LOGISTIC EFFICIENCY OF THE PRODUCT IN LOGISTICS STRATEGIES OF SMALL MANUFACTURING ENTERPRISES. Maciej BIELECKI

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1 LOGISTIC EFFICIENCY OF THE PRODUCT IN LOGISTICS STRATEGIES OF SMALL MANUFACTURING ENTERPRISES Maciej BIELECKI Lodz University of Technology, Lodz, Poland, EU, Abstract: Logistics is becoming one of the most crucial areas of management, that determines the competitiveness of enterprises. When analyzing the complexity of the whole logistics system, it is worth seeing that the product itself plays an important role in it. The logistical efficiency of the product determines particular logistics activities and they in turn contribute to the rationalization of logistics. One should note that the logistical efficiency of the product should be also taken into consideration in the strategic area of logistics management. The article presents the results of research related to the matter of logistical efficiency of the product. It describes the main assumptions and factors that determine the logistical efficiency of the product. The author presents the concept of strategic models of logistics operations and the place that the product has there, along with its logistical efficiency. The article also shows the results of research related to the issue of logistics product efficiency illustrated by the examples of chosen manufacturing enterprises. The work is concluded with a summary and an indication of further direction to be taken in scientific research related to the subject in question. Keywords: product, efficiency, logistical efficiency of the product. 1. INTRODUCTION The rapidly changing environment more and more often imposes changes in the existing company strategies. These changes do not apply solely to the overall strategy of the enterprise, but also to its various functional areas. One of these areas is logistics, which, due to the constantly evolving environment needs to undergo continuous processes of rationalization and improvement. Rationalization and improvement of enterprise logistics leads, in many cases, to a situation where the range of areas that are subject to these operations is exhausted. Therefore, it seems important to take up the effort to analyze the product itself, as an important element in the improvement of logistics, and to define its place in logistics strategies. Referring to the definitions cited in literature, one should note that the product, in most cases, is defined as the object of market exchange, or as anything that may be purchased on the market. However, it is worth to mention that the product should provide certain specific benefits to customers, in other words it should have the ability to satisfy certain needs of the customer. On the other hand though, it would be advisable to look closer at the features that the product should have to ensure benefits to the manufacturers at the same time. Analyzing the product from the perspective of the manufacturer, one may identify certain management areas, according to which one would be able to define particular features of the product that bring benefits. One of these areas is logistics. When trying to combine logistics with the subject and interpretation of the product, one may obtain the concept of a logistically efficient product, and is able to define the features related to this efficiency. Logistical efficiency of the product should also be connected with the way logistics is recognized in a manufacturing enterprise, indicating a place where these strategies should include the product itself.

2 2. LOGISTICAL EFFICIENCY OF THE PRODUCT Defining the logistical efficiency of the product should begin with the analysis of three basic concepts: the product, the logistics product and its efficiency. According to Kotler, the product is defined as any subject of market exchange or anything that may be offered on the market therefore a product may be understood as material commodity, service, place, organization or idea. Since this definition allows to include into the notion of a product practically the majority of material and non-material items that are subject to market exchange, therefore in the context of a manufacturing enterprise, one should assume that a product is a material good being a part of production output, subject to market exchange. It should be noted at this point that the quoted definition is somewhat narrowed, as it obviously ignores the issue of production services. From the perspective of the concept of logistical efficiency of the product, it can be assumed that the characteristics of raw materials, intermediates etc. adopted in the production process as service, should be like those of a ready product and be identically subject to logistical efficiency. Since the above-quoted definition of a product makes it impossible to single out the features that a product should have to be effectively managed in the whole logistics chain, it would be useful also to quote the definition of a logistics product. Golembska describes the logistics product as a collection of wishes and expectations of a customer as to goods and services, of some form and quality, that may be obtained, in line with these requirement, only in a logistics system. Therefore, products or services understood as logistics products are, on one hand, the outcomes of the flow within the logistics system, on the other the economic form of this product allows all channel participants to gain profits. Golemska s interpretation is clearly inclining towards the determination of the characteristics that logistics services might have as a product, so for the purpose of the issue in question it should be slightly modified. Golembska also discusses he very definition of a logistics product on the level of the structure, stating that the third, highest level of this structure is occupied by the logistic product. According to the author, there are three levels of a logistic product, which have been bulleted below: 1) The physical form of the product, understood as a collection of basic characteristics of the product, along with its physiochemical features; 2) Product as cargo, i.e. all features of the product that allow to treat it in the context of the load (shape, form, weight, possibility to pack in unit loads, spatiality) 1. 3) Logistic product, understood as a product in the supply chain. The above-presented definitions show that each product, on one hand, should be appropriate from the perspective of the flow in the logistics chain, while on the other hand it should meet the expectation of the customer, ensuring benefit for the company. Achieving such state of balance by the enterprise could lead to obtaining maximum logistical efficiency. As the concepts of the product and logistic product have already been presented, logistical efficiency should also be defined. However, the interpretation of this notion in the context of the product may be somewhat troublesome. Efficiency, in its technical meaning, according to the PWN Polish Language Dictionary is the ratio of the effect of the action to the its means, expressed in percentage. From the point of view of management, the ratio of the effect to the effort is very often called productivity or effectiveness. Therefore, one should note that the concept of efficiency itself, used in the context of a logistically efficient product, may already evoke discussion. Just as well, the name of logistically effective or productive product could be used instead. However, since the essence of this article is to present certain idea, at this stage of research work 1 One could discuss other features, such as brand, or quality, which do not necessarily have to be related to treating the product as cargo.

3 the notion of logistical efficiency of the product will be used exclusively to outline the concept formulated by the author. When beginning to specify the conditions that define a logistically efficient product, one should first refer to the commonly available theoretical issues that allow to logically organize the subject in question. Taking the phase and functional approach as the staring point, one should expand the definition by Golembska and assume that a logistically efficient product should have specific characteristics that stem both from the functional division (order handling, inventory management, storage, transportation and packaging) as well as account for the movement of the product within the company according to the phase division (within the sub-systems of supply, production, distribution, utilization and returns). The initial assumptions so constructed do not exhaust, however, the areas related to the logistical efficiency of the product. Noticing that every logistics system should aim at full integration with the entities cooperating with the company links in the supply chain, when specifying the conditions, one should also include the issue of supply chain management. The conditioning of a logistically efficient product will be influenced not only by such supply chain links as mining, processing and trading companies, the role of which results from the characteristics of a given product manufacturing, but also service providers, i.e. logistic companies, entities dealing with transportation and shipping, brokerage companies (intermediaries in information exchange), as well as storage and waste disposal facilities. The areas that should not remain without significance for the logistical efficiency of the product are the additional management areas related to economy, work health and safety, environmental protection, quality, marketing or logistics services. They all have significant impact on shaping the product as the element of market exchange and full customer satisfaction. Especially complete customer satisfaction becomes, in many situations, the paramount feature that determines the design. One should note, however, that all the above-mentioned management areas have a direct or indirect influence on the logistical efficiency of the product. Since the scope of the areas necessary to explore is very large, at the initial stage of the research on the logistically efficient product, one should adopt certain initial assumptions. From the perspective of logistics, the key issue to include is the fact that a logistically efficient product needs to be subject to flows and should be coherent with the system of the information and decision-making processes. 3. LOGISTICS STRATEGIES OF ENTERPRISES AND THE LOGISTICAL EFFICIENCY OF THE PRODUCT Logistics strategies are relatively broadly discussed in literature. However, they mainly refer to the big enterprises sector. Therefore, the need has been noticed for creating a logistics model in the strategic and operational context for small and middle-sized companies. A very important factor that has crucial impact on the strategies within the sector of small and medium-sized manufacturing companies is the stage of development in the area of their logistics management. Taking Given the presented assumption, one may perform a division of operations for the SME sector, into two basic areas: The first one, classifies logistics in the context of a strategic approach to the actions in a manufacturing enterprise and divides it into conceptual and adjustment logistics. The other area, allowing to assess the nature of the actions in the operational context is adjustment and improvement logistics. The combination of the areas under discussion makes it possible to notice that in the context of manufacturing management at least four basic models of logistics activities should be created. They would constitute the average or a blend of the strategic and operational approaches to logistics Table 1. Each model should be primarily interpreted in terms of the strategic approach to logistics. Conceptual logistics deals with the determining basic conditions of manufacturing enterprise logistics management performance and building its operational concept on this basis. Its aim should be to design an optimal logistics solution for the identified boundary conditions, so that they would fulfill the basic principles of logistics. It should also identify those areas of the company that for various reasons cannot be integrated with logistics.

4 Adaptive logistics deals with the sphere of activities where the primary objective will be adjusting logistics to the actions of the enterprise in a way that would be most efficient, at the same subjected to the functional, non-logistic spheres of the company s activity. Regardless of the chosen type of strategic approach to logistics, the effects of the operational approach should not change. Tab. 1. Model approach to logistics in the strategic and operational context Operational approach Corrective logistics Improvement logistics Conceptual logistics CC model CI model Strategic approach Adaptive logistics IC model II model Source: Own work Viewing the corrective logistics as actions aiming at correcting errors, mistakes and irregularities in particular spheres of logistics and contrasting this definition with the concept of improvement logistics (understood as achieving excellence in the logistics spheres, making them increasingly better), one may notice that both the former and the latter concept will have a similar result in the strategic approach. In the conceptual logistics approach, the task of corrective logistics (the CC model) will be to lead to the situation where the designed logistics concept would function according to its initial assumptions, via a range of corrective actions. In the same approach, also issues will appear related to improvement logistics (the CI model) which, by development of e.g. logistics technologies would identify the areas enabling its improvement. The same is true for adaptive logistics, with this difference that corrective logistics (the IC model) would perform the corrective function for logistics actions, in the direction of the basic logistics principles that have been omitted at the previous stages of enterprise development, in the course of logistics customization. Improvement logistics (the II model) may temporarily improve adaptive actions without the need to account for the fact that these actions are carried out on insecure foundations, as is the case with conceptual logistics. The logistics models presented as seen from the strategic and operational perspective are therefore an appropriate complement of the original division, which distinguishes only conceptual and corrective actions, and a convenient starting point to assess the impact of the product itself and its logistical efficiency on the debated issue. 4. LOGISTICAL EFFICIENCY OF THE PRODUCT VS. STRATEGIC AND OPERATIONAL APPROACH TO LOGISTICS A logistically efficient product should find its place in strategic and operational logistics. For if we assume, what the current focus of the author s research work, that it will be possible to categorize the features of a product that determine its logistical efficiency, then it will also be possible to include, in varying degrees, the logistically efficient product in the strategic and oppressive aspects of logistics in a small manufacturing enterprise. This way, the enterprise that chooses the corrective-improvement logistics (the CI model) should, already at the stage of product manufacturing, single out the features that contribute to its logistical

5 efficiency, including and making use of new knowledge from the area of logistics, previously not applied. The adoption of the described model allows to create new logistics concepts, especially related to the product itself. The company that adopts this model, also provides the customer with added value, by the very choice of such solution. In turn, the company that intends to adapt the conceptual-corrective strategy (the CC model) should focus their actions on correcting the product to increase in its logistical efficiency. With the use of feedback coming from the market and the analysis of solutions available there, the company changes its products, basing on the methods that have been already discovered. In case of adaptive strategy, the problem of logistical efficiency of the product is of secondary importance. The companies using the adaptive-corrective strategy (the AC model) practically should not be at all interested in the logistical efficiency of the product. The essence of the company s activities is based on possibly best adjustment of its logistics activity to the needs coming from the market. It is worth to note that companies decision-making capability is very limited, as regards product design or improvement, while the company tries to refine the logistics processes only. The main and overriding factor taken into account in the processes of rationalization is the cost factor. The adaptive-improvement strategy (model AI) is the one that already allows the company to perform certain changes, however, they may be applied mainly in the logistics processes area. Making changes in the product is significantly limited by the customer. The improvement aspect of this strategy allows for the modification of the product, however only within limitations. The changes made to the product ought to primarily translate onto the benefit of the customer, as only then will they be possible to implement. 5. RESEARCH RESULTS The issue of logistical efficiency of the product, analyzed in the context of strategic and operational approach to logistics, ought to find its reflection in the research. At present, results of a pilot study have been analyzed, carried out in two stages in small manufacturing enterprises. Since the content of this paper needs to keep particular format, only the results of the research analysis will be presented. The results in detail may be seen in other publications by the author. For the purpose of the pilot study, an interview questionnaire was constructed, divided into: the part concerning the entrepreneur managing the company, the section on conditions of small manufacturing business functioning, a section on logistics, divided further into particular logistics sub-systems, along with the processes occurring therein, and a section on logistical efficiency and logistics strategies. It should be noted that since the issue of conditions for logistics management in small manufacturing companies is very extensive, while the scale of similarity of certain logistics processes resulting from the specific features of a given business entity may be very different, it was decided that the study would be carried out on a certain homogenous group of manufacturing enterprises, for which the common denominator is functioning in one common industry textile, in case of this study. Additionally, the objective of this pilot study was to analyze the group of business entities that are managed solely by indigenous entrepreneurs, who do not exceed certain turnover limit. Thus, some additional assumptions emerged, regarding: the size of the company, the type of ownership structure and the extent of income. The results clearly show that among the surveyed companies, the issue of logistical efficiency of the product is practically non-existent. The enterprises in question are focusing their efforts on the best possible adaptation to the needs of the market, seeing virtually no need for any corrective actions, not to mention any improvements regarding logistics. Most of the activities related to transportation, storage, order handling, inventory management or packaging are performed intuitively. At the same time, the entrepreneurs do not appear willing to take into consideration any theoretical or practical knowledge available on the market. With such ratio of responses, questions relating to the logistics performance of the product, revealed a practically complete absence of consideration for the above-mentioned issue in the management strategy of the enterprise. To exemplify these, chosen a selection of conclusions will be presented, concerning order handling, packaging and transportation.

6 As regards order handling, the companies mainly use a relatively outdated telephone system or a fax. Few companies use computer support for order handling, and even lower percentage of companies use the Internet. In most cases, the order handling system works according to the customer is the king system, realizing practically every wish of the customer, with no regard for the consequences these actions may have for logistics. In terms of packing processes and types of packaging, most companies do not have the system of packaging type recognition, or solely uses the system of visual identification. Packaging used in the packing process is usually standard plastic or cardboard boxes available on the market. Similarly with the activities rationalizing the product in terms of reducing its dimensions, to increase storage and transportation capacity. Practically, the entrepreneurs do not use such measures. As regards transportation, most companies use their own transport, which usually is supposed to perform both logistics functions of the company and be a family means of transport. The interiors of the vehicles, in most cases, are not adapted to carry particular types of products. The existent situation is confirmed by the behaviors of the surveyed companies as regards the strategies used. In most cases, there is no uniform strategy of a company, not to mention strategies related to the areas such as logistics or quality. As the main purpose of their activity, the companies mostly report only the desire to stay on the market. 6. SUMMARY Logistics is becoming an increasingly more important area providing competitive advantage to the company. However, the processes of improvement and rationalization have certain limitations. These often result from the finite range of options for improvement of the limited number of logistics management areas. The idea of a logistically efficient product opens yet another field that may have potential for rationalization and improvement. The presented concept of logistical efficiency of the product indicates yet another area of logistics to be included in effective enterprise management. This area, combined together with strategic and operational approach to logistics, allows to identify these enterprises that create the new logistics quality and those that should correct and improve their quality by following the good example. Trying to refer the presented research results to the strategic and operational approach to logistics, one may say that the surveyed group of companies solely concentrates on logistics in its adaptive sphere. In the light of the presented study, it would be hard to say that the companies in question use any corrective measures. If such measures appeared, it would mean that there is a system of logistics errors identification and correction. The notion of a logistically efficient product is virtually non-existent in the companies subject to research, which would only testify to the fact that the low level of logistics management in these companies presently does not account for the necessity to introduce any changes in the product, regarding its logistical efficiency. Subsequent research work will concentrate on big manufacturing enterprises, which, in the opinion of the author, may realize the idea of logistical efficiency of the product. This way, knowledge should be gathered, on all conditions for the logistically efficient product, indicating potential goals of corrective and adaptive operations in the realization of logistics. LITERATURE [1] BIELECKI M., Produkt logistycznie sprawny w małych przedsiębiorstwach produkcyjnych [Logistically Efficient Product in Small Manufacturing Enterprises], The Gospodarka Materiałowa i Logistyka Magazine, 11/2011, PWE, Warsaw, 2011

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