The Total Logistics Concept

Understanding the Total Logistics Concept (TLC)

Imagine you’re running a small bakery. You decide to switch to cheaper, thinner boxes to cut costs. Clever move, right? Not so fast. Those fragile boxes might:

    • Collapse during storage, requiring more warehouse space
    • Break during transport, leading to costly replacements
    • Result in dissatisfied customers receiving damaged goods

In this scenario, focusing solely on reducing packaging costs (a single function within logistics) leads to higher overall logistics costs. This is because the savings in packaging are offset by increased warehouse space needs and higher transport costs.

This illustrates the core of total logistics concept (TLC): every decision in your logistics chain impacts the whole system. It’s not about optimising individual parts – it’s about harmonising the entire orchestra. 

Key Trade-offs in Logistics

To apply the total logistics concept effectively, the bakery should consider the following trade-offs: 

  • Within Logistics Components: These trade-offs occur within a single function or area of logistics, such as warehousing.
    • Random vs. Fixed Storage Locations:  Random storage might optimise space but make it harder for bakers to find ingredients quickly during rush periods. Fixed storage ensures easy access but may lead to underutilization of space if not managed properly.
  • Between Logistics Components: These trade-offs involve decisions between different elements within logistics that affect each other.
    • Packaging Strength vs. Warehousing Efficiency: Increasing packaging strength (which raises costs) may lead to fewer damages during transportation.
  • Between Company Functions: These trade-offs occur across different departments or functions within a company. For example:
    • Production Run Length vs. Warehousing Costs:  Longer production runs might lower per-unit costs. However, this may lead to higher storage costs if the bakery produces more than immediate demand, requiring additional freezer or shelf space.
  • Between the Company and External Organisations: These trade-offs involve interactions with external entities like suppliers, distributors, or service providers:
    • Direct Delivery vs. Distribution Depot Network: Direct delivery offers quicker access to the market but may involve higher transportation costs per unit. Using a distribution network could lower per-unit transportation costs by consolidating deliveries.
Here are some additional examples detailing how these trade-offs impact various aspects of a business, including finance, production, distribution, and marketing:

Planning for Logistics

For the concept of total logistics to be effectively implemented and for appropriate trade-offs to be successfully managed, businesses must adopt a proactive and structured planning approach.

Planning should occur across different time horizons, typically classified as strategic, tactical, and operational planning: 

  • Strategic Planning. Strategic decisions are long-term and involve major commitments that affect the overall direction of the logistics operation.
    • Time Span: 1 to 5+ years
    • Focus: Overall structural decisions, trade-offs between company functions and with other organisations, corporate financial plans and policies, and policy decisions developed into a strategic plan. 

Example: Choosing a transport mode for a new global logistics operation. This decision sets the foundation for how goods will be transported across international markets.

  • Tactical Planning.Tactical decisions are medium-term and focus on optimising logistics operations to achieve specific objectives.
    • Time Span: 6 months to 1+ year
    • Focus: Subsystem decisions, annual budgets providing finance/cost basis, and translating strategic plan details into an operational plan without imposing on other logistics components.

Example: Selecting the most cost-effective packaging solution or determining optimal production runs to balance production costs and storage needs.

  • Operational Planning. Operational decisions are short-term and involve day-to-day logistics activities to ensure smooth operations.
    • Time Span: Day-to-day. 
    • Focus: Day-to-day decision making, operations controlled against standards and rules, control via weekly/monthly reports, and implementing the operational plan.

Example: Scheduling daily delivery routes or managing inventory levels in warehouses to meet customer demands.

The Planning and Control Cycle

The planning and control cycle described in the image is a systematic approach to managing logistics operations. It’s a continuous process designed to ensure that logistics activities are effective, efficient, and responsive to changing conditions.

Let’s break down each stage of the cycle and provide some examples:

The planning and control cycle described in the image is a systematic approach to managing logistics operations. It’s a continuous process designed to ensure that logistics activities are effective, efficient, and responsive to changing conditions. Let’s break down each stage of the cycle and provide some examples:

  1. “Where are we now?” (Feedback) Assess your current logistics performance. Are your delivery times competitive? Is your inventory turnover optimal?
  2. “Where do we want to be?” (Objectives) Set clear, measurable goals. 
  3. “How are we going to get there?” (Planning) Develop strategies to achieve your objectives.
  4. “How do we know when we have arrived?” (Monitoring) Establish Key Performance Indicators (KPIs) to track progress.

Tips for Implementing TLC 

  • Map your entire supply chain to visualise interconnections
  • Invest in data analytics to make informed decisions
  • Foster cross-departmental communication
  • Regularly review and adjust your logistics strategies
  • Consider partnering with logistics experts for specialised insights