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materials management definition by abe22

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									Proceedings of 5th International Symposium on
Intelligent Manufacturing Systems, May 29-31, 2006: 283-291
Sakarya University, Department of Industrial Engineering



       SWOTH ANALYSIS OF A TRANSPORTATION COMPANY IN WAY OF
                BECOMING A LOGISTICS ORGANIZATION


                                  Assist. Prof. Dr. Pınar KILIÇOĞULLARI
                                   Kocaeli University Engineering Faculty
                                     Industrial Engineering Department
                                               Kocaeli / Turkey
                                          e-mail: pinarki@kou.edu.tr
                                       Tel. No: 0262 335 1168 (2145)
                                              Fax:0262 335 2812


                                               Sezai IġIK, MSE
                                    Kocaeli University Engineering Faculty
                                      Industrial Engineering Department
                                               Kocaeli / Turkey
                                         e-mail: sezaiisik@yahoo.com
                                        Tel. No: 0262 335 1168 (2145)
                                              Fax: 0262 335 2812



                                                      ABSTRACT

The term logistics, which is heard a lot in these days, expresses different activities
performed during a production process; such as planning, procurement, transportation and
the storing of materials.


In parallel to the technological advancements, rates and varieties of production as well as
its distribution channels are growing in number and causing complexities in logistics
activities of companies. Starting from the establishment of demand until the final
shipping is materialized , the companies is to determine material requirements and
necessary stock levels, to establish storage procedures of the end-products and to choose
their distribution strategies.


The aim of this study is to define the logistics system and the system management, to
evaluate the functions of a logistics company by a SWOTH analysis.

SUBMISSION AREA: Virtual World
1. Introduction:
The phrase of logistics was first used in military terminology, afterward used by the private
sector as well to express distribution functions.
Although it had formerly been used only to mean distribution, today, in parallel to the
establishment of logistics companies and logistics branches of production plants, its
meaning has expanded to cover production planning, inventory control and transportation
functions.
The functions contained within the scope of logistics imply that, these functions are to be
performed as economically as possible. Due to the fact that in logistics functions the
minimization of costs is essential, it will be wise to make use of operations research
techniques.

2. The Concept of Logistics
There is not any generally accepted definition for logistics, but there are different
explanations that have almost the same meaning. In business applications, logistics is
defined shortly as “the art of material management”.1 (Timur, 1998) this expression covers
materials movements starting from the source of raw material to the delivery of the
finished product to the end user.
Another definition for the logistics is “...to provide the requirement to the right place and at
the right time.”
        The most valid and accepted definition of Logistics at the present time is made by
The Council of Logistics Management. This definition says that, logistics is “The process
of planning, implementing, and controlling the efficient, cost effective flow and storage of
raw materials, in-process inventory, finished goods and related information from point of
origin to point of consumption for the purpose of meeting customer requirements. 2
(Tunable 2002)
 Within the scope of this definition, customers are “production sites” for suppliers,
“consumer’s houses” for retailers, and “warehouses” for wholesalers.
Supply chain is a string like structure composed of suppliers, producers, wholesalers,
retailers and customers. Within this structure the communication and transportation
between the links of the chain is enabled by logistics managers.
The Business Logistics Management is defined as; ”… in order to provide value in time
and place, the planning, organizing and controlling of transportation and storage functions
from the point of procurement of raw material to the flow of products to end users with
sufficient customer services together with necessary expenditures in supplying these
services”. 3 (Kocamaz, 1988)
In parallel with production and service processes along the supply chain, logistics
functions are taken into consideration in three levels. These are; procurement logistics,
production logistics and distribution logistics.




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2.1 Logistics System.
     The system is composed of elements.
     There exist relations among these elements
     The system has a specific goal.
We know that the logistics system has different elements such as; storage, transportation,
stocking, and transportation. Goods are transported, kept in a storage space, and from there
transported to required locations on necessary times. That is, there exist apparent relations
among these elements. Besides, due to the fact that the objective of logistics is to reduce
costs and to enhance customer satisfaction, the concept of logistics well suits to system
definition.
The logistics system directly affects the level of efficiency and effectiveness in the process
of transforming of raw materials into finished product as well as in services rendered to
customers.
More and more organizations worldwide want to develop products for global markets. At
the same time, they need to source material globally to be competitive. One of today's
trends to solve this problem is outsourcing logistics or using third-party logistics (3PL) to
manage complex distribution requirements.
Organizations have developed strategic alliances with 3PL companies all over the world to
manage their logistics operations network. These alliances are also known as logistics or
supply chain outsourcing and contract logistics.
Logistics system comprises the following elements:
     Upper management
     Company site
     Customer services
     Sale forecast
     Procurement
     Stock and materials management
     Storing
     Distribution
     Management of transportation fleet
     Management information systems
2.2 Goals and Stages of Logistics Management.
The goals of logistics within the organization are to value;
     The right material and product, at the right time,
     In the right amount and at the right place,
     At the Right quality and at the least cost.
Logistics is the scientific form of planning, commanding, and controlling of materials and
information flow within a system.4 (ĠĢletmede Lojistik, 3D, 2002)



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For a production business, logistics is to be considered in three steps:
     1. Purchasing logistics
     2. Production logistics
     3. Distribution logistics
2.2.1 Purchasing Logistics.
In order to meet the demands, to provide the desired product at the right time and at the
right place or to enable it be produced as quick as possible, the companies give a great
importance to the management of their procurement process so that they are able to
purchase the raw or other semi-finished material used in production at the most suitable
prices and as fast as possible.
2.2.2 Production Logistics.
The goal of the production logistics is to provide the right material, in the right amount,
and at the least cost. It is responsible for the providing of materials at production sites.
2.2.3 Distribution Logistics.
It is the most important step of the logistics process and covers the activities to deliver the
products to end users. Although the physical distribution seems be closer to the marketing
functions, it is very important in designation and the completion of production activities.


3. SWOT Analysis
A SWOT analysis stands for Strengths, Weaknesses, Opportunities, and Threats and is a
simple and powerful way to analyze a company's present marketing situation.
3.1 Identifying Internal and External Position
SWOTH analysis involves sizing-up firm’s internal (strength and weaknesses) and external
(opportunities and threats) position.

Strength is something firm is good at or characteristic giving it an important capability.
Such as; useful skill, important know-how, valuable organizational resource or competitive
capability and, achievement giving firm a market advantage. Weakness is something firm
lacks, does poorly, or condition placing it at a disadvantage. Basic concept is as follows. A
company’s internal strengths usually represent competitive assets; its internal weaknesses
usually represent competitive liabilities. The desired condition is for the assets to
outweigh the liabilities by a hefty margin. Strengths are significant to strategy-making
because they can: serve as cornerstones of strategy and help build competitive advantage.
A good strategy aims at correcting firm’s weaknesses which can: make it vulnerable,
prevent it from pursuing attractive opportunities and put it at a competitive disadvantage.
Here strategic management principle is as follows: successful strategists seek to exploit
what a company does best: expertise, strengths, core competencies and strongest
competitive capabilities. Strategists avoid strategies placing heavy demands on areas where
company is weakest or has unproven ability.




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4. Application:

  The company is in road transportation business between Turkey and Italy and at the same
time, is among the founder-partners of Turkey’s some leading Maritime Companies
employing RO-RO vessels. The company has 25 trucks and 40 different types’ trailers in
various capacities. In parallel with the company’s renewing and improvement strategy, the
number of vessels within the transportation fleet changes continually and all has GPS
(global positioning system) capabilities.


4.1 SWOTH Analysis of the Company
Strengths:
      + Is a long- standing company
      + possesses young and dynamic manpower
      + has expertise in Turkey -Italy road transportation route and owns a branch office
         in Italy
      + has strong internal communication channels
      + all vehicles has GPS systems
      + maintains a cooperative and collaborative working environment, decision
         making depends on consent and mutual agreement
      + has a well-organized and powerful record and documentation system
      + warm customer relations and considerable attention are paid to customers
      + management pays utmost attention to training (it is believed that the new
         generation logistics employees must be well-trained and equipped with
         contemporary knowledge, therefore intensive training programs are carried out
         within and outside of the company)
      + employees are open to developments and changes
      + continual replacement of transportation vehicles
      + vehicles conform to Euro 2 and Euro 3 standards
      + maintenance of vehicles is of a great importance
      + all kinds of cargo (excluding refrigerated cargo) can be transported
      + all cargo and transportation vehicles are insured
      + effective communication capability by the use of a centralized telephone
         exchange
      + all employees are able to use all application software related to their tasks
      + all employees started their carrier with the company, and are still working there
      + a strong financial structure
      + has storing capabilities with rented facilities
      + high degree of customer satisfaction




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  Weaknesses:
   - customer portfolio is static, additional new customers are rare
   - lack of marketing functions
   - lack of flexibility
   - vision and mission statements are not given emphasis to
   - strategy can not be developed
   - targets are not explicit
   - high prices
   - engaged only road in transportation does not have own storage facilities
   - company does not have different departments to perform various functions
   - different tasks are performed by same personnel, no specialization in different
      functions
   - there exist no special software for transportation business
   - no human resources department
   - no Management Information department
   - feedback is week to evaluate customer satisfaction
   - no task/function definitions for workers
   - high stress level
   - lack of motivation
   - no systematic budgeting system

Opportunities.
          The market is suitable for growth and development
          Logistics concept is gaining importance in market
          there exist contractor companies to get support when a difficulty arise to
             meet the demand in the market
          developments in technology provide improved vehicles with enhanced
             capabilities
          in logistics arena, outsourcing possibilities are increasing
          availability of improved warehousing systems
          availability of improved security systems
          e-business
          Improving transportation software
          new transportation destinations
          expected improvements in customs regulations
          Enhanced Training possibilities in parallel with the developments in
             logistics sector
          Process in way of integration to European community
          New approaches in human resources




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            Possibility of hiring personnel with lower salaries due to the high supply in
             the market
Threats:
          Stagnation in economy and industry
          disturbances in international political arena
          deteriorated road surfaces
          variable and adverse weather conditions
          price increase in fuel
          difficulties to employ expert personnel in specific logistics functions
          more selective customers
          accidents and/or smuggling attempts due to misconduct of some drivers
          long queue times due to insufficient number of Ro-Ro ships
          bribery allegations in custom affairs
          increased competition in transportation sector
          intensive bureaucracy in custom clearance procedures

4.2 Results of SWOTH Analysis
Taking into account of the strengths and weaknesses of the company identified with the
SWOTH analysis and in accordance with the results obtained from the customer survey
carried out, some goals and targets as well as vision, mission and quality policies of the
company are defined. Short-term (1 year) and long-term goals are as follows:
 Short- term goals:
         Initiation of promotion and marketing activities.
         Procurement of a suitable software for the operational functions of the
             company
         Establishing the human resources department
         Open up a new transportation line to Georgia
         Realization of departmentalization
         Setting up a new quality policy
         Arranging social activities to increase motivation and unity within the
             company
         Enlargement and renewing of the vehicle fleet

Long- term goals:

          to increase the number of countries that
          to provide institutionalization
           to become a 3PL organization
          in order to o increase market share and provide better services within a
           competitive environment, seeking out merging with other organizations




                                            289
Vision:
Becoming a 3LP logistics company with national and international recognition.

Mission:
All kinds of cargo can be transported including permanent storage facilities with or
without the provision of custom clearance services. The vehicle fleet is to be enlarged,
departmentalization is to be realized to provide better services and division of labor among
responsibilities of each department is to be materialized to enable expertise.

Quality Policy:
The first priority is to be given to customer satisfaction. To provide this, all transported
goods are to reach their destinations safely, at right times and without any damage.

5. Conclusions.
While we were performing this study related to the most rapidly developing sector, namely
logistic become s, it is understood that there exist some confusion between the meanings
of “logistics” and “transportation” in the market. The increasing importance of this sector,
and the increasing number of experts employed in this sector are indications that
companies are going away from “the transportation culture” and advancing towards the
concept of “third party logistics”. It is also noticed that, emerging logistics companies,
transportation companies and other supporting organizations are spending great efforts to
develop themselves and the sector as well.
It is concluded that, the first priority to be given to institutionalization. Following this, it
will be easier to work in way of becoming a 3PL organization. Organized marketing and
promotion activities will become effective in the expansion and development of the
company.
Establishing of the human resources department will eliminate important deficiencies and
the system will function more harmonious.
If the company sets up its own storage facilities, its revenue will increase and at the same
time it will obtain advantages in the way of becoming a bigger organization.




                                              290
References:




1.   3D ĠĢletmede Lojistik Dergisi, (2002-2003) Sayı:10
     Karabulut, M, Kaya, i., Pazarlama Yöntemleri ve Stratejileri, ĠĢletme Ġktisadı,
2.   1988,Ġstanbul, s:77
3.   Kocamaz,Tuncay Fiziksel Dağıtım, Marmara Üniversitesi Yayınları,1988

4.   Rushton,Alan, Oxley, Johnand Croucher, Phil,(2001) Handbook of Logistics and
     Distribution Management
     Thompson,A,A and Strickland III, Jr.A.J., (1990) Strategic Management Concepts
5.   and Cases,Donnely &Sons Company
     Timur, Necdet (1988), Sanayi ĠĢletmelerinde Lojistik Faaliyetlerin Organizasyonu,
6.   EskiĢehir: Anadolu Üniversitesi Yayınları, 1998, s:1
     Tunçbilek Mehmet, (2002) “Lojistik Hayati Bir Konu”, 3D Lojistik Dergisi, Sayı 14,
7.   p:42
8.   www.bplans.com

9.   www.kibris.net/ahmet/MAN640/chp4/chp4.htm




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