premise offered and
the means to generate this value, the action pattern developed by the
organization through a long period of time and the organization’s positioning
in the market. On the other hand, to indicate a concept of operational efficiency,
we use [4] , to whom the function of production is to gather the
resources destined to the processing of a company’s goods and services, it’s
efficient to use effectively its resources and provide goods and services in a
way to satisfy its customers.
These two
elements are essential, meaning that there is no use for a company to try to
improve its logistic op- eration system, by using a group of techniques widely
known and divulged instead of a well elaborated strategy. The same is true for
the opposite idea, to have a company use a lot of time and energy in the
elaboration of a strategy and not give attention to the way it performs various
activities along the execution of services cycle.
In this way,
we understand that the capacity of the operator to compete is strongly
influenced by these two elements. The logistic architecture and the models must
be developed with this reference in mind. So, the
Picture 1.
Logistic services life cycle. Source: Created by the author. In this chart we
can show the relation between the phases of the logistic services life cycle
and the strategic models idealized in the study.
strategy is
developed by taking into consideration the established view, mission and
strategies, and is supported by a logistic operationalization model which
contemplates physical and technological structures capable of mak- ing this
type of organization efficient in its operation.
In this
context, Picture 2 presents the logistic architecture based on
models proposed in the study, in details as follows:
The author
defends the idea that the logistic operator must set up the essential processes
of the logistic system in two large areas:
The first
area―the Intelligence―is related to the continuous processes which elaborate
the whole business intelligence so as to respond as quick as possible to
internal and external clients’ needs. In order to have that, according to the
premise, responding to the logistic services life cycle, it’s essential to
elaborate a way to: respond to client’s demands, the processing of intelligent
viable answers to different questions posed by internal and external clients;
and the information, which can be used to measure, point out and manage the
service level rendered by the company to its clients.
The second―the
infrastructure area―refers to the continuous processes serving as the
foundation of the architecture, which are supported by the infrastructure
supporting the company’s logistic operations and refer to the technological,
transportation and physical structure. The author understands that elaborating
the planning and strategic design of these areas is essential to ensure
competitiviness capable of connecting production to consumption
This concern
is relevant because these are the structures which transmit value to the client
and allows the right goods to be delivered, at the right time, right amount,
right place, in good conditions and at a minimum cost, which also make the
accurate information report of the logistic operation and tracking of the order
possible, so as to efficiently respond to client’s demands and requirements.
Therefore, in
order to structure the Intelligence area, the researcher points out the need
for companies to develop a model to respond to client’s needs, a logistic
intelligence processing system which must include the supply, production and
distribution management model, besides establishing an information model which
can measure the logistic service level. The author also shows the need to
organize the infrastructure area companies have so as to establish a logistic
operationalization model. We can present as follows, each component of the
logistic architecture and how they interact with each other to have a harmonic
and efficient whole.
Picture 2.
Logistic architecture based on models. Source: Created by the author.
The Model for
Responding to Customer’s Demands for Logistic Services―should deal with the
important issue of customer service. When considering the gateway of the entire
logistic architecture, the author realized, through bibliographic research and
case study, just how this area is still underdeveloped, both academically and
business wise. Part of the literature studied shows a decentralized initiative
by some authors in relation to the topic. So, the author gathered some of these
studies such as the ones by [5]
- [8]
which deal with the important issue of customer service called, respectively:
Serviço ao Cliente (Customer service); Rentabilidade de Clientes e NÃvel de
Serviço (Client profitability and service level); Segmentação de mercado para
diferenciação dos serviços logÃsticos (Market segmentation to set apart
logistic services); and Custos logÃsticos: uma visão gerencial (Logistic costs:
a management view).
These studies
were the foundation used by the author to understand the importance of taking
client demand response architecture into consideration. Thus, the idea is that
the logistic operator should be able to establish a group of principles and
logical rules which stimulate the organization to act in a different manner,
aiming to respond to different needs of various clients, in such a way not to
increase costs dramatically. Therefore, the idea is to develop a model which
can be used as reference for the company to establish a good customized
logistic service structure, with an efficient cost and which responds to
client’s demands at the same time, help the organization distribute resources
and logistic efforts along the process more effectively.
The Logistic
Intelligence Processing System―it’s the core of this whole structure and a key
area for the development of the logistic operator’s business. In this system,
the entire supply chain management has to be processed, which requires the
organization to use the following models:
Supply
Management Model―should answer to the purchase management, stock, storage and
transportation. Relevant Questions: Is the stock management appropriate for service
demand? What is the best way to relate to suppliers? How can we establish
strategic partnerships and alliances along the supply chain?
Production
Management Model―should answer questions related to scheduling (program) and
production, flexibility, productivity and synchronism management, etc. Relevant
Questions: What is the best technology? Which are the right methodologies to be
implemented? How can we integrate the distribution channels?
Distribution
Management Model―should answer questions in relation to forecasting demand,
distribution, channel and network, type of transport, more appropriate
premises, among other topics. Relevant Questions: What is the best distribution
system? Is there a methodology to better establish a tax and logistic solution?
What is the best route in terms of taxes? Are these opportunities to optimize
the transport system? What is the best distribution network? According to Picture
1 , the author approaches the spefic need for the distribution management model to define and implement an analysis model of the logistic and tax
configurations so as to structure the decision making process thus enabling a
better solution to be provided to the customer.
All of these
issues and questions, to be dealt with on a daily basis in companies, should
have well established models and answers which would be able to explain or
forecast, based on theory, the structure and the behavior of the areas which
constitute the logistic operator’s intelligence processing system.
The
Information Model of the Logistic Service Level―from the moment when customized
service packages can be defined and offered to the client to measure and
analyze the logistic performance is also an important variable when referring
to service level. Performance techniques and measures adopted for current
logistic reality are critical, because the effective cost control of operations
requires appropriate information about the logistic performance.
The author
concluded, during the case study and experience as a consultant, that most
companies need more structured measures and data banks in order to manage their
logistics, because the systems, many times, offer disconnected and unnecessary
information in relation to the decision making process. She has also realized
that there isn’t a consensus about what is being measured from collaborators.
Therefore,
these measures should be well defined and established so as to guarantee that
the logistic service is adjusted to the desired goals. And also, to control the
logistic activities processing, to verify an operation accuracy and compare the
performance the company wants to attain. The logistic operator must develop an
information model about the logistic service level.
The idea is
for the operator to be able to formulate a group of principle about the
structure which must be used to organize a series of information that are part
of a specific and defined measuring system, in such a way that it’s possible to
manage the level of the service rendered by the logistic operator to its
clients.
The Logistic
Operationalization Model―it’s responsible for establishing a group of
principles concerning the planning and strategic design of technological,
transport, and physical structure, which support a company’s logistic
operations. These operations have a vital role to be played in the supply
chain, because they connect the suppliers’, manufactures’ and distributors’
units to the client and even to the client’s clients. As a consequence, these
well established structures can significantly alter the operational expenses,
the fixed assets and level of client satisfaction.
Despite this
importance, such structures, a lot of times, are neglected by the management.
So, the author mentions the need for the logistic operator to look for
operational efficiency, establishing a logistic operationalization model
concerned with: integration of these relevant structures and activities,
achieve strategic efficiency and obtain competitive advantages by offering
services with a differential and reduced costs of equipment, vehicles, premises
and information systems.
The author
also points out that client satisfaction and the recipe are directly related to
the speed, reliability, and flexibility these structures allow.
So, all effort
made to design the logistic operationalization model proposed in the
architecture will allow the logistic operator to significantly leverage its
results. Thus, this type of organization should adopt a more strategic view in
relation to these structures, recognizing the abilities these structures have
to improve business initiatives, allow new strategies to be adopted for the
supply chain and add competitive advantage to the company.
3.
Interaction among Models
After describing
the models which constitute the logistic architecture, it’s important to
briefly mention how they interact. The customer service structure receives the
needs for service from clients, in which services and clients are separated
into different segments and classified, respectively, in a customized manner;
this characterizes the information input which activate the logistic
intelligence processing system, consisting of supply, production, and
distribution management models to be answered, with intelligent and viable
solutions to various required needs, which reach the clients/consumers through
the logistic operationalization model. After that, the service must be
evaluated according to the information model created to measure and manage the
level of the logistic service rendered.
Finally, the
five proposed models may contribute as important tools to manage and evaluate
the ability to generate value with supply chain management. It can also serve
as a criteria to decide about outsourcing of activities, for example: a company
may be good in the service level and demand management and bad in the
distribution management. This company can verify which parts of the model,
considered as weak, are essential to add value to the customer and give focus
to improve them. On the other hand, this company may perceive that this
activity can be outsourced without a risk of value loss to the customer.
4.
Conclusions
According to [9]
, the usage of logistic operators is, without a doubt, one of the most
important trends in modern business logistics, both locally and globally. In
Brazil, such phenomenon is also a reality [10]
. The Brazilian market of logistic operators has been going through, over the
last five years, a continuous growth, and has showed continuous changes: the
appearance of new companies, mergers and acquisitions, and even international
operators. Therefore, the logistic operator needs to be better prepared to face
the increasing competition.
This paper
contributes to supply chain literature with the development of an integrated
view of logistics infrastructure and logistics intelligence, in a way that the
balance of these two managerial efforts can generate better results in the
processes of customer value transfer. In a practical context, wholesaler
companies seems to focus more on the infrastructure side than on the logistics
intelligence or on a balance of these.
Another
conclusion is related to the five different proposed models. Three of them are
often mentioned in the literature (Supply Management Model, Production
Management Model, Distribution Management Model). In addition, the authors
conclude that companies should adopt the Model for Responding to Demands and
the Model of Service Level Information in order to increase their abilities to
balance logistics infrastructure and logistics intelligence issues. This
initiative may contribute to improve the demand answering management and the
service level.
In this
context, the logistic architecture developed has conjugated models with clear
pre-determined goals to be used in the execution of a certain activity and/or
administrative actions. This theory focuses on the client and aims to integrate
and manage all the interface elements of the logistic system, by connecting and
uniting strength for the organized and structured exercise of all logistic
activities. Considering a practical aspect, this paper provide explanation of
supply chain processes in wholesalers distributors companies, in a way to
detail some specific problems and suggestions to improve its management.
Therefore,
each model cited here, when well structured, can leverage the client
satisfaction level, as long as the client is well served in his/her needs,
satisfied with the solution provided, rendered with the right service and
product at the right time and under the right conditions, with reasonable
costs, and receives information concerning the logistic operations, content,
times and positions of a certain order to support his decision making process.
About The Author:
About The Author:
Tania Regina Brasileiro A. Teixeira, Márcio
Lopes Pimenta
Federal University of Uberlandia, Uberlandia,
Brazil
Email: pimenta.mp@gmail.com, taniateixeirabr@yahoo.com.br
__________________________
Publication Details:
iBusiness
DOI: 10.4236/ib.2014.64020
Copyright © 2014
by authors and Scientific Research Publishing Inc.
This work is licensed under
the Creative Commons Attribution International License
Cite This Paper:
Cite This Paper:
Teixeira, T. and Pimenta, M. (2014) Logistic
Architecture Based on Models. iBusiness, 6, 195-200. doi:
10.4236/ib.2014.64020.
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