LOGISTICAL PLANNING PROCESS – PLANNING AND DESIGN METHODOLOGY
To match the changing environment in the logistics due to the changes in the markets, competitors, suppliers and technology, there is a need for systematic planning and designing a methodology to formally include the relevant consideration and effectively evaluate the alternatives for a flawless Logistical System.
The logistics relational and operating environment is constantly changing. Even for the established industries, a firm’s markets, demands, costs and service requirements change rapidly in response to the customer and competitive behavior. Just as no ideal logistical system is suitable for all enterprises the method for identifying and evaluating alternative logistics strategies can vary extensively. However there is a general process applicable to most logistics design and analysis situations. The process can be segmented into three phases: problem definition and planning, data collection and analysis, and recommendations and implementation. The following discussion describes each phase in detail.
PHASE I – Problem Definition and Planning
We must understand and assess the present industrial environment, study the characteristics of present industrial environment, study the characteristics of present system, and find out if any modifications are required. In feasibility assessment, there are following three categories.
|a) Situational- Analysis||The purpose of the situational analysis is to provide senior management with the best possible understanding of the strengths and weaknesses of the existing logistics capabilities for both current and future environment. The situational analysis is the performance of measures and characteristics that describe the current logistics environment through:|
|Internal review||Examines all major resources such as work force, equipment facilities, relationships and information These are required to understand if customers’ requirements are met. Internal review is made regarding customer service, materials management, transportation, warehousing, and inventory.|
|Market Assessment||This is required to assess customers’ desires. It should focus on external assessment like suppliers, customers and consumers.|
|Technological Assessment||The new and better technologies which are available in the areas of
transportation, materials handling, storage facilities, packaging, and assessed and compared with the existing facilities. Modes of better form of communications have also to be looked in to.
|b) Supporting Logic Development||This consists in integrating the findings of internal review, market assessment and technological assessment made above. Here, we study the following:|
|Justification||Potential benefits change must be clearly identified.It has also to be justified if detailed research and analysis is necessary to implement the new logistical system.|
|Identification||Areas where improvements can be made should be identified, like for
example, streamlining inventory, realigning distribution centers.
|Redesign Alternatives||This includes a) knowing the current procedures and system
b) Identifying the most likely alternative procedures and system.
c) Constructing flow diagrams
|c) Cost Benefit Estimates||The final feasibility assessment is a preplanning estimate of the potential benefits of performing a logistic analysis and implementing the recommendation. Benefits should be categorized in terms of:|
|Service Improvements||This refers to increasing the loyalty of the existing customers to the firm’s products, attracting new customers.|
|Cost Reduction Benefits||This indicates whether installing the new, logistical system will reduce the financial expenses whether will reduce amount of capital deployed, decrease variable expenses.|
|Cost Prevention||Cost prevention reduces involvement in programs and operations experiencing cost increases. Any cost prevention justification is based on an estimate of future conditions and therefore is vulnerable to some error. E.g. many material – handling and information technology upgrades are at least partially justified through financial analysis of the implications of future labor availability and wage levels.
This comes after Feasibility Assessment. It involves the following categorizations:
|Statement of Objectives
|It documents cost and service expectations of the logistical system revisions in measurable factors. The objectives define time frame for revisions, specific performance requirements, like inventory availability, customer shipments requirements, mixed commodity orders, core customers.|
|Statement of Constraints||It can happen that senior management will place restrictions on the scope of permissible system modifications. Restrictions may be in terms of large financial investments. Again, the management may agree for modifications in some department only. Therefore, a statement of constraints gives a well defined staring points and overall perspective for the planning effort.|
|Managerial Measurement Standards||Managerial performance standards must be fixed. Standards must be with respect to overall systems performance. But the goals fixed must not be impractical.|
|Analysis Procedures||Once the project objectives and constraints are developed, planning must identify alternative solution and select the best approach. Analysis techniques range from simple manual methods to elaborate computerized procedures.|
|Project work Plan||A project work plan must be determined and the resources and the time
required for completion identified. Project management is responsible for the achievement of the expected results within the time and budget constraints.
|PHASE – II Data Collection And Analysis
Once Feasibility Assessment and Project Planning are completed Phase II focuses on Data Collection and Analyses which includes the following:
|1. Assumptions and Data Collection
This activity builds on the feasibility assessment and project plan to develop detailed planning assumptions and identify data collection requirements
|Define Analysis Approach and Analysis Techniques||The analytical approach ach uses standard numerical methods to evaluate each logistical alternative. The common techniques are simulation and optimization Simulation techniques are used when significant uncertainty Optimization involves the use of linear programming or mathematical programming to evaluate alternatives and select the best one.|
|Define and review Assumptions||For planning purposes, the assumptions define the key operating characteristics, variables and economics of current and alternative systems. Business assumptions define the characteristics of the general business environment such as trends in the market, consumer wants, product changes, and competitive actions. Management assumptions include definition of alternative distribution facilities, transport modes, logistic processes and fixed and variable costs. Analysis assumptions define the constraints and limitations such as problem size, solution methodology.|
|Identify Data Sources||Detailed data must be collected and organized to support analysis. When Data are extremely difficult to collect or when the necessary level of accuracy is unknown, sensitivity analysis can be used to identify data collection requirements. Data regarding sales
and customer orders, specific customer data, costs associated with manufacturing and purchasing, modes and rates of transportation, are all relevant for analysis.
|Collect data||Once data sources have been identified, the process of collection of data begins. Care should be taken to collect latest data that do not contain errors. Also, the data collected should be useful for logistical analysis.|
|Validation of Data||Validation of data is required to verify that the results accurately reflect reality. The objective of validation is to increase management credibility regarding the analysis process. If in case the process does not yield credible results, management will hold little confidence in the alternative analysis.|
The analysis uses the technique and data from the previous activity to evaluate logistics strategy and tactical alternatives. This consists of the following:
|Define analysis questions||The questions asked should be specific and pertaining to alternatives,
which are suggested. For Example question regarding a distribution center should pertain to evaluation of combinations of locations. In case of inventory analysis, questions should be focused on alternative availabilities and uncertainty levels of Mock.
|Complete and validate Baseline analysis||Baseline analysis other current logistics environment is made. Potential errors may result from incorrect or inaccurate input data, inappropriate or Inaccurate analysis procedures, or unrepresentative validation data. These must be rectified.|
|Complete the Alternative analysis||Once the approach has been validated, the next step is to complete an evaluation of the various alternatives available. Relevant performance characteristics of each alternative must be determined. The options may include changes in management policies and practices with regards to number of distribution centers, inventory levels, transport shipment size,etc.|
|Complete the sensitivity analysis||The best performing alternatives are targeted for further sensitivity analysis. Uncontrollable factors such as demand, competitive actions are used (for analysis purposes) to assess the ability of potential alternatives to operate under a variety of conditions. E.g.: Suppose the alternative strategy suggest five distribution centres. Sensitivity analysis investigates whether the five distribution centres will still be a correct decision if the demand increases or decreases by 10%.|
|PHASE III – Recommendations and Implementations|
|1. Development of Recommendations|
|Evaluate costs and benefits||After selection from among the best of the alternatives, an analysis comparing the present cost and service capabilities with projected conditions must be made for the alternative. Benefits can be either in terms of one time savings or recurring operational economies or both.|
|Develop a risk Appraisal||Risk appraisal considers the probability that the planning environment will match the assumptions. It also considers the potential hazards related to system changeover. External risks include uncertainty associated with demand, competitive actions, etc. Internal risks include labour and productivity considerations, changes in resource accessibility.|
|Develop presentation||A presentation has to be made to the management which identifies
rationalizes and justifies the suggested changes. The presentation and the accompanying report must justify the changes in terms of service,
expenses, asset utilization, productivity ‘Improvements. The presentation should incorporate extensive of graphs, maps and flow charts.
|Define Implementation plan||Implementation plan has to be defined in terms of individual events, their Sequence and their dependencies. While implementing the plan, it should Be ensured that the plan must provide individual assignment responsibility and accountability.|
|Schedule Implementation||The schedule of implementation must allow time for acquiring facilities and equipment, negotiating agreements, developing procedures and training.|
|Implement||The final task of the logistical planning is the implementation. Implementation must include adequate controls to ensure the performance occurs on schedule and that acceptance criteria are carefully monitored.|
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