Logistical organization Logistical functions were not receiving any importance ptior to 1950.

They were treated as support functions and dispersed in the organization. Post war business woke up to the fact that logistics played very important role in war. As so many concepts came from warfare to business logistics also began to receive importance gradually. Organization underwent series of changes as new concepts took hold in business. As these dispersed functions reported to separate functional heads no cross-functional links existed between them. [ref. Log. visual TRADITIONAL ORGANIZATION OF
LOGISTICALLY RELATED FUNCTIONS]. At

that time it was thought that commercial,

manufacturing and marketing were the only functions important to business. Post 1950, as reorganization started, some of the logistical functions were brought together and grouped but these groups still reported to different heads. When this regrouping was done there was lot of resentment in organizations as some functions were deleted from some functional heads. These functional heads felt that their importance is being depleted and resisted these moves. But as functional proximity started yielding performance improvement this resistance mellowed and organizations accepted the change. Stage I organization The grouping explained above resulted into stage I organization. [ref. Visual below]. Materials department dealt with inbound logistics and materials department reported to manufacturing department. Marketing dealt with customer service. Traditional departments remained as they were. As a result there was no function with direct responsibility for inventory. Trade off points between transportation & inventory were ignored.

1

CHIEF EXECUTIVE

COMMERCIAL INVENTORY CONTROL ORDER PROCESSING CREDIT AUTHORIZATION
MANAGEMENT INFORMATION SYSTEM FACILITIES PLANNING

MANUFACTURING MRP PURCHASING RAW MATERIAL WAREHOUSING FINISHED GOODS FACTORY TRANSPORTATION INDUSTRIAL ENGINEERING
PRODUCTION SCHEDULING

MARKETING FORECASTING CUSTOMER SALES ORDER INTERFACE FINISHED GOODS FIELD WAREHOUSING

TRADITIONAL ORGANIZATION OF LOGISTICALLY RELATED FUNCTIONS

2

Stage II organization, 1960 to early 1970 [ref to visual below] A new function at higher level called physical distribution was created reportable directly to the CEO of the company. This department assumed direct responsibility for outbound logistics. Inbound logistics still remained with materials management. Concept of integration of logistical functions is now well accepted. Logistics started contributing to the strategy of the company as the head of physical distribution function began to be a party strategic decisions. Concept of logistical information system was still not around as a result cross functional integration was not considered. Stage III organization, 1980 [ref to visual below] Single authority for logistics was created at the top most level in the management hierarchy. Logistical functions are grouped as planning functions, controlling functions and operting functions. Goal of this kind of organization is strategic management of logistical functions. Clear cut areas of responsibility and overall integration facilitated by LIS. This type organization is rarely seen in practice. But we can strongly feel the trend towards moving in this direction. Logistical Organization Stage IV Flatter or horizontal organization, where span of control is very large. Flow of instruction is limited as concept of self directed work teams is introduced. Teams have clear goals and try to achieve them without leaning on top largely for direction. Logistical Organization Stage V (Organization of future) An electronically connected virtual organization. In this phase of development logistical organization is not real any more. All logistical activities are transacted by relevant functions of management with electronic support. This phase resembles the situation before logistical internal integration. But now, integration remains in the form of information support.

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CHIEF EXECUTIVE

COMMERCIAL
INVENTORY CONTROL

MANUFACTURING

MARKETING

FINISHED GOODS FACTORY

FORECASTING

CREDIT AUTHORIZATION

INDUSTRIAL ENGINEERING

PHYSICAL DISTRIBUTION

MANAGEMENT INFORMATION SYSTEM

PRODUCTION SCHEDULING

CUSTOMER SALES ORDER SERVICING

MATERIALS MANAGEMENT FACILITIES PLANNING MRP

FINISHED GOODS FIELD WAREHOUSING

ORDER PROCESSING PURCHASING TRANSPORTATION RAW MATERIAL WAREHOUSING

FINISHED GOODS INVENTORY CONTROL

STAGE I LOGISTICAL ORGANIZATION CHIEF EXECUTIVE

4

COMMERCIAL

MANUFACTURING

PHYSICAL DISTRIBUTION

MARKETING

MANAGEMENT INFORMATION SYSTEM

PRODUCTION SCHEDULING

TRANSPORTATION

FORECASTING

FACILITIES PLANNING

INDUSTRIAL ENGINEERING

ORDER PROCESSING

MATRL. MAGT

FINISHED GOODS INVENTORY CONTROL

MRP FINISHED GOODS FIELD WAREHOUSING

PURCHASING

RAW MATRL. WAREHOUSG

FINISHED GOODS FACTORY WAREHOUSING

RAW MATRL INVENTORY CONTROL

CUSTOMER SALES ORDER SERVICING

CREDIT AUTHORIZATION DISTRIBUTION PLANNING STAGE II LOGISTICAL ORGANIZATION CHIEF EXECUTIVE

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LOGISTICAL EXECUTIVE

PLANNING

CONTROLLER

LOGISTICAL SUPPORT

LOGISTICAL RESOURCE PLANNING

PACKAGING

PRODUCT MARKET FORECASTING REQUIREMENT PLANNING

PRODUCTION SCHEDULING

MATERIAL HANDLING ENGINEERING

CAPACITY PLANNING

WARE HOUSING

ORDER PROCESSING

MRP

INV. CONTROL

FUNCTIONAL PLANNING

TRANSP. & TRAFFIC

LOGISTICAL OPERATIONS PURCHASING MANUFACTURING SUPPORT PHYSICAL DISTRIBUTION

STAGE III LOGISTICAL ORGANIZATION

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