logistics structures the supply network around three main factors: the flow of materials, the flow of information and the time taken to respond to demand from source of supply. The scope of the network extends from the ‘focal firm’ in darker red at the centre across supplier and customer interfaces, and therefore typically stretches across functions, organisations and borders. The network is best seen as a system of interdependent processes, where actions in one part affect those of all others. The key ‘initiator’ of the network is end-customer demand on the right: only the end-customer is free to make up their mind when to place an order. After that, the system takes over.
Logistics has been emerging from Peter Drucker’s shadowy description as ‘the economy’s dark continent’ for some years.1 From its largely military origins, logistics has accelerated into becoming one of the key business issues of the day, presenting formidable challenges for managers and occupying some of the best minds. Its relatively slow route to this exalted position can be attributed to two causes. First, logistics is a cross-functional subject. In the past, it has rightly drawn on contributions from marketing, finance, operations and corporate strategy. Within the organisation, a more appropriate description would be a business process, cutting across functional boundaries yet with a contribution from each. Second, logistics extends beyond the boundaries of the organisation into the supply chain. Here, it engages with the complexities of synchronising the movement of materials and information between many business processes. The systems nature of logistics has proved a particularly difficult lesson to learn, and individual organisations still often think that they can optimise profit conditions for themselves by exploiting their partners in the supply chain. Often they can – in the short term. But winners in one area are matched by losers in another, and the losers are unable to invest...
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