Logistics managers: who needs them? Walther Ploos van Amstel

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Logistics managers: who needs them?
Logistics performance is important…
Walther Ploos van Amstel
Summary of thesis (2002)
Ploos van Amstel, W. (2002). Het organiseren van logistieke
beheersing. Boom Koninklijke Uitgevers.
Every manufacturing company has a physical goods flow. This gets
moving if company staff, customers, suppliers or logistics service
providers take logistics decisions about the development of the
goods flow. The way in which a company organises the flow of
goods, the logistics, can contribute to the realisation of the
company’s objectives. Logistics influences customer satisfaction,
the company’s costs and operating capital associated with stocks
and capacities. It even influences the speed with which the
company can respond to new wishes from customers: new
products, new services and new distribution channels.
The demands that individual customers make on the product and
the delivery time, as well as on the service during and after
delivery, are becoming stricter. At the same time, the company
must pay close attention to costs and operating capital from the
point of view of shareholder value. Quality and cost objectives must
be simultaneously realised. Logistics is therefore under pressure in
many companies.
Logistics is no longer confined to the four walls of the company.
Collaboration in market and product development and outsourcing
require intensive collaboration between companies: supply chain
management. A successful supply chain demands a perfect internal
logistics chain within each of the participating companies.
Companies therefore develop an integrated logistics concept. A
well-chosen balance between the logistics structures, the logistics
control model, the logistics ICT and the logistics organisation.

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Good logistics performance demands logistics control
It nevertheless appears time and time again that the logistics
coordination in companies is difficult to achieve. The logistics
performance is influenced by the decisions taken by people. These
logistics decisions are taken in several, often functionally oriented
departments. Such departments have their objectives. The taking of
these individual logistics decisions therefore does not automatically
lead to products ultimately arriving at the customer with the right
specifications. The division of tasks between people and
departments means that coordination is continually required
between the interconnected steps in the goods flow.
Logistics control focuses on realising this desired
interconnection
Logistics control is: the organisation, the planning and the control of
the goods flow, from the development, the purchasing, via
manufacturing and distribution to the end customer, with the aim of
satisfying the needs of customers at low cost and with controlled
use of capital
If a company has long delivery times or can afford large stocks, the
company can control the steps in the goods flow more or less
independently from one another. The necessity for integrated
coordination is then limited. If the requirements from the
environment increase, the need for coordination also increases. If
mutual coordination, for instance by means of direct contact or by
telephone or email, is inadequate to realise this coordination,
additional coordination mechanisms are required. There are
companies that then decide to centrally organise the logistics
control in one department that must monitor the goods flow from a
control tower. Other companies, however, choose to keep the
logistics control decentralised at functional departments such as
manufacturing, purchasing and sales.
The organisation is a key factor for logistics control

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The logistics organisation determines the level of integration with
which people who take logistics decisions approach the logistics.
The logistics organisation also determines the emphases and
priorities in the action of the people.
The logistics organisation involves:
1. The introduction of several levels in the logistics control.
2. Distinguishing the organisational units to be controlled (for
example, manufacturing and distribution units) as logistics
organisational units that independently perform part of the
logistics processes.
3. Combining decisions for logistics control at organisational units.
4. Making connections between the organisational units.
5. Subdividing and connecting of task areas: the activities for the
logistics control are ultimately assigned to people and groups of
people and the tasks and responsibilities are determined.
Knowledge about the logistics organisation is still
inadequate…
A lot has been achieved in the field of logistics management.
Nevertheless, knowledge about the logistics organisation is still
inadequate. This study therefore aims to produce scientific
knowledge about the organisation of logistics control by
approaching the subject from the point of view of organisational
theory and by comparing it with day-to-day practice. The challenge
for this study is to develop design models that assist logistics
designers at manufacturing companies in the evaluation and design
of the logistics organisation.
The objective will be achieved in four steps:
1. The definition of logistics control and the decisions that involve
this logistics control.
2. The identification of organisational theories about organising in
general and integration/coordination in particular.
3. The development of design models for the logistics
organisation based on organisational theories.

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4. The evaluation of the design models in practice by performing
single and cross-case analysis.
The logistics organisation is an organisational theory question and
must therefore be answered on the basis of organisational theory
principles. Organisational theory has several perspectives for
examining organisations. For this study, the contingency approach
has been chosen. The way in which an organisation should be
designed and equipped depends upon the situation. It is precisely
the limitation of employing this one approach that offers
possibilities for observing and evaluating the functioning of the
design models in practice.
Division of labour and coordination are the centralised
organisational theory subjects for logistics control …
Organisational units arise from the division of labour: jobs,
departments, offices and divisions. The division of labour facilitates
the specialisation of people and resources on a particular
homogenous task, so that higher effectiveness, quality and
efficiency of performance can generally be achieved. By means of
further differentiation, differences are also created in goals, time
perspectives, style of interaction and the level of formalisation of
structures.
Every form of the division of labour represents a break in the
coherence in a wider context. By means of the division of labour,
boundaries are created: between several levels in the organisation
and the hierarchical position of people, between jobs, departments
and disciplines, between the company and suppliers, customers and
service providers and between countries, cultures and markets. The
realisation of the right logistics performance is not easy therefore.
The division of labour can lead to fairly autonomous and
uncoordinated plans by and between departments and ultimately
even to sub-optimal situations and poor logistics performance.

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Coordination aims to restore the broken connection; how can the
organisational units be forged into a single unit in a wider context.
As far as possible, the logistics control takes place in separate units
of the logistics structures by means of well-designed tasks,
adequately trained people and regulations and procedures. To
clarify the position in the organisation, task and job descriptions are
made, where necessary, and tasks and instructions are published
for the performance of activities. The mutual coordination can then
take place in advance by means of planning.
Increasing coherence, more severe market demands and greater
complexity require the incorporation of more and more radical
coordination mechanisms that are designed to process exceptions
as much as possible: permitting forms of logistics leeway, creating
autonomous logistics organisational units, investing in logistics ICT
and the realisation of horizontal and lateral relationships.
Permitting leeway is undesirable from the point of view of logistics
costs and benefits. Carrying the implementation of autonomous
organisational units too far can reduce economies of scale,
synergetic effects can be wasted and the coherence between the
organisational units can even be lost entirely. It is doubtful whether
logistics ICT is adequate to achieve logistics control.
In the case of horizontal and lateral relationships, coordination
and/or decision-making relationships are incorporated throughout
the hierarchy. In order to realise rapid and especially improved
coordination between organisational units, the emphasis shifts from
a hierarchical connection to a horizontal connection between
organisational units. Horizontal and lateral relationships can be
created by means of informal communication, formal
communication, formal teams, coordinators and the matrix
organisation. The implementation of these relationships places a
heavier burden on the organisation. Non-essential, but excessive,
built-in mechanisms are regarded as annoying. A conscious choice
is essential, therefore.

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Horizontal and lateral relationships for logistics control
The question is then which contribution the realisation of horizontal
and lateral relationships, for instance the appointment of a logistics
manager, can make to the improvement of the logistics
performance.
If the organisational theory insights into the additional coordination
mechanisms are applied to the organisation of the logistics control,
two design models can be distinguished: a decentralised and a
centralised logistics organisation.
Decentralised logistics organisation…
In the decentralised logistics organisation, the logistics decisions are
decentralised with the functional departments. Logistics
coordination is realised by means of informal or formal coordination
within the hierarchical structure.
In the case of informal coordination, the coordination is primarily
facilitated by means of guidelines, regulations, simplified rules,
tasks, procedures and objectives. Direct, informal mutual
coordination only takes place between people when exceptions
occur. Also in the case of formal coordination, the coordination is
primarily facilitated by means of guidelines, regulations, simplified
rules, tasks, procedures and objectives. Additional coordination is
realised by regularly bringing together people from the functional
departments in particular formal structures.
Centralised logistics organisation…
In the case of a centralised logistics organisation, additional logistics
coordination is organised within the organisation structure in a
logistics department. For an autonomous organisational unit, the
logistics structures are coherently controlled at goods flow level.
Two emphases are possible: coordinator-integrator or integrator-
manager
The logistics department as coordinator-integrator fulfils a role that
is directed towards stimulating the coordination between several

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departments, but without the formal authority to take decisions. As
coordinating department, the logistics department as integrator-
manager fulfils an integrating role with particular binding powers.
The logistics department is given powers to overcome differences
between departments in the decision-making. The logistics
department follows the implementation of the logistics planning,
draws attention to abnormalities and makes actual adjustments.
Logistics complexity and logistics predictability define the
logistics organisation
In the case of low logistics complexity, it is relatively easy to make
the logistics plan. The coordination can be formally or informally
realised within the existing hierarchical structure: with direct mutual
coordination between the functional departments or between
people.
If the logistics complexity increases, considerable effort is required
to (re)make the logistics plan. This demands greater effort from the
departments. A logistics (staff) department can fulfil a coordinating
role in the preparation of the logistics plan. The decision-making is
the responsibility of the functional departments.
If the logistics predictability decreases, evaluation and adjustment
is increasingly required to keep the goods flow on the right track.
This means that information about the logistics execution must be
compiled time and again and a new logistics plan must be drawn
up. In a situation in which the logistics complexity is low, this
causes few problems. Because the logistics complexity is low, the
information is often on hand and the consequences of decisions for
the different departments are easy to keep track of. Coordination
can be realised in direct, informal contact between people, and ad
hoc in the case of problems.
If the logistics complexity increases and the logistics predictability
decreases, it becomes increasingly complex to provide insight into
the consequences of decisions. Achieving an ‘optimum’ solution for
the entire organisation requires a greater effort. In a situation with
a high logistics complexity and a low logistics predictability,

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coordination cannot only be realised via the existing hierarchical
structure and formal consultation. The logistics department not only
has a coordinating role in the preparation of the plan, but also
especially in the logistics control of the decision-making with
respect to deviations. The logistics department must be able to
influence the decision-making or even have the powers to take
decisions.
Confrontation with reality shows that ….
The design model for a decentralised logistics organisation is
suitable for situations with a low logistics complexity and a high
logistics predictability. Structurally sound logistics performance can
be achieved.
If there is a decentralised logistics organisation in a company with a
high logistics complexity and a high logistics predictability, poor
logistics performance is achieved. The design model is therefore not
suitable in this case.
The question then is whether the design model is suitable for a
centralised logistics organisation with a high logistics complexity
and a low logistics predictability. The cases show that this is not
automatically the case. Three companies that decided to centrally
organise their logistics control initially improved their logistics
performance. Later on, the performance deteriorated again.
However, one company decided to gradually develop towards a
centralised logistics organisation and was able to structurally
improve the logistics performance. Therefore, the question whether
the design model is suitable for a centralised logistics organisation
with a high logistics complexity and a low logistics predictability,
cannot be answered affirmatively just like that.
Explanations for the lack of success of a centralised logistics
organisation can be found in:

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1. The question is whether structurally sound logistics performance
can be achieved in situations with a high logistics complexity and
a low logistics predictability.
2. The inability to maintain the attention and priority for logistics.
3. The one-off centralised organisation of the logistics control
instead of a step-by-step approach.
4. The laborious implementation of ICT.
5. Not allowing logistics managers enough time to structurally
improve the logistics performance.
6. Not showing a structural result quickly enough or making visible
the positive influence of logistics on the company’s objectives.
7. Being unable to overcome resistance.
8. Lack of support from the management.
9. Being unable to make sufficient distinction in the distribution of
logistics decisions at the goods flow and departmental level.
10. Other explanations that do not form part of this study.
Further investigation is required into
The questions for further investigation stem from five points of
view:
1. The coherence within the integrated logistics concept.
2. The functioning of the logistics organisation.
3. Improving the empirical basis.
4. The analysis of the issue based on other points of view from
the organisational theory kaleidoscope.
5. The logistics organisation in the case of supply chain
management.