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.

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 CHIEF EXECUTIVE

COMMERCIAL MANUFACTURING MARKETING

INVENTORY MRP FORE-

CONTROL CASTING
PURCHASING
ORDER CUSTOMER
PROCESSING SALES
RAW MATERIAL
WAREHOUSING ORDER
CREDIT INTERFACE
AUTHORIZATION FINISHED GOODS
FACTORY FINISHED
MANAGEMENT GOODS
INFORMATION TRANSPORTATION FIELD
SYSTEM
WARE-
HOUSING
INDUSTRIAL
FACILITIES
PLANNING ENGINEERING

PRODUCTION
SCHEDULING

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.

3
 CHIEF EXECUTIVE

COMMERCIAL MANUFACTURING MARKETING

INVENTORY
CONTROL FINISHED GOODS
FORECASTING
FACTORY

INDUSTRIAL
CREDIT PHYSICAL
ENGINEERING
AUTHORIZATION DISTRIBUTION

PRODUCTION CUSTOMER
SCHEDULING SALES ORDER
MANAGEMENT
INFORMATION SERVICING
SYSTEM

MATERIALS
MANAGEMENT FINISHED
FACILITIES GOODS
PLANNING FIELD
WAREHOUSING
MRP

ORDER
PROCESSING
PURCHASING

TRANSPORTATION

RAW MATERIAL
WAREHOUSING FINISHED GOODS
INVENTORY
CONTROL

STAGE I LOGISTICAL ORGANIZATION

CHIEF EXECUTIVE

4
COMMERCIAL MANUFACTURING PHYSICAL MARKETING
DISTRIBUTION

MANAGEMENT PRODUCTION
INFORMATION SCHEDULING TRANSPORTATION FORECASTING
SYSTEM

INDUSTRIAL ORDER
FACILITIES ENGINEERING PROCESSING
PLANNING

MATRL. FINISHED GOODS

MAGT INVENTORY
CONTROL

MRP
FINISHED
GOODS
FIELD
PURCHASING
WAREHOUSING

FINISHED
RAW MATRL. GOODS
WAREHOUSG FACTORY
WAREHOUSING

RAW MATRL
INVENTORY
CONTROL CUSTOMER
SALES ORDER
SERVICING

CREDIT
AUTHORIZATION

DISTRIBUTION
PLANNING

STAGE II LOGISTICAL ORGANIZATION

CHIEF EXECUTIVE

5
 LOGISTICAL EXECUTIVE

PLANNING CONTROLLER

LOGISTICAL LOGISTICAL
SUPPORT RESOURCE
PLANNING

PACKAGING
PRODUCT PRODUCTION
MARKET SCHEDULING
FORECASTING
MATERIAL
HANDLING
ENGINEERING REQUIREMENT CAPACITY
PLANNING PLANNING

WARE ORDER
HOUSING PROCESSING MRP

INV. FUNCTIONAL
CONTROL PLANNING

TRANSP. &
TRAFFIC

LOGISTICAL OPERATIONS

PURCHASING MANUFACTURING PHYSICAL

SUPPORT DISTRIBUTION

STAGE III LOGISTICAL ORGANIZATION