Sustainable Solutions for SCM

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.

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