Innovations in Logistics

Introduction

Innovations have largely been judged as the drivers of an active economy, and more so in the field of logistics, their contribution has started gaining substantial appreciation as opposed to the past few years when they had not been exhaustively analyzed. Rapidly changing customer needs as well as new models of businesses in the market prompts the industry to offer a wide range of brand new chances to redevelop the market by means of innovative and superb logistics services (Sakchutchawan, 2011). Technology has a huge contribution to the efficient creation of logistics processes. This paper proceeds to discuss the various aspects of logistics innovations, including examples of the most recent ones that have occurred in the past; an in-depth analysis of an outstanding innovation; and determining the measurability of innovations.

Examples of logistics innovations

Logistics innovations are usually categorized into two main classes, that is, technological and administrative. The latter refers to changes in business processes, structures, and management of supplier and customer relationships; while the former incorporates those technologies for information management, data acquisition, transportation, and warehousing. In the first category, it is arguable that ICT has played a major role in creating innovative change in logistics services (Córdova, et al, 2012. In this class, there is a plethora of technologies that have been invented over the last five years that have been instrumental in easing logistics processes, including telematics, which are used to remotely monitor and control transport of infrastructural structures e.g. vehicle diagnosis, shipment tracing and tracking, and driver hours monitoring among others; radio frequency identification, also known as RFID which is used to track and trace assets or merchandise along the supply chain; digital administration, for instance, use of electronic signatures for proof of commodity delivery; and transport technology, for instance, the introduction of electric vehicles, use of double decks, use of better and cheaper fuels, and improved aerodynamics are all geared towards achieving a faster delivery while turning the transport sector to comply to green technology (Odair & Getúlio, 2011). Apart from these technological innovations, there are numerous administrative logistics innovations that have taken place in the past few years, including: Just-in-Time (JIT) which promotes the use of more frequent and smaller deliveries; value added structures and services including warehousing, co-manufacturing, co-packaging, mass-customization, and labeling which expand the role and importance of logistics providers in the chain of supply; and fourth party logistics (4PL), which is an extension of the 3PL that has everything to do with outsourcing, among others (Chailom & Mumi, 2010). All these innovations have greatly impacted on the logistics service sector, especially to the positive.

Analysis of Just in Time (JIT)

As mentioned earlier, JIT has had a major effect on the running of logistics services by promoting use of more efficient and smaller deliveries. It is a production strategy which aims to improve the return on investment of a business by such actions as reducing carrying costs and in-process inventories. Kanban, or signals are used to operate this technology between different points in the production process that informs the attendants when to make the next facet of commodities in question. Kanban can be visual signals of just tickets, which when implemented correctly would lead to continuous improvement on the process line thereby improving an organization’s ROI (return on investment) (Stephan & Reto, 2010). It is a method of controlling inventories where materials are brought into the production area, to the customer, or the warehouse just in time to be used, so that there is reduced need for storage of materials in the warehouse. It also relies on other key components of the inventory chain as dictated in the lean manufacturing criteria. Without such support, JIT can end up giving erroneous results and outcomes.

The philosophy that JIT uses is quite simple: that the storage of inventories which have not been used is actually a waste of resources. It exposes hidden costs that are incurred as a result of keeping inventories, and provides alternative solutions to keep the company inventory to minimum. The cost of implementing JIT may be high in the initial steps, but saves a lot of costs in the long-run. However, it is imperative to note that implementation of JIT has various drawbacks, which can also be significantly considered as costs (Samiaah, Hassen Hamzah & Zakaria, n.d). For instance, it offers little room for making mistakes since minimal stock is usually retained for reworking. This is done as part of its strategy to reduce stored inventories, and may lead to huge losses when a serious mistake that needs reworking occurs along the production line. Moreover, since the whole production process is reliant on suppliers, a hitch in the supply chain whole cause serious sabotage to the process (Córdova, et al, 2012). Lastly, the JIT system does not encourage storage of spare finished products to take care of emergency orders, since all productions are tailored to meet actual orders made in prior.

The JIT system assumes a continuum of an implementation process. The Hewlett-Packard’s Boise plant used a model to implement its JIT system, and this has been widely used as the blueprint in many other organizations. The system involves design of the flow process, carrying out total quality control, stabilizing the set schedule, instituting the Kanban Pull System, working closely with vendors, reducing inventories further in other areas of production, and improvement of the product design scheme (Mota Pedrosa, 2012). Depending on the capacity, volume, and financial wherewithal of an organization, the whole implementation scheme could take between 6 to 12 months. Each component of the implementation scale could be awarded 1-2 months depending on the load of activities that each category carries. A surprising effect that would go unnoticed when the JIT is fully implemented is that the response time of an organization would fall to about a day. There would be marked increase in customer satisfaction and company’s equity returns.

Benefits of JIT are obvious, given its simple philosophy of operation. Holding of low levels of stock in a warehouse or a company’s storage area means that there is a reduced need for storage space, which saves on insurance and rent costs. Additionally, there is less working capital that gets tied up in the stock, since stock is only obtained when it is required. As such, JIT reduces risks of perishing of stock, out-datedness, or obsoleteness (Chieh-Yu, Yi-Hui & Shu-Hen, 2009). Moreover, the system also discourages the build-up of unsold stock which usually occurs as a result of a negative shift in demand, and subsequently less time is often spent on reworking and checking of finished products, since the whole idea is about getting the job done rightly the very first time. Lastly, the system also has a competitive advantage as the lean manufacturing idea creates a flexible business operation that enhances more effective communication with suppliers and customers, and rapid adjustments can be made with changing market demands (Sakchutchawan, Hong, Callaway & Kunnathur, 2011).

Success Criteria of Project Implementation

In every project implementation cycle, the main objective of a project manager is to deliver a project within the stated budget and time scale defined. In order to come up with a successful project, managers need to work closely with customers and other stakeholders to ensure that deliverables of the project are compliant to the needs of the customer. The project implementation process involves the successful introduction and development of projects in a company, which is a rather complex process requiring lucid attention to a wide array of budgetary, human, and technical variables. Usually, the project manager plus the team members are faced with the difficulty of delivering a successful project amid a huge load of work, fragmentation, frenetic activity, and superficiality. In addition, some managers have the responsibility of making projects successful while they have limited access to sufficient budget, power, or manpower to handle the sophisticated process off project implementation (Chieh-Yu & Yi-Hui, 2008). It is in the condescendence of such project implementation turbulence that the success criteria gains paramount significance.

Success criteria have been defined as the measurements and metrics that have been established for determination of the success of a project implementation process, with regards to set objectives. Thus, in incorporates the visible and measurable indicators of a success of a project. They are important as they help determine whether set objectives are met, if the required change has been achieved, and whether there are any necessary improvements that need to be made (Halman & Voordijk, 2012). Several parameters have been used by many organizations in a project success criterion. Pakseresht & Asgari (2012) illustrate the use of key performance indicators (KPIs) as project success criteria, and which are majorly applied in measuring the benefits gained from a new project. Bajec (2012) also argues that they provide insight into the original objective and scope of the project. The performance indicators are aligned with the objectives of a business; are established by clients at the commencement of a project and are listed based on priority; they prove to be a strong and practical stance for products acceptable by clients; and are quantitative and measurable (Cao & Swierczek, 2010). Simply setting project success criteria in line with the key performance indicators is not enough, but realizable targets need to be set by a project implementation team.

The initiatives assumed by the project manager are actually the beginning point of the project success criteria. The active involvement of a project manager would most likely bear successful results which meet customer expectations (Asli & Nursel, 2011). This would require going an extra mile to exceed the expectations of customers by delivering the project with the budgetary allocation, stated deadline, and with the desired quality. Shen, Wang, XuLi & Liu (2009) however warn that this parameter could be overestimated to lead to unnecessary costs. The main idea is to always stick to the original plan and carry out a proper implementation process with adjustments made upon customer’s request. Success factors are those contributions which the management makes towards successful completion of a project. They include skilled and talented project manager, dedicated and organized project team, a project with a realistic scope and timeline, a supportive organization to both the team and the manager, and a favorable external environment with adequate back-up plans to curb emergencies (Capgemini, 2006). Many researchers suggest further criteria for project success, including establishing effective negotiations between the company and the customers; conducive and proper project plan; judicious assigning of tasks to team members; efficiently managing project risks; allocating enough time for process improvement; and proper qualitative and quantitative project estimation (Su, Gammelgaard, & Yang, 2011; Lin, 2008; Lianguang, Su & Hertz, 2012). It is largely agreed that success criteria differ from one organization to another, but the most common aspects of this system involves the above discussed features, which when perfectly implemented would obviously generate the desired results and ensure customer satisfaction.

Academicians acknowledge that the success criteria for project implementation are instrumental in determining the success of a project, from the onset of its design to the completion and evaluation. Innovations in the field of logistics play an important role in optimizing the effectiveness and efficiency of logistical process across many sectors in both the local and global economies, and thus their implementation process needs to be evaluated for success. A major driver of innovation in logistics is the system of globalization, which has expanded the target market, and made trade between countries more lucrative than confining oneself to local business. In a more scientific aspect, innovations in logistics have in extension contributed to reduction in the level of environmental pollution by encouraging adoption and use of green technology (Akbalik & Penz, 2011). Thus, it is currently a policy that virtually every new project being launched in the economy must carry out an environmental impact analysis. This is a statistical and research-intensive process that identifies any possible impact of a proposed project.

Project implementation is a complex process that engages the entire workforce in an organization, and needs effective collaboration to proceed. The process is, however, marred with various uncertainties and challenges, as researchers have correctly identified. This goes hand in hand with technology adoption, where academicians note that people have a natural degree of resistance to new innovations. Ranging from early adopters to skeptics/laggards, project implementers vary in their willingness to engage in that process. It is recognized that creation of new process flows is a major challenge in every organization, because it alters the traditional system thus creating the need for extensive adjustments and massive training.

In addition, the need for logistics innovation has provided a necessity to identify and tune potential innovators towards that field of life, so as to make the process of project implementation easy and fast. Today, innovators are encouraged to learn by listening and then practicing, meaning individuals have to constantly pursue new technologies, be active participants in conferences and professional associations, listen to new vendors, do more research, deriving lessons from the academic logistics community, and staying ahead of the adoption curve (Sakchutchawan, Hong, Callaway & Kunnathur, 2011). Researchers hypothesize that success criteria will take a higher toll in the process of project implementation, and operations in the various sectors of the economy will be optimized as their success is guaranteed due to effective evaluation methods.

Measuring Logistics Innovation

Measurement of innovation at almost all levels of the economy requires reliable and systematic measurement strategy that would be capable of identifying trends, compare countries and regions, compare different sectors of the industry, identify practices that are promising, and assess the effects of existing policies in a given industry (César & Vicente, 2011). In the logistics services system, measurement of innovation is fraught with various challenges (Kravchenko, 2011). The use of the Key Performance Index in measuring logistics innovation has been widely accepted as the most applicable method that yields accurate results on the performance of a new innovation.

The KPI measurements have been specifically developed for each organizational level including tactical, operational, and the executive. The system consists of metrics that focus on the implementation timeline, costs, quality of outcome, and compares performance with past techniques. Tactical-level metrics for measurement usually emphasize on operational efficiency, effective business performance, and return on investment. These KPI measurements go beyond internal metrics to incorporate such aspects as value chain partners through organizing the supply chain mandates, and exploits the capability of reward systems and KPI dashboards (Fernanda et al, 2011). The measurement index should be able to look at the past performances and make comparisons with the current state of affairs so as to be able to generate comparative data on the performance of logistics innovation (Helmi et al, 2011). The following are the benchmarks against which the performance of the innovation should be based: the innovation should be easy to implement and adopt; a cost-benefit analysis should be able to favor the innovative idea; it must be able to alienate the problems associated with the traditional system of operation; the implementation time scale should fit within the stated timeline; and the budgetary allocation should be sufficient for the project (Mohammad & Amir, 2010). Specifically, various models have been proposed in the past for measuring performance, including TOPP system which views performance along three dimensions, that is, efficiency, effectiveness, and changeability (Fabio et al, 2011). Effectiveness focuses on customer satisfaction; efficiency emphasizes on optimal and effective use of resources; and changeability deals with having strategic plans to handle changes in the production environment (Jiancheng & Kaihua, n.d). This model can be integrated within the KPIs metrics to give prime feedback on the performance of an innovation in logistics, as indicated in figure one below.

Point of view Horizon	Internal		External
Point of view Horizon	Management	Employees	Customer	Society
Long-term
Short-term operations

Effectiveness

Efficiency

Satisfaction

IT utilization and innovation

Fig. 1: High level framework for KPIs cluster and metrics for measuring Logistics innovation.

Conclusion

Logistics innovation remains a rapidly developing filed in the economy, and it is imperative that companies embrace these innovations so as to be able to gain competitive advantage, and to reduce costs of operation. It has confirmed that innovations in logistics lead to better customer satisfaction, and intensifies the relation between the supplier and the customer. A new project should be adequately implemented based on the success criteria, and measurement frameworks used to assess its effectiveness.

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