Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

Introduction

An enterprise is, according to the APICS Dictionary (15th Edition, APICS, Chicago, 2016), any undertaking, venture, initiative, or business organization with a defined mission.

In this suite of courses, the enterprise is understood as a firm, a company in its economic environment, and namely as a sociotechnical system. The elements of the system as well as their relation­ships, both within the system and to surrounding systems, are complex in nature. Various interested parties with different ideas and goals have an impact on the company, which makes company management a complex task. Figure 1 shows three dimensions of business activity. Integral company management means building management systems along these dimensions, which simultaneously interlock.

Fig. 1                  Three dimensions of business activity.

Today, management systems for tasks along the value-adding chain affect customers and especially suppliers, just as customers and suppliers influence the management systems. This close partnership is also necessary from the perspective of the comprehensive product life cycle. Product returns from the customer, disassembly, recycling, and returns to suppliers have to be considered as part of value-adding and paid for accordingly.

Management systems for the stake­holders of the enterprise deal with business partners, employees and owners (share­holders). Such individual stakeholders stand opposite the collective stakeholders in the form of society — that is, the macroeconomic system in which the company as a microcosm is embedded. In the figure, the environ­ment (nature) is shown as a personified stakeholder. In practice, of course, the demands of the environment become manifest only through the environmental consciousness of the other stakeholders mentioned.

Priority areas of management systems related to company performance focus on the expected quality and delivery as well as required costs and their financing. Flexibility, agility, and innovation are usually potentials that have an indirect impact on business results, via future performance in the other three areas. Tasks related to company performance influence one another mutually and function as tasks that cut across the tasks along the value-adding chain and the tasks related to stakeholders.

Integral logistics management focuses in particular on expected delivery — on goals such as customer service ratio, delivery reliability, and short lead times. To achieve the objectives, the corresponding way of thinking has to be successfully anchored in all of the management systems along the entire value-adding chain, also across companies. Integral logistics management monitors value-adding over the entire product life cycle, but also considers the impact on the various stakeholders, especially the business partners.

Integral logistics management means implementing ideas, concepts, and methods that have the potential to increase the effectiveness and efficiency of company performance. Here, magic formulas, catchwords, and simplifying theories do not stand much of a chance. The complex reality of day-to-day operation of companies in industry and the service sector demands highly diligent detailed work. In contrast to many a strategic concept in company management, the proof of truth — namely, effectiveness — shows up quickly and measu­rably. Errors rapidly produce dissatisfied customers and employees, and thus poor business results. This immediacy and measurability do not make it easy to shift the blame to others.

On the other hand, logistics tasks offer a variety of possible solutions. This is an area that calls for human creativity, drive, and perseverance. Methods of planning & control in company logistics, and particularly computer-supported tools, are after all merely supporting aids. Moreover, experience has shown repeatedly that the successful use of methods and tools depends heavily on the people who implement them.


Structure of the Suite of Courses

The suite of courses comprises 4 parts:

  • Part A (courses 1 through 3):  Fundamentals, Strategies, and Design Options in Integral Logistics Management
  • Part B (courses 4 through 9):   Strategic and Tactical Concepts of Planning & Control in Integral Logistics Management
  • Part C (courses 10 through 17):  Methods of Planning & Control in Complex Logistics Systems
  • Part D (courses 18 through 20):    Overview of Further Management Systems in the Enterprise

Parts A examines integral logistics management as embedded in the entrepreneurial activities as well as the strategic design of supply chains.

  • Course 1 deals with integral logistics management as embedded in the entre­preneurial activities of developing, manufacturing, using, and disposing of goods. The focus is on the business objects, target areas, basic principles, analyses, concepts, systemic and systematic methods, as well as technologies for the management of logistics systems both within and across companies.
  • Course 2 on supply chain design first considers basic principles for “make or buy.” It discusses models, opportunities and threats for different kinds of partnership between legally independent firms along the supply chain, followed by the management of supply chain risks.
  • Course 3, also on supply chain design, discusses location planning with its integrated determination of production, distribution, service, and transport networks as well as the sustainability in supply chain management.

Part B introduces the fundamental concepts and tasks of planning & control in logistics, operations, and supply chain management, as well as the corresponding software.

  • Course 4 starts with methods for business process analysis that are important for the systematic procedure for the design of systems for planning & control in supply chains. It develops a characteristic in planning & control with features that are tailored to the key performance indicators for measuring the degree of achievement of the company objectives in Course 1. This characteristic can be different for each product family. Finally, the course introduces four concepts for planning & control in supply chains dependent on this characteristic.
  • Courses 5 through 8 introduce the essential business objects and business processes for these four concepts:
    • Course 5: the MRP II / ERP concept
    • Course 6: the Lean / Just-in-Time concept and repetitive manufacturing
    • Course 7: the concept for product families and one-of-a-kind production
    • Course 8: the concept for the process industry.
  • Courses 5 through 8 present an overview of the business methods and their relation to the characteristic in planning & control. The respective courses develop detailed business methods in two simple but important cases: master planning in the MRP II / ERP concept and repetitive manufacturing in the Lean / Just-in-Time concept.
  • Finally, course 9 discusses ERP and SCM software for these four concepts as well as success factors for the implementation of this kind of software.

Part C offers a detailed discussion of planning & control methods in complex logistics systems. The reference model in Figure 2 (introduced in Section 5.1.4) summarizes the presents an overview of the planning processes according to — vertically — temporal range (long, medi­um, and short term) and — horizontally — all the planning & control tasks. The processes and tasks are shown in the logical temporal sequence.

Fig. 2                  Reference model of business processes and tasks in planning & control.

  • Courses 10 through 17 examine the individual tasks in succession (ex­ceptions: The dis­cus­sion of bid processing and customer order con­figu­ra­tion starts in Section 5.2.1 and continues in Section 12.1; course 16 dis­cusses cost estimating together with job-order costing). The introduc­tion to each section will refer back to the above reference model and show the task together with the temporal ranges of planning for which the task is particularly pertinent.
    • Course 10: Demand Planning and Demand Forecasting
    • Course 11: Inventory management and stochastic materials management
    • Course 12: Deterministic Materials Management
    • Course 13: Time management and scheduling
    • Course 14: Capacity management
    • Course 15: Order release and control
    • Course 16: Cost estimating, job-order costing, and activity-based costing
    • Course 17: Representation and system management of logistic objects
  • The methods in courses 10 through 17 provide a deeper under­standing of the concepts in courses 5 through 8. They comprise all that is required for designing the logistic systems that is not characte­rized by frequent order repetition. The detailed discussion of these methods provides the reader with an in-depth methodological foundation for understanding the Kanban and master planning techniques introduced in part B. Many of these techniques have their origins in the MRP II / ERP concepts. However, they also apply to the process industry as well as to product families with many variants, whereby they, of course, are applied to the business objects of those processes.

Part D provides an overview of some management systems that are closely inter­connected with Integral logistics management. Among these are strategic management, technology and product innovation management, the financial and cost accounting system, information, knowledge and know-how management, and system and project management. Part D shows, also and most especially, why and where the linkages exist. In any case, the information provided here is meant to serve as a summary.

  • Course 18: There is a special inter­connection between Integral logistics management and Total quality management or Six Sigma. Both management systems focus on fulfillment of concrete customer needs and thus belong to the area of operative implementation in the enterprise. The Japanese approaches give priority to a combination of concepts from both systems. The Toyota Production System for example, combines the lean / just-in-time concept with the jidoka concept, which is a concept for quality management.
  • Course 19: Systems engineering and project management are also very strongly connected with Integral logistics management. First, the associated tasks in their entirety can be understood as management systems. The design, development, and continual improvement of these systems must be approached using the methods of systems engineering and project management. Second, some tasks are unique (one-of-a-kind); for example, in facility location planning, in the project business, or in customer-specific services (production and procurement without order repetition). Third, some techniques are used in both management systems. These are, among others, scheduling techniques, such as the Critical Path Method (CPM) and the Gantt chart, and methods of financial evaluation of investments, such as the payback or Net Present Value methods.
  • Course 20: In connection with ERP and SCM software systems (see course 9), the connection of information management with Integral logistics management is clear. Information management can provide techniques and methods for realistic modeling of business processes and correct representation of logistic business objects. This makes possible suitable data management, which ensures that the necessary data on objects is available at all times in a detailed and up-to-date form.

Notes to the Reader

Definition of terms

Definitions of key concepts and terms usually appear in text boxes, or in special tables or lists, or in footnotes. The terms being defined always appear in italics.
  • The definitions of terms sometimes take the form of an indented bulleted list. This form is useful particularly where one and the same characteristic has varying degrees of expression.
  • A gray background highlights important principles, examples, points to remember, prescribed procedures, steps of a technique, or solutions of selected scenarios and exercises. The reader will often find a reference to a figure.

Optional sections

  • Some sections of the suite of courses are not essential reading for an understanding of the subsequent material. An asterisk (*) identifies these optional sections.
  • Also optional in this sense are the additional definitions provided in footnotes. They appear for the sake of completeness or as information for practitioners or for readers coming from related disciplines.

Abbreviations

We use the following abbreviations in the text:

  • cf. for “compare”
  • R&D for “research and development”
  • ID for “identification” (for example, item ID)
  • IT for “information technology”

Search for keywords with numerous occurences

Some keywords will yield no useful search result, due to their numerous occurrences in the text. However, by clicking the respective keyword in the following list, the search will result in the section where the keyword is defined.

Please direct your questions or comments to: Paul.Schoensleben@ethz.ch.