What can logistics achieve?
In recent decades, the term “logistics” has developed into a general term. That is a good thing. But what is not so good is that “logistics” is often used incorrectly – especially in the media – and is misused in some companies for all kinds of incidents. So it’s high time to shed some light on the thicket of linguistic mutilation. We also don’t want to make the mistake of asking so-called “what questions”, i.e. questions about the “essence” of a thing or object, e.g. “What is logistics”. This is because questions about the essence of a concept do not help us either scientifically or in practice. First and foremost, we ask: What are the benefits of logistics or, to put it another way:
Logistics and its services
In a broader sense, logistics services are always improvements in the area of the supply environment of systems. Such systems can be companies, non-profit organizations, transport, hospitals, households, etc. These systems require physical supplies. These systems require physical supplies in order to exist. The physical supply is primarily controlled by information. Thus, the physical and informational supply service is one of the essential logistical services on a very abstract level.
What are the individual services of logistics, insofar as they are perceived or recognized as a value by the respective “customer”? These individual logistics services – as a rule – concern some typical and essential ones, which are briefly listed below:
- Delivery time
- Adherence to delivery dates
- Ability to deliver
- Delivery quality
- Delivery flexibility
- Security of supply
- Delivery transparency
One thing can already be said here, however, that the individual logistics services are interdependent. For example, a short delivery time conflicts with high delivery reliability. Each performance value in logistics has a certain relationship with the other performance values. These relationships need not only be conflicting, they can also be supportive and in some situations relatively neutral.
The increase in logistics performance
If the individual performance values are to be improved, the above points can be summarized as follows.
- Shortening the delivery time
- Increasing the ability to deliver
- Increase in delivery quality
- Increase in delivery flexibility
- Improving the security of supply
- Improvement of delivery transparency.
However, all improvements in a logistics system are accompanied by necessary measures that either require higher input costs (input = costs) or a trade-off of delivery performance values.
Logistics and the economic principle – performance and costs
If we assume the theoretical case that everything in a company is optimized, then an improvement in an individual service is only possible with the deterioration of another individual service (Pareto-optimal state) or the costs for the individual service increase. This is the essential premise of the principle of economic efficiency (economic principle). In other words: services can be maximized for a given cost or costs can be minimized for a given service. Logistics” is therefore a profoundly economic discipline, even if extensive technical and IT knowledge is often required in practice.
The above definition of the principle of economic efficiency already shows how far removed the theoretical concept is from practice.
In my 30 years of practice, I have not come across a single case of complete optimization. In the world of economics, this complete optimization is called Pareto efficiency (Pareto optimum). A state is Pareto-efficient if not a single element of the system can be improved without making at least one other element worse off.
The “slacks” of practice
In practice, no company is in a static state, nor is there any possibility that a system that is in a dynamic environment will ever be Pareto-efficient. Pareto efficiency is merely a theoretical construct and can at best serve as a working hypothesis or a guiding idea for improving the system or parts of the system. The flip side of an increase in performance is always an increase in costs, which need not exclusively concern logistical costs. This fundamental basic assumption of the complete optimization of a corporate logistics system is – as will be shown in further articles – far removed from reality. Consequently, it is precisely the “slacks in practice”, i.e. the “sags in practice”, that are the cause of improvements on both the performance and the cost side.
Further information on the history of logistics can be found under“Once upon a time…: the beginnings of logistics and intralogistics“.
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