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Figure 3.8 Interfaces and conflicts between logistics and production
Other examples of conflicts include [47]:
• When purchasing shifts to bulk purchases it will generate discounts in price
and will increase most likely the availability in production, but on the other
hand it also increases working capital and the associated cost and it will
increase the space needed to store the goods.
• When marketing/sales offers customers decreased delivery times, it aims for
better service for customers and higher sales (prices). On the other hand, it
means logistics has to maintain more decentralised warehouses with lower
capacity usage and the need for a more responsive logistics department with
more personnel to keep the service levels.
• A wider product range will mean wider sales opportunities but has challenges
for other departments. Purchasing often loses to the possibility to create
volume discounts because of smaller quantities of each material. Logistics
has to handle, stock and schedule a higher number of materials. Production
has to cope with more change-overs and smaller lot sizes.
To cope with the challenges, measures that are aimed to cover the goals of
the whole supply chain should be integrated and possible inconsistencies have to be
analysed and eliminated. An example is to use the concept of the total cost of ownership
to calculate and compare the purchasing prices of offers from different suppliers or
use activity based costing to calculate the prices for products assigning more precisely
overhead costs such as administration (or logistics) cost.
This guideline is especially linked to the criteria control-span adherence on the
level of an individual performance element and in a broader sense consistency with
(overall, holistic) goals on the level of the performance management process.