Solutions should not be more complicated than the problems they are trying to solve!

Micrologistics and Macrologistics - The Dichotomy of Logistics

Background

The traditional view of logistics, primarily because the term is all inclusive and its scope is so large, forces a company’s perceived needs and the solutions or solution path to be equally inclusive and as large in scope. Likewise, managing the entire logistics process is similarly perceived to be prodigious, and extensive.  This characteristic caused the method of approach, problem identification and available solutions to be, singularly robust.  The net result was a failure to see unique problems and the denial of incremental solutions.  This overwhelming view has achieved little benefit at a high cost and its propagation will continue to drive the potential benefits of world class logistics excellence further and further from our reach. 

There have been several different arguments that have been advanced, purportedly to identify the reason that historic logistics solutions have not yielded the anticipated benefits and results.  The “all inclusive” view of logistics demanded that, both the problem and its solution had to be “robust”.  Constrained by this view, there was a natural denial that, “simpler is better” or that unique problems even exist.  Consequently, the dilemma of two moving targets exists; instead of the problem being focused and well anchored, it, like the solution, is in constant motion. Therefore, the ability to achieve a value match on need and solution was impossible.  At best, the solutions have been relegated to, “Rube Goldberg” symptom treatment rather than problem resolution. The result of this failure is demonstrated by very little or no ROI, waste of time and talent and the continuing burden of supporting a decision whose criteria were imperfect.

The sheer magnitude of logistics and its pervasive nature positions it to be likened to the corporate octopus.  The body represents the core competencies, while the tentacles or feelers reach into the entire organization extracting, delivering and processing the attributes and capabilities of logistics.  Logistics as a device, mining the data, and harvesting the opportunities, positions it as the best corporate business discipline that is capable of achieving profit improvement and overall success in operating performance.   The impact of logistics, more so than any other discipline, on every business, can be so powerful and enabling that it is of utmost importance to develop a methodology that will allow the entire logistics capability to prosper within an organization and amongst its trading partners.  By re-examining logistics from near and far, it became clear that segmentation of the term could significantly increase effective management and operations. 

Logistics and supply/demand chain have been incorrectly used interchangeably and to describe each other.  It therefore follows that the application and reasoning are circular; so, effective articulation, with resultant success, is impossible.  These factors, coupled with the myth that logistics is a chain have made the goal of world class logistics excellence amorphous.  If the notion of the chain continues to represent logistics, we will see a continuation of insufficient ROI, underutilization, poor response to tasks and events and a significant misuse of management intelligence, talent and time.  

Logistics is dynamic! It is comprised of many moving components that continually interact, constantly adding substance to an evolving process.  The very definition of logistics, “the discipline that manages the flow of raw material through the finishing process and responsible for customer satisfaction”, clearly demonstrates that its current representation as a chain is in direct contravention of the “flow”.  There are no distinct sides; supply and demand is part of a continuous, connected process.

A Different Way to Look At Logistics

In decision making theory, understanding differences and the levels of difference is a mission critical element that must be incorporated and operate pervasively throughout the entire decision process. The complexity of logistics as it relates to worldwide commerce, both for today and tomorrow, requires a clear understanding of these various differences and a fresh look.  The current concept that logistics is best described as the “supply and demand chain” whose links portray the functional elements, incorrectly postures logistics as being linear and erratic.  Logistics is a fluent and dynamic process; the “chain” must be replaced in order to maximize the benefits and to bring this important discipline to the next level!

Beginning with the premise that logistics could offer significantly more to industry, the dichotomy of economics seemed like an appropriate reference.  When compared and contrasted with economics, it became clear that the opportunities and benefits that economics achieved after its dichotomy (macroeconomics and microeconomics) could be reasonably applicable to logistics. By linking macro and micro to the term “logistics” a new capability was created.   With macrologistics and micrologistics as the primary components of logistics, professionals now have the ability to focus more precisely and meaningfully on the subject. 

Micrologistics is defined by the study of the operations of the individual components of logistics, such as transportation procurement, inventory control, data capture and management, shipment visibility, cost control, materials management, optimization, etc.

Macrologistics is the study of the overall aspects and workings of logistics.

See the example below of macrologistics and micrologistics.

The View from the Macrologistics Perspective

When consideration is given to all of the micrologistics elements and the multitude of sub-elements, it should be clear that interdepartmental and interdisciplinary relationships are achievable and they are also manifold.  Implementing a sound macrologistics strategy coupled with the appropriate micrologistics components should identify and continue to identify the critical interdepartmental and interdisciplinary relationships that are responsible for corporate performance and success.

When a company is viewed through the macrologistics perspective, the interdisciplinary and interdepartmental connects and disconnects are highly visible and obvious.  The high visibility gained through this perspective is actually achieved by virtue of the pervasive ability of the micrologistics components, such as transportation, to penetrate departments and disciplines, both internal and external.  As an example, product shipment involves, at least, three entities, the shipper, the consignee and the carrier.  By tracking the data and information of a shipment transaction across and through these entities, the various departments and disciplines that are involved become obvious. 

Micrologistics and Interdepartmental and Interdisciplinary Relationships

Because business is dynamic it is dependent upon the interaction of a multitude of events, functional performance and the inter and intra-departmental and inter and intra-disciplinary relationships and of everything relevant between the vendor and the customer.  Therefore, a sound corporate strategy is required that is capable of continuously processing information that is collected in the transaction stream.  The dynamics can then be effectively understood and managed.  Because MML is a focus through which continuously refreshed data flows, coupled with its ability to manage complex relationships, it is best positioned to address these concerns.  The relative position of the Logistics Department as it relates to the entire company and its role as a functional provider of services, such as transportation, allows it to deliver information to the corporate knowledgebase and report any deviations rapidly.  As an example, a consulting engagement with a prominent cosmetic and fragrance firm demonstrated that failure to include the logistics discipline into the corporate knowledgebase resulted in an immediate report.  However, the damage had already been done; the promotion was complete and ready to ship. Failure to recognize the importance of interdisciplinary relationships resulted in an unnecessary freight expense in excess of $1,000,000.

“It is very typical for the Sales and Marketing departments to develop promotional products.    By the time the promotion was ready for shipment, the Transportation Department discovered that the packaging for express or parcel mode exceeded the maximum size requirements by two (2) inches.  Consequently, the promotion was forced into motor freight transportation, and each of the thousands of shipments incurred a minimum charge that far exceeded the cost for express or parcel service.” 

Departments within an organization must be held together.  How they are held together is one of the key challenges that every administration must effectively deal with.  If an organization believes that glue is the agent, others might believe that it is too binding and therefore restrictive.  On the other hand, if the cohesive agent is fluid, one that lubricates the process and also has the appropriate binding capacity to allow reasonable freedom so as to achieve the flow of information, the probability of utilizing the relationships effectively is significantly increased.

Micrologistics Provides New Opportunities

Logistics, for many years, existed and perhaps continues as an oversight or high level understanding of a business process or operating component that remains, by performance that which only describes an entire process.  For too many, this word remained and still remains “bundled” and accepted singularly as a complex process.  In an attempt to better understand and to apply the principles of logistics, some clever people conceptualized “logistics as a chain”.  However, as shown in our white paper, “Logistics is Not a Chain” we presented the natural dichotomy of logistics.  By breaking logistics down into its two primary components, MML, logistics practitioners have been given a new freedom and ability to better understand and utilize more of the discipline and in more ways than ever before.

With the restrictive chain being thrown aside, transportation, as an example, is now a micrologistics component and it is therefore capable of taking on far more meaning than it had in yesterday’s role.  In one of its new roles, it can be a “penetrator” that is a device that can travel through and across departments and disciplines, placing and extracting data and information, but always collecting and processing as it moves.  By studying and managing the overall aspects, process and workings of the transportation component, macrologistics is positioned to identify, recognize and understand the inter and intra-departmental and inter and intra-disciplinary relationships

The Only Way To Eat An Elephant Is One Bite at a Time.

Companies that take the time and effort to break down their logistics issues can significantly improve operations and reduce expenditures.  Solutions to today’s logistics issues however, need to address two unique requirements; they need to solve the instant, micrologistics need and simultaneously resolve or fit within the macrologistics requirements. 

As an example, some might feel that an obvious way to reduce transportation expenses is to renegotiate rates with carriers, cutting transportation charges to the bone.  If total consideration is given only to transportation cost reduction (a function of micro logistics), than the impact to customer service levels, damages, lead times, etc. will not be addressed thereby compromising the overall macro logistics efficiency and strategy.

Likewise, another approach to cost reduction may be to create a robust transportation network in which suppliers, carriers, and third party providers can all collaborate and share information to ensure the optimal balance between cost and service.  Fundamentally, this approach would require a robust solution whereby trading partners would need to overcome the following:

This approach is both costly and presents an immeasurable and lengthy ROI.

The speed at which events occur sometimes causes us to lose sight of the critical building blocks necessary for logistics excellence and commercial success. Too often, business is viewed from the “macro level”, consequently not enough attention is given to the critical operating components in the micrologistics level necessary for growth and ongoing performance.

Utilizing macrologistics and micrologistics, the logistics professional is better equipped and can focus more rapidly on problem resolution, process improvement, areas of opportunity, and solutions.   This new found MML (Micro-Macro Logistics) methodology significantly improves visibility allowing the user to drill down more precisely and to focus on an appropriate level of detail than was previously possible.  Data collection, using the MML method is more robust, therefore data and information, using the MML method of approach, are more prolific; process interrogation and improved decision criteria are the result.  Consequently, higher rates of success, regarding problem identification and solution matching occur more frequently. The MML tool continues to demonstrate overall efficiencies and economies.  

Solutions should not be more complicated than the problems they are trying to solve!

This MML methodology allows users to start or add simple incremental solutions that satisfy their micrologistics needs and build, develop, tweak and evolve their macrologistics.  As each additional micrologistics issue is addressed, the macrologistics picture can be adjusted by tuning or adding other micrologistics functions.

Think of logistics solutions in terms of a grove of orange trees.  If you wanted a glass of orange juice, how would you get it?  Would you pick all of the oranges off of the tree, bring them to a processing plant, extract the juice, bottle the juice and then finally pour a glass?  Of course not, you would go after the low hanging fruit, peel, squeeze and drink!

Likewise, the logistics professionals' quest for solutions should start with simple incremental solutions that deliver "the juice" or the savings rapidly and with minimal cost and impact.  It is evident that different problems require different solution sets.  Solutions sets that find themselves higher up on the Logistics Pyramid, will tend to be more costly to implement and maintain, will only provide a Return on Investment further into the future, and will be more sophisticated and complex.  In addition, the chances that a single solution, closer towards the top of the Logistics Pyramid, will solve all of the micrologistics requirements are remote.

Continuation

Please consider this white paper as a continuum in this subject area, succeeding white papers will address common issues and address them with common solutions.  We encourage our readers to direct any specific questions or comments to papers@transportgistics.com .

Disclaimer

The information presented above represents the opinion of the author and not necessarily the opinion of TransportGistics, Inc. nor is it presented as a legal position.

All content copyright by TransportGistics, Inc. All rights are reserved. The authors of the articles retain the copyright to their articles. No material may be reproduced electronically or in print without the express written permission from TransportGistics, Inc. or the individual authors (papers@TransportGistics.com)

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