The main problems in logistics, Conclusions - Logistics

2.4. The main problems in logistics

The transition from managing individual functions to integrated process management involves breaking the functional boundaries of the various services of the organization, interfering with previously "sovereign" region. Therefore, serious organizational conflicts may occur at the enterprise. The logistics service should effectively manage these conflicts, as well as those conflict situations that are "traditionally" arise because of the conflicting interests of the various divisions of the organization. Distinguish typical problem areas of intra-firm logistics - the source of conflict situations between organizational units: stocks; purchase; delivery to the warehouse; planning of orders; processing of orders; delivery from a warehouse; logistical service; collection of empty containers and goods. The first three areas are associated with the incoming stream, the remaining five are associated with the outgoing streams.

Let's consider in more detail the problems associated with incoming threads, and the corresponding inter-functional conflicts.

Inventory . A serious problem for many companies are stocks, the excessive volume of which "freezes" considerable financial resources, creates difficulties in the warehouse and prevents the normal operation of the company. On the other hand, often there is a situation of a shortage of stocks necessary for buyers, which is fraught with not only direct sales losses but also far-reaching consequences up to the loss of customers. Thus, the level of stocks often becomes the subject of conflicts that arise between such divisions of the company as purchases, sales, marketing, finance, as well as under the jurisdiction " warehouse logistics service. The marketing department is interested in maximizing reserves in order to improve customer service and reduce the likelihood of a stockout. The financial department seeks to minimize stocks, as it realizes that they "deaden" significant funds that could be directed to other purposes and bring profit. The procurement service, pursuing the local goal of minimizing the cost of procurement, strives to obtain maximum wholesale discounts and often purchases excessive volume of products, not taking into account the possibilities of the warehouse, available stocks and costs for their maintenance and processing.

Purchasing Management . Inventory management is inextricably linked to the problems of procurement and supply to the warehouse. Purchasing management is typical of interfunctional conflicts arising from such parameters as the assortment of the purchased goods, the basic terms of delivery, the terms of delivery (the type of vehicle, as well as the shipping container and commodity), the choice of the supplier. Let's consider each of the listed sources of conflicts.

The assortment of the purchased consignment (in particular, at the level of the freight unit) is the subject of a conflict between the procurement service and the warehouse. The procurement department, in order to obtain discounts, acquires large lots of homogeneous products and prefers not to pay suppliers additional services for completing the freight unit in the assortment that is required by end-users and the logistics chain-retail and service organizations. The warehouse is interested in that. so that the assortment of cargo units, at the level of shipping containers - boxes, would coincide with the typical assortment of orders of the majority of customers, as this will significantly reduce the cost of handling.

As is known, the basic terms of delivery , widely used in international trade practice, determine the distribution of risks, costs and the exchange of documentation between the parties to the contract of sale. The procurement service is inclined, as it were, to act on the supplier's side in determining the basic terms of delivery, trying to extract the maximum benefit from the relationship with it. This benefit, as a rule, is expressed in the provision of a variety of discounts and preferential working conditions. The finance department is interested in minimizing the company's expenses for the purchase and subsequent delivery of the purchased lot to the warehouse. The interests of the transport division of the company are to reduce the costs of transporting their own transport, which dictates the need to transfer the primary responsibility for the delivery of goods, as well as the attendant risks to the seller.

The procurement service, striving to achieve the most beneficial relations with the supplier in terms of minimizing the cost of the purchased products, may not attach particular importance to the delivery vehicle offered by the supplier, and not to require the latter additional services (in particular, value added services in the sphere transportation). At the same time, the warehouse is interested in that. so that the parameters of the delivery vehicle are combined with the technical characteristics, the equipment of the loading and unloading front and the used lifting and transport equipment. Such a correspondence will make it possible to minimize the time of preparatory work for cargo handling, to mechanize the unloading of vehicles, and to reduce downtime of vehicles.

The container and the commodity are the subject of intersection of the multidirectional interests of the already repeatedly mentioned procurement and warehouse services. The procurement department, trying to get discounts and additional benefits from suppliers, does not pay much attention to the parameters of the container and the availability of the commodity. The warehouse is interested in using modern means of mechanization when unloading a vehicle, minimizing the time for preparation for unloading operations, the minimum number of transshipments, etc.

The definition of the container and the commodity can also lead to a conflict situation between the procurement service and the transport department that is part of the logistics service. The transport department seeks to maximize the full load of vehicles and. accordingly, reducing the frequency of flights in order to reduce transportation costs. The lack of harmonization of accounting and contractual units, which underlies this conflict, leads to a significant increase in circulation costs.

The problem of choosing a supplier is one of the most important in the management of purchases. Its importance is due not only to the fact that a large number of suppliers of the same products operate in the modern market, but mainly because the supplier must be a reliable partner of the company in the implementation of its logistics strategy. The selection of the supplier is carried out according to certain criteria, among which are the quality of the supplied material resources and services, the reliability of supply, the financial conditions of the capability (ability) to satisfy the requirements of the customer-company, the location, the accompanying service, etc. The preference of certain criteria by different divisions of the firm and ignoring the statistic indicators, important for the normal functioning of other units of the organization, is the basis for the emergence of a number of interfunctional confe- rences faces. These conflicts can be resolved within the framework of the logistics function of purchasing management by coordinating the local interests of organizational units with the company's system goals.

Supplying goods to the warehouse. Let's now turn to the problem of supplying the purchased goods to the warehouse.

The procurement service is interested in purchasing as many consignments of products as possible in order to obtain wholesale discounts from suppliers. The warehouse, although interested in maximizing its capacity utilization, still has limitations. connected with the volume of the latter, and seeks to avoid additional costs arising from the need for emergency accommodation of incoming goods (overtime, the attraction of additional personnel, additional operation of handling equipment, the need to review the placement of stocked goods, etc.). Due to a significant difference in the intensity of incoming and outgoing material flows, the warehouse is forced to incur significant costs for maintaining a stock. Reducing the cost of maintaining stocks and losses from a deficit is a matter of principle for the logistics department of the logistics department.

The transport department is interested in minimizing the cost of transportation, and therefore, the implementation of rare voyages with the full use of the cargo capacity of vehicles.

Finally, the quantity of the schedule line can become an "apple of discord" for procurement services and sales of a wholesale enterprise. This conflict situation is especially characteristic for companies engaged in the sale of perishable goods, goods with limited shelf life or seasonal products. Unlike the procurement service, which strives to get the maximum wholesale discounts, the sales department understands the possible difficulties and losses associated with the sale of similar products and tries to reduce the volume of purchases of such demanding art of product sales.

In determining the delivery time, the procurement service again, figuratively speaking, is on the supplier's side. Reduction of delivery terms is usually associated with an increase in the cost of the purchased goods due to the provision of value-added services, which does not meet the local functional interests of the organizational unit in question.

The marketing department seeks to shorten the delivery time with that. so that the products of interest to the consumer are at his disposal as soon as possible. In addition, reducing the length of the delivery cycle enables the marketing department to make more accurate and realistic sales plans. Like the marketing department, the sales department is interested in reducing the delivery time, which allows you to more accurately execute sales plans and avoid the difficulties associated with selling out of fashion or seasonal products.

Functional interest of the transport economy of the company is to carry out transportation on the most economical routes, which does not always mean minimization of the duration of the transport cycle.

The inventory management department is interested in setting the delivery time, which allows to optimize the level of stocks in the company's logistics system.

The analysis of the functional areas of the enterprise associated with outflows from the enterprise is not difficult and can be carried out similarly to the above. Undoubtedly, the list of conflicts in the field of logistics is not exhaustive and universal, but it gives an opportunity to draw some important conclusions and outline ways to detect hidden problems of the enterprise in the field of interfunctional interaction.


1. The functional units of the business organization (wholesale enterprises) involved in the management of the flow of flows have local goals and objectives (interests).

2. The objectives of the company's services are often contradictory, mutually exclusive, and therefore are a source of emergence within organizational, cross-functional conflicts.

3. Persecution of organizational units exclusively by their local goals leads to increased inter-functional conflicts and serious deviations from the company's strategic course and objectives.

4. One of the main tasks of the logistics service in the company is to prevent and resolve cross-functional conflicts by effectively coordinating the activities of the organizational units.

5. The logistics service as a link with integrated and coordinating potential at almost all levels of the organizational hierarchy and realizing the process flow management principle has real opportunities and tools for coordinating the local goals of the company's divisions and the global, systemic goals of the organization.

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)