Logistics and Supply Chain Management, 4th Edition

OVERCOMING THE BARRIERS TO S U PPLY CH A I N INTE G R ATION

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that flows from the marketplace at one end of the pipeline to supply points at the

other will increasingly shape the organisation – not the other way round.

Such a change will be accelerated by the trend, commented upon earlier in this

book, for companies to focus on what might be termed ‘core competencies’ and

to outsource everything else. In other words, the business of tomorrow will most

likely only perform those activities in the value chain where they believe they have

a differential advantage, and all other activities will be performed by partners,

co-makers and logistics service providers. In cases such as this the need for co-

ordination of information and materials flows between entities in the supply chain

becomes a key priority, further highlighting the central role of logistics as a

process-oriented management task.

In this brief review of the challenges facing the organisation in a changed envi-

ronment we have emphasised the need to break down the ‘walls’ that traditionally

have fragmented the organisation and impeded the cost-effective achievement of

customer service requirements. Clearly there is a need for ‘pattern breaking’ on

a major scale. The only way such significant change will be achieved is through

leadership from the very top of the organisation. It is no coincidence that the hand-

ful of companies that have achieved excellence in logistics have been through a

process of change that was driven from the top. Companies like Xerox, Hewlett

Packard, Nokia and Philips have experienced, and are still experiencing, often

painful change as they transform themselves from functionally based businesses

to market-facing businesses. Whilst the impetus for change differs from company

to company, the engine of change has been the same – the search for superior

performance through logistics management.

Benchmarking

The intense level of competitive activity encountered in most markets has led to a

new emphasis on measuring performance not just in absolute terms, but rather in

terms relative to the competition, and beyond that to ‘best practice’.

In the past it was usually deemed to be sufficient simply to measure internal

performance. In other words, the focus was on things such as productivity, utili-

sation, cost per activity and so on. Whilst it is clearly important that such things

continue to be measured and controlled it also has to be recognised that such

measures only have meaning when they are compared against a relevant ‘metric’

or benchmark. What should be the metric that is used in assessing logistics and

supply chain performance?

There are in fact several dimensions to the measurement problem. The first

key point to make is that the ultimate measuring rod is the customer, hence it is

customers’ perceptions of performance that must be paramount. Secondly, it is

not sufficient just to compare performance to that of immediate competitors.

We must also compare ourselves to the ‘best in the class’. Thirdly, it is not just

outputs that should be measured and compared but also the processes that

produce that output. These three ideas lie at the heart of what today is termed

competitive benchmarking.