Delivering Strategic Performance Question Bank

SECTION A

Global Logistics Performance Improvement Strategy

Leo A.P. Moerkens and William K. Pollock over the years have worked with several companies. Based on their experiences they have concluded that a significant portion of customer dissatisfaction is caused using less than optimal logistics systems. They have also observed that by designing an optimal logistics system, costs can be reduced significantly while maintaining or improving customer satisfaction levels.

The assertion of the two scholars above fitted into a business planning for performance improvement review carried out by Global Logistics (GL) a renowned Logistics and Transport Company that operates in five (5) countries in West Africa showed that the optimization of their logistics systems is capable of reducing costs of their business operations across the value chain and at the same time improve customer satisfaction ratings. With this understanding, the Company commissioned a Strategic Thinking Team in April 2016 to evaluate the entire companys logistics systems and other linking activities. The scope of work handed to the Strategic Thinking Team fell under the following:

(a) The companys ability to balance supply and demand (b) Optimization of the companys distribution services (c) Evaluation of costs and services provided to customers (d) Possible trade-offs

(e) Embedding quality in logistics strategy

After four (4) months the Strategic Thinking Team concluded its work and presented the report to Management. The snapshot of the recommendations submitted by the Strategic Thinking Team to Management is presented below:

Balance Supply and Demand

To fulfill the scope of work required; the Strategic Thinking Team assessed the cost-effectiveness of the various services rendered by the Company. At the end of their investigations, it was established that 80% of demand comes from 20% of the customers located in two countries out of the five countries. Also, the strategic thinking team established that 80% of movements are on 20% of the routes within each country in which the company operates. And 80% of customer complaints came from 20% of the services delivered in all countries. In addition, 80% of delays in schedule arose from 20% of labour used in delivering services in all countries. It was also established that 80% of the problems arose because 20% of the systems defects prevented most customers to track their goods. The Strategic Thinking Team's final observation was that 80% of profit is generated by 20% of services offered to clients. These findings helped the Company to structure its services into three (3) categories the Green services that form 20% of the services provided yet earn the company 80% of profit; Blue services that form 50% of the services provided yet earn the company just 15% of profit; and the Red services that form 30% of the services provides yet earn the company only 5% of the profit. The big dilemma that faced Management is whether to continue offering the Blue and Red services which generate less to the companys profit portfolio, but these two services contribute significantly to the corporate image enhancement over the years.

Distribution Services

The service mixed has implications for moving goods to the customers located at variant destinations. The strategic thinking team indicated that the fastest way is to have dedicated service. The Blue and Red services formed a major part of services offered by the company but cost more to providing them to customers. Management must, therefore, take the decision on whether to continue providing them or otherwise. Should management deemed it fit to continue to offer them; management must consider other issues such as extra cost, cost-saving strategies, effective management of costs with respect to labour, inventory, and transport, storage, loading, and unloading facilities, expensive local delivery, speed, and frequency required customers, and develop a strategy that ensures that the businesss corporate objectives are met.

Evaluation of Costs and Services

As already indicated above 20% of the services is from the Green services yet to help the company to rake in 80% of the profits. Most of the services provided, between the Blue (50%) providing 15% of profit and Red (30%) that contribute 5% of profit to the company. The Strategic Thinking Team recommended that Management must consider cost control in providing the Blue and Red services. Especially the Red service why the Company must continue to provide them is inevitably a difficult decision to make. Whatever decision that is reached, the service must be provided in the most cost-effective way. Another huddle that Management must carefully consider is costing of services improvements especially for the Red services. It is evident that businesses can only be competitive in a competitive environment when they are able to continuously improve in most of the business operations to retain existing customers and attract new ones.

Trade-offs

The report has shown that if there should be trade-offs then it should be concentrated around the Red Services. The Strategic Thinking Team indicated that service improvements to them probably would not generate more profit and may well incur a loss. The Strategic Thinking Team went further to indicated that the only time improvement should be considered is when it is obvious that the entire organization would benefit in terms of gaining a better reputation for quality and customer care.

Embedding Quality in the Logistics Strategy

A strategic approach to quality management must be based on an accurate understanding of what customers want, and how this can best be provided cost-effectively. It should not be assumed that what the organization regards as desirable service attributes necessarily coincide with those of its customers. The Strategic Thinking Team realized that for the Company to embed quality in its logistics strategy the following factors used as quality assessment indicated must be improved:

(a) Reliability: 80% of the customers indicated that is unable to provide promised services in s dependable and accurate manner.

(b) Assurance: 50% of the customers indicated that some employees are unable to convey trust and confidence.

(c) Empathy: 60% of the customers indicated that some of the employees failed to provide caring, individualized attention to them

(d) Responsiveness: 30% of the customers indicated that some of the employees showed an unwillingness to help them and no promptness when service demands are placed.

Management of GL has implemented most of the recommendations made by the Strategic Thinking Team. At the end of 2016, the Company has seen great improvement in all performance indicators. The Company had optimized it's logistics systems which led to reduction in business operations costs across the value chain and at the same time improving customer satisfaction ratings.

Questions

a. Discuss what you may want Management to consider in case they decided to continue delivering the Blue and Red to their customers. (8 marks)

b. Discuss the prominent factors of relevance that may help GL create efficient and effective distribution services. (8 marks)

c. Discuss the factors that GL should consider when evaluating the costs and services delivered in the eyes of a competitive business environment. (8 marks)

d. Discuss the factors GL must consider in its trade-offs plans with regards to the various services offered in order for the Company to optimize the logistics systems. (8 marks)

e. Discuss the steps GL should take to improve the factors affecting the quality of its logistics

services offered. (8 marks)