Essentials of Logistics and Management, Third Edition. The logistician plays a critical role in the growth of his or her company – in this third edition of Essentials of Logistics, the conceptual framework in which all the stakes and themes of logistics is systematically analyzed, with a strong focus on the role of the supply chain. Indeed, many elements are critical to the successful logistical strategy: customer relation management, interactive information support, production optimization and process development, vision, strategy and operations management, and human resources and resource allocation. Growing out of a successful course given by the International Institute for the Management of Logistics (IML) of the Swiss Federal Institute of Technology (EPFL), in Lausanne, and by the Ecole des PontsParisTech (ENPC), the purpose of this book is to present a methodology allowing the reader to understand and act based on the critical factors embedded in the design of strategy. Concepts are thus combined with practical examples. Transversal vision and detailed case studies highlight the main themes of modern logistics and daily preoccupations of logisticians. The book is addressed to all professionals of logistics: managers, planners and engineers; as well as to graduate students specializing in the field.
Couv_Perret_2012_Couverture 12.11.12 16:40 Page1 EPFL Press ESSENTIALS OF The Global Supply Chain Edited by Philippe Wieser, Francis-Luc Perret and Corynne Jaffeux PHILIPPE WIESER is Director of IML, the International Institute for the Management of Logistics (EPFL – Lausanne and Ecole des Ponts-ParisTech) and professor at EPFL FRANCIS-LUC PERRET is Vice-President of the EPFL in charge of Planning and Logistics, Professor of Logistics and Management of Technology at EPFL, and founder of the International Institute for the Management of Technology (IML) CORYNNE JAFFEUX is professor at the Montesquieu-Bordeaux IV University Since 1991 she has been adviser of the AFT-IFTIM general direction for questions of higher education She is also Co-Director of IML Paris G16839 N10721 Philippe Wieser, Francis-Luc Perret and Corynne Jaffeux The logistician plays a critical role in the growth of his or her company – in this third edition of Essentials of Logistics, the conceptual framework in which all the stakes and themes of logistics is systematically analyzed, with a strong focus on the role of the supply chain Indeed, many elements are critical to the successful logistical strategy: customer relation management, interactive information support, production optimization and process development, vision, strategy and operations management, and human resources and resource allocation Growing out of a successful course given by the International Institute for the Management of Logistics (IML) of the Swiss Federal Institute of Technology (EPFL), in Lausanne, and by the Ecole des Ponts-ParisTech (ENPC), the purpose of this book is to present a methodology allowing the reader to understand and act based on the critical factors embedded in the design of strategy Concepts are thus combined with practical examples Transversal vision and detailed case studies highlight the main themes of modern logistics and daily preoccupations of logisticians The book is addressed to all professionals of logistics: managers, planners and engineers; as well as to graduate students specializing in the field ESSENTIALS OF LOGISTICS AND MANAGEMENT LOGISTICS & MANAGEMENT ESSENTIALS OF LOGISTICS & MANAGEMENT The Global Supply Chain Edited by Philippe Wieser, Francis-Luc Perret and Corynne Jaffeux THIRD EDITION EPFL Press EPFL Press Distributed by CRC Press ESSENTIALS OF LOGISTICS AND MANAGEMENT Cover Illustration: © buchachon - Fotolia.com ESSENTIALS OF LOGISTICS & MANAGEMENT The Global Supply Chain Edited by Philippe Wieser, Francis-Luc Perret and Corynne Jaffeux THIRD EDITION EPFL Press A Swiss academic publisher distributed by CRC Press EPFL Press Presses polytechniques et universitaires romandes, EPFL Post office box 119, CH-1015 Lausanne, Switzerland E-Mail:ppur@epfl.ch, Phone: 021/693 21 30, Fax: 021/693 40 27 Taylor and Francis Group, LLC 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487 Distribution and Customer Service orders@crcpress.com © 2013 by EPFL Press EPFL Press ia an imprint owned by Presses polytechniques et universitaires romandes, a Swill academic publishing company whose main purpose is to publish the teaching and research works of the Ecole polytechnique fédérale de Lausanne Version Date: 20140107 International Standard Book Number-13: 978-1-4665-7309-3 (eBook - PDF) All rights reserved (including those of translation into other languages) No part of this book may be reproducted in any form — by photoprint, microfilm, or any other means — nor transmitted or translated into a machine language without written permission from the publisher The authors and publishers express their thanks to the Ecole polytechnique fédérale de Lausanne (EPFL) for its generous support towards the publication of this book Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the CRC Press Web site at http://www.crcpress.com Contents Introduction What is “The Essentials of Logistics and Management” ? New stakes, new challenges for logistics Logistics: a holistic approach 3 Chapter Global Supply Chain Management 1.1 Organization and competition in a globalized economy 1.2 Global Supply Chain Management 16 1.3 Bibliography 30 1.4 The author 31 Chapter The Structure and the Operations of Logistics Systems 2.1 Introduction 33 2.2 Forms and strategies of design 34 2.3 Discovery of stochastic lags and oversized inventories 36 2.4 Designing the logistics project’s life cycle 39 2.5 Measuring the risk 45 2.6 Simulating the risk profile of the logistics project 47 2.7 Designing with multicriteria decision-making tools 51 2.8 Bibliography 54 2.9 The author 55 Chapter Designing the Supply Chain 3.1 Supply chain management 57 3.2 Managing variety 70 3.3 The supply chain in the digital era 77 3.4 Supply chain management and strategy 82 3.5 Turbulent times 89 3.6 The authors 93 Chapter Statistical Forecasting and Demand Analysis 4.1 Introduction 95 4.2 Model application 96 4.3 Characteristics of a chronological series and forecasting basics 96 4.4 Examples of forecasting models 97 4.5 Forecasting model: application 98 VI The Essentials of Logistics and Management 4.6 Models and forecast results 101 4.7 Quality of a forecast 103 4.8 Interpretation of forecast results 106 4.9 Forecasting approach, application 110 4.10 Conclusion 112 4.11 Glossary 113 4.12 Bibliography 113 4.13 The author 113 Chapter Leading in Service Innovation: Three Perspectives on Customer Service Value Delivery 5.1 Understanding the growing importance of innovation in services 115 5.2 Deploying innovation and reinventing service businesses 119 5.3 Developing cross-functional coordination in service innovation 124 5.4 Harnessing technology as an enabling option for strategic value delivery 131 5.5 The author 133 Chapter Purchasing and Logistics: Perimeter Overlaps in a Context of Global Sourcing 6.1 When survival is the issue, you need to be better than your competitor 136 6.2 Purchasing as the decisive factor of a company’s competitiveness 136 6.3 The sense of “global” sourcing 137 6.4 Successful purchasing is a triangular game 138 6.5 (De)centralization of purchasing 139 6.6 Long-term partnering with Suppliers (SRM), or iterative re-exposure to competition? 140 6.7 Supplier and product development 141 6.8 Cost/price/value/stakes: four approaches to weigh the impact of a given purchase on business profitability 142 6.9 Ethics and purchasing 144 6.10 Buying is a fantastic game! 145 6.11 The author 145 Chapter Production Systems 7.1 The Just in Time approach, of misleading simplicity 147 7.2 Computerized approach to production management: MRP (Manufacturing Resources Planning) 163 7.3 Interdependence of methods and representations 168 7.4 Bibliography 170 7.5 The author 172 Chapter The Management of Distribution and Operational Logistics 8.1 The different levels of logistics maturity 173 8.2 Warehouse conception 175 8.3 Operational warehouse management 181 8.4 Stock management 189 Contents VII 8.5 Transport 195 8.6 E-business 197 8.7 The author 199 Chapter Transport Management as a Key Logistics Issue 9.1 Introduction 201 9.2 Production, logistics and transport 201 9.3 Logistical management of transport 207 9.4 Conclusions 226 9.5 First Focus: Rail freight transport in Europe 230 9.6 Second Focus: Intermodal transportation: a major challenge for seaports 234 9.7 Third Focus: Urban freight transport 238 9.8 References 243 9.9 The authors 244 Chapter 10 Logistics of International Trade 10.1 Introduction 247 10.2 Key logistics options 251 10.3 Major aspects of an international trade transaction 255 10.4 The international movement of goods 271 10.5 Border-crossing issues 287 10.6 Recommended reading and websites 292 10.7 The authors 292 Chapter 11 Information Systems 11.1 Introduction 293 11.2 Information Systems (IS) vs Information Technology (IT) 294 11.3 Information Systems 294 11.4 Conclusion & Perspectives 306 11.5 Glossary 308 11.6 References/Useful Links (as of March 2007) 309 11.7 The author 310 Chapter 12 Supply Chain Connective Technologies 12.1 Introduction: What does supply chain connectives technologies mean? 311 12.2 General overview and major trends in connective technologies 311 12.3 e-Supply chain: from physical to virtual chains 313 12.4 e-Supply chain: M2A versus A2A 315 12.5 The costs and benefits of e-supply chain implementation: fast moving consumer goods (FMCG) and other examples in Italy 317 12.6 Examples of e-supply chain implementation and cooperation 319 12.7 Tracking systems: RFId 322 12.8 RFId impact on MIS: centralized versus distributed 323 12.9 RFId on the product: the supply chain 324 12.10 RFId on people 326 12.11 Wireless sensor networks: more than RFId 328 12.12 Localization: several technologies for performance 329 12.13 Conclusions 331 12.14 Bibliography 331 12.15 The authors 332 VIII The Essentials of Logistics and Management Chapter 13 Operations Research in Logistics 13.1 What is operations research? 333 13.2 Vehicle routing problems 334 13.3 The traveling salesman problem 336 13.4 Solution methods for the TSP 338 13.5 Solution methods for the vehicle-routing problem 344 13.6 Real-life constraints 349 13.7 Arc-routing problems 352 13.8 Conclusion 354 13.9 References 356 13.10 The author 356 Chapter 14 Modeling and Simulation in Logistics 14.1 Introduction 359 14.2 Discrete-event simulation 359 14.3 Mathematical toolbox 363 14.4 Applications 388 14.5 Bibliography 397 14.6 The authors 398 Chapter 15 The Lean Supply Chain 15.1 Introduction 399 15.2 The roots of lean in the Buddhist Philosophy 399 15.3 Growing product variety: the Toyota response 400 15.4 New product development is the first strategic issue 402 15.5 Time is critical for everything 403 15.6 Concurrent engineering and Obeya Room: two lean tools of lean new product development 405 15.7 Target costing and lean new product development 408 15.8 The tools of lean production 411 15.9 Management Information Systems and Lean 416 15.10 Culture and lean implementation 419 15.11 Conclusions 420 15.12 Bibliography 421 15.13 The author 421 Chapter 16 Marketing and Innovation Management 16.1 Introduction 423 16.2 Marketing evolution: widening scope and customer focus 424 16.3 Understanding market dynamics 425 16.4 Market dynamics in action: New products, new services, changes in customers’ perceptions (supply-chain contribution) 433 16.5 The two major dimensions of marketing: industrial products and consumer goods 438 16.6 System selling 444 16.7 Conclusion: new frontiers in marketing 447 16.8 References 449 16.9 The author 449 Chapter 17 Financial Accounting 17.1 Introduction 451 17.2 The balance sheet : current assets 454 Contents IX 17.3 The Balance Sheet : Liabilities and shareholder’s equity 456 17.4 The Income Statement 459 17.5 The Statement of Cash Flows 461 17.6 Working Capital 463 17.7 Financial Ratios 463 17.8 Analyzing the Income-Statement ratios 466 17.9 Balance sheet standards by Industry 468 17.10 Additional Disclosures and Audit Reports 468 17.11 Conclusion 469 17.12 Glossary 470 17.13 Bibliography 472 17.14 The authors 473 Chapter 18 Processing & Controlling 18.1 Logistics business processes 475 18.2 Business Process Management 485 18.3 Controlling 489 18.4 Activity Based Costing 497 18.5 The author 503 Chapter 19 Financial elements 19.1 Introduction 505 19.2 Principles in corporate finance 505 19.3 The value of money 509 19.4 Project appraisal 511 19.5 Financial choice 517 19.6 Project consequences in accountability 522 19.7 Securitization and structured financing 531 19.8 Conclusion 532 19.9 References 533 19.10 The author 533 Chapter 20 Understanding Global Strategic Dynamics 20.1 Introduction 535 20.2 Some fundamental concepts of strategic analysis 536 20.3 A strategy process 538 20.4 Winning beyond classical strategic perspectives 547 20.5 Conclusion 550 20.6 Bibliography 550 20.7 Acknowledgements 552 20.8 The authors 552 Chapter 21 Managing Human Resources 21.1 Introduction 553 21.2 The context of a project 556 21.3 The project stakeholders 559 21.4 Major problems 563 21.5 Team motivation 565 21.6 Conflicts in projects 567 21.7 The factors of project success 572 21.8 Check-list: do’s and don’ts 575 21.9 Bibliography 576 21.10 The authors 577 Managing Human Resources 565 In Figure 21.8, we see that delay in a project creates a situation of stress, which leads to tensions within the team, and hence a decrease in productivity, which in turn will amplify the delay of the project 21.5 Team motivation If we admit that most colleagues want to develop themselves and show what they are capable of, the project environment is a welcome setting for many colleagues: outside a daily routine, colleagues can prove their ability to accept challenges The framework of the project allows them to make contributions that are clearly much greater than in the traditional framework of the firm, for several reasons: • a project always contains something new, a technological innovation; • a project needs the integration of various components; • a project requires a lot of problem-solving As well as these possibilities of intrinsic motivation linked to the work to be done, the project manager has at his disposal possibilities and different instruments to motivate his colleagues, because: • a project must be carried out on schedule; • a project may be seen throughout the firm; • a project finishes with a tangible, visible objective In a study regarding the management of human resources in project management, Klatt, Murdick and Schuster (Klatt 1985) analyze the particularities of projects that allow for particular types of motivation They especially note the following points: • The people who participate in projects are colleagues who have a more positive attitude towards risk, attach less importance to security, and who particularly appreciate the challenges that a project represents Indeed, we must underline that often, the participants in a project have not been chosen, but instead have volunteered • Throughout the project, the content of the work changes often, which offers development possibilities that are much greater than those when working on line production • The project environment is an ideal place for an MBO (Management By Objectives) approach • The innovation that a project requires offers much greater possibilities for recognition (for the work accomplished) than in line production work • Work in interdisciplinary teams is a factor of personal motivation On the other side, on a project, certain people only work in a temporary manner and cannot consequently be motivated for the long-term success of the project 21.5.1 Study of the motivating factors in projects Yourzak (1986) has tried to empirically establish a list of the most important motivating factors in projects Taking as a starting point Herzberg’s theories regarding motivation, Yourzak asked 128 project managers and 59 workers to rank the motivating factors in projects by order of importance It is interesting to note that the managers gave replies similar to those of the workers, as the following table shows, which indicates the ranking of each factor: 566 The Essentials of Logistics and Management Table 21.3 The importance of the motivation factors according to Yourzak (1 = very important) Motivating factor Managers Workers Recognition 1 Responsibility Fulfillment Promotion Development 10 Salary Project manager’s training and supervision 7 Work 8 Relationship with the project manager Relationship within the team 10 Working conditions 11 11 Team subordinate relationship 12 12 Organizational policy 13 15 Title/status 14 14 Security 15 13 Personal time 16 16 Recognition, responsibility, and self-accomplishment represent, for both groups, the three most important factors 21.5.2 Motivation and satisfaction If motivation is linked to the work itself and constitutes a major factor for the work of the project, satisfaction depends principally on exogenous factors: salary and work conditions Herzberg calls these elements hygiene factors There exists an asymmetrical correlation between motivation and satisfaction: motivation can favor satisfaction, whereas dissatisfaction can diminish motivation On the other hand, satisfaction will not increase motivation It has not been possible to show a correlation between satisfaction and productivity (whereas this correlation is very high for motivation) On the other hand, satisfaction is in close negative correlation with the fluctuation of personnel, as well as absenteeism Taking Lawler’s model, Owens (1990) has reversed the terms: for him, good team performance leads to team satisfaction This observation must be qualified, because Owens combines motivation, morale, and satisfaction: “a straightforward definition of job satisfaction is the feelings one has about his/her job Then ( ) a goal of most project managers is to create an atmosphere leading to high team morale This term is often used synonymously with job satisfaction.” This confusion in concepts is widespread in the literature about human factors in project management The relationship between performance and motivation is very real: the effect of training creates a project that proceeds well We have shown, in the empirical analysis of projects, the existence of such positive loops of reaction – known, for example, under the name of “winning team spirit” Here, success brings success Meeting the milestones motivates the whole team, which then gains confidence in itself and becomes sure “to get there,” making them sure in reality to finish the project successfully (Fig 21.9) Managing Human Resources 567 In m cre ot as iva e tio n se ity ea tiv cr c In odu pr in in M n am wi Te to re su ile s m ton et es Fig 21.9 The loop of positive retrospective effect 21.5.3 Satisfaction and project work Satisfaction is linked to the general conditions of the firm (salaries, timetables, etc.), upon which the project manager has practically no influence Satisfaction seems to be a factor that evolves slowly over time, and we can reasonably admit that it is quasi-stationary over the duration of the project All the models that try to explain satisfaction give a central place to rewards, to the perception of the value of rewards, and so on In projects, bonuses and other significant rewards are not very often given, or else they are only given to the project manager (in the United States, on the other hand, this practice is more frequent) Amongst project managers, a revealing sally circulates: “to direct a project is like playing pinball; if you win, your only reward will be the right to play again.” Rewards constitute extrinsic motivation, which can have the effect of destroying the intrinsic motivation linked to work As Deming argues, “( ) the present style of reward ( ) squeezes out from an individual, over his lifetime, his innate intrinsic motivation, self-esteem, dignity They build into him fear, self-defense, extrinsic motivation” (Deming 2000) In the following section, we examine in more detail the mode of project organization and functioning 21.6 Conflicts in projects A project is by definition a field of conflict between the contradictory desires of the various actors in the project The users would like a system having numerous functions, while the client would like a system delivered on time and as cheaply as possible Those in charge of maintenance would like a well-documented system, the engineers would like technical challenges but hate documentation, and the project manager’s superior would like ambitious aims, a project within budget and other limits, and no surprises The gathering of colleagues coming from different jobs or hierarchical levels, stress and the particularities of matrix structure favor the appearance of new conflicts According to Pinto (2009), the traditional manager spends more than 20% of his time dealing with 568 The Essentials of Logistics and Management c onflicts, and this percentage ought to be even higher for project managers Several authors have tried to analyze the sources and particularities of these conflicts Wilemon (2002), in his study on conflicts in projects, has tried to understand the factors that determine the intensity of conflicts For him, conflict potential is increased by: • the variety of the team members’ expertise; • the ambiguity of the roles in the project teams And the potential of conflicts diminishes with: • the challenge of the work assigned by the project manager; • the comprehension of the project objectives by the members of the project team; • the ability of the project manager to reward and to punish; • the congruence with the aims of superiors (objectives of the general management); • the authority that the project manager has over the participants in the project In his study, Thamhaim (2005) defines seven types of conflict that may occur during the development of the project, and then analyses the intensity of each of these types of conflict Here are the seven types, in order of decreasing intensity: • conflict over schedules; • conflict over priorities; • conflict over resources; • conflict over technical points; • conflict over administration; • conflict between people; • conflict over costs The categories used by Thamhaim seem a bit too superficial On the other hand, D.S Kezsbom (2001) has carried out a more thorough study of 275 people in charge of projects at big firms in the United States The questionnaires asked the participants to indicate, in order from one to seven, the sources of conflict Kezsbom then defines a rating from the data, bearing in mind the position and the number of times something was mentioned The results are given in Table 21.4: Table 21.4 Sources of conflict Aims/definition of priorities 24% Personality 16% Communication 15% Policy 8% Administrative procedures 8% Allocation of resources 7% Schedules 7% Leadership 6% Roles/ambiguous structures 2% Costs 2% Salary structure 2% Previous conflicts 1% Managing Human Resources 569 His study shows once again the determining role of aims and priorities Let us note that the “policy” category in fact brings together human factors Its exact description is: “disagreements which derive from the NIH (Not Invented Here) syndrome or from the project actors’ personal aims.” The human factors, therefore, add up to 48% of the sources of conflict Sommerville (2002) has demonstrated a correlation between stress and conflicts in construction projects His results also show that the aspects of cost (2%) and schedules (7%) play a marginal role 21.6.1 Conflicts and forms of organization For Owens, conflicts are often the consequence of an unclear definition of the organizational form of the project, as well as of the respective competencies of the actors The project environment is often characterized by unclear definitions of the respective roles of each person The role and the competencies of the project manager may be left vague (because there is no description of the project manager’s requirements), and the respective roles of the team members, as well as of their competencies and their responsibilities, are rarely defined with precision The result is the possibility of a large conflict; role ambiguities lead to role conflict because: • Expectations are different amongst team members; • Two people think/hope to play the same role Those people who perceive their role to be badly defined will have more difficulty taking part in the project (Owens 1990) 21.6.2 Global sources of conflict Logistics projects are very often global, involving multiple locations in different time zones, with different languages, cultures and organizations (Fig 21.10) In an international, multicultural environment: • different values and habits tend to collide, while • physical and psychological distance hinders communication Locations Organizations Cultures Languages Time Zones Fig 21.10 Dimensions of global projects (Binder 2010) 570 The Essentials of Logistics and Management Both factors contribute to generate additional conflicts, making it difficult to address and resolve all of them Cultural differences can lead to incompatible views, for instance on the distribution of work, responsibilities and power, on risk acceptance, on customer satisfaction, and, in general, on what is to be considered “normal.” Distance not only makes detecting and addressing conflicts more challenging, but distance itself can be the source of additional conflicts, such as when defining acceptable times for a meeting to take place between locations in different time zones, or simply when choosing the language or the communication infrastructure to be used Very often in logistics projects, the team members don’t even know each other personally They have to co-operate with individuals they have never met and never will At best, they may know each other’s face and voice from video or phone conferences, with most of the communication being done electronically, usually by email Getting to know each other can sometimes make things easier, but besides causing additional costs, moving people from one location to another can sometimes even worsen the situation As Binder remarks, “individuals working in foreign locations may suffer from ethnocentrism, which is the evaluation of their behaviors and working style according to local norm and standards, usually tending to be unfavorable The local team can consider the visitor as being naïve or impolite, simply because their values are different On the other hand, (…) foreigners working in another country can have the same impression of the local workers” (Binder 2010) 21.6.3 The project manager confronted with conflicts Several authors underline the important role of the project manager in the early detection and resolution of conflicts For Harrison, the detection of conflict is one of the “essential factors” which leads to the formation of an effective team The project manager must be attentive to the smallest signs: a team member who does not pay attention to what the others say, a lack of respect, personal objectives, or the existence of unfriendly attitudes (Harrison 2004) For Binder, the project manager has to always foster discussions to identify potential reasons for conflict and, in global teams, obtain a common understanding of divergent, critical topics (Binder 2010) In his classic study, “The psychology of interpersonal relations,” Heider remarks that if two sides in a conflict have a positive relationship with a third person (e.g., the project manager), it is more difficult for them to maintain the conflict So, an extroverted, open, sociable project manager will have less conflict on his team (Heider 1958) Referring in particular to software projects, Boehm goes further: in his “W theory,” he characterizes a project manager’s primary roles as a negotiator between his various constituencies and as a packager of project solutions with win conditions for all parties (Boehm 1989) Hill has analyzed the behavior of excellent project managers in the oil industry and has compared them to a reference group of executives First of all, when faced with a conflict, effective project managers have a much larger range of possible answers Then, they have less fear of possible trouble and show a will to approach conflicts instead of avoiding them In fact, they like social interactions (in the FIRO,2 their need for interpersonal exchanges is worth an average of 27.2 compared with 22.9 for the reference group) They themselves practice the behavior they recommend, and determine in this way the “climate” of the group They often FIRO = Fundamental Interpersonal Relations Orientation, a theory of interpersonal relations introduced by William Schutz in 1958 Managing Human Resources 571 talk about the positive effect of open-mindedness and of open discussion about problems Members of the reference group often talk about the negative nature of conflicts (Hill 1988) 21.6.3 Modes of conflict resolution Project managers prefer a collaboration/confrontation approach, as Thamhaim (2005) shows Thamhaim asked 150 project managers to specify the approaches they preferred for solving conflicts Figure 21.11 shows the results of this study % of project managers who reject a strategy 75% 50% % of project managers who approve a strategy 25% 25% 50% 75% Collaboration Compromise Appeasement Competition/pressure Withdrawal Fig 21.11 Strategies of conflict resolution It is interesting to note that the modes of conflict resolution are alike whatever the interlocutor (team, superior, client), with however a notable exception: in conflicts with those in charge of line production, it is the compromise approach that is preferred 21.6.4 A common objective The most important factor for reducing conflicts consists in having a common objective In order to encourage this attitude, it is necessary: • to repeat that the only criterion of evaluation of individual and group performances is the total efficiency of the project; • to clarify responsibilities; • to favor informal interactions (sport, eating together, parties, etc.); which allows for • the passing of informal information – without the opening of informal communication channels, communication between groups will be heavily hindered; • that the project manager knows how to control his emotions “If you cannot manage your own emotions in the workplace, you cannot manage other people” (Harrison 2004) 572 The Essentials of Logistics and Management Adams and Barndt have also studied types of conflict and their modes of resolution In a survey carried out on several hundreds of project managers, they examined the evolution, during different phases of the project, of the intensity of conflicts and of the satisfaction of members of the team (Adams 1988) The results show a constant decrease in the intensity of conflicts over the project life cycle: 0.70…0.67…0.62…0.44 They also show a decrease in satisfaction: 5.83…5.35…5.29 (calculated using the Job Diagnostic Survey short form, with no value available for the closing, fourth phase) This decrease in satisfaction over the course of the project, which all project managers know well, is reflected in this quip: “a project is composed of four phases: enthusiasm – disillusionment – panic – looking for culprits.” 21.7 The factors of project success It is quite remarkable to note that the success or failure of projects in the field of logistics is rarely due to technical factors In general, technical aspects are relatively well mastered, the technologies involved often having already proved themselves in other fields The success or failure of projects is, on the other hand, largely dependent on the human factors In a study of 650 projects, Baker and Murphy analyzed the factors contributing to project success (Baker 1988) Using partial regressions, they tried to determine the effect of each criterion upon the success of projects What is interesting is that 77% of the variation in the analysis of the success of projects can be explained by the elements shown in Table 21.5 Table 21.5 Project success factors • A good relationship between the project manager and the person in charge of line production • Team spirit • The team is conscious of the what is at stake • The acceptation of the aims by the team • The ability of the team • A good relationship between the project manager and the official administration • A good relationship between the project manager and the client • Realistic progress reports • The project manager’s expertise on the administrative level • Informal relationships between team members • The project manager’s competencies • Adequate procedure for modification • Work security for the team • Participation of the team in decision making • Participation of the team in solving problems • Organization enthusiasm • A good relationship between the project manager and his superior • The project manager’s expertise on the human relationships level 21.7.1 The role of the project manager All the elements above, except for two (in italics), can be directly influenced by the project manager; the two others (“Work security for the team” and “Organization enthusiasm”) depend more on the mother organization Managing Human Resources 573 Motivation Global project comprehension Well-explained aims Communication with the management Confidence of the users Support of the mother organization Confidence solidarity cohesion within the team Client satisfaction Communication between the team and the project manager Each member is aware of his responsibilities Communication within the team Relationship between the line and the project Absence of conflicts within the team Mutual help, interest in others To be conscious of what is at stake in the project Stability (no fluctuation in numbers) The team’s confidence in the project manager Communication between the project manager and the client Neutralizing of the project enemies Winning team spirit The right to make a mistake Availability of people 0% 20% 40% 60% Fig 21.12 Project success factors The first factor indicated (“A good relationship between the project manager and the person in charge of line production”) plays, as we shall see later, a major role Those in charge of line production must, indeed, let the project have resources, and their lack of collaboration or their opposition would be a major handicap for the project Does a magic recipe exist which assures project success? Certainly not, but, on the other hand, we have been able to show a series of factors that are statistically tightly linked to project success In our survey of more than 100 project managers, we have determined the following success factors (Figure 21.12) The most important factor is indeed motivation We must, however, bear in mind the fact that for many project managers, especially those who come from the technical side of the firm, “motivation” represents a catch-all concept, explaining everything, which may also be the only concept they have at their disposal to apprehend social realities 21.7.2 The role of communication As opposed to the analysis of Baker and Murphy, our analysis demonstrates the importance of communication, which intervenes on four levels: • communication between the team and the project manager; • communication within the team; 574 The Essentials of Logistics and Management • communication between the project manager and the client; • communication with the management This notable difference in the analysis of success factors can be explained by cultural considerations Baker carried out his study in the United States; ours has been done in Europe It could be that the need to communicate is greater on the Old Continent What is also very important, in Figure 21.12, is that the five following factors (global project comprehension, well-explained aims, confidence of the users, support of the mother organization, and confidence, solidarity, and cohesion within the team) all deal with the theme: confidence – transparency – clear aims Well-explained aims, a well-defined framework, and mutual confidence between the sides involved can seem trivial, but are actually crucial Let’s not forget, however that projects are “abnormal,” temporary structures in a firm, in which power lines are badly defined and which therefore offer a weakly structured framework Misunderstandings and suspicion appear very easily As seen above, this is especially true in international, multi cultural or global teams, where choosing the correct global project structure and using the appropriate collaborative tools becomes a critical factor of success 21.7.3 Choosing the correct global project structure Depending on the size of the project and the complexity of the activities to coordinate, successful global projects use a distributed, rather than a centralized structure (Fig 21.13), with local coordinators who are responsible for sub-projects or work packages They can manage their local team without the barriers created by time zones, different languages and cultures, while the project manager can concentrate on ensuring proper communication among the coordinators This avoids misunderstandings and increases efficiency (Binder 2010) Location Location Project Manager Location Location Location Project Manager Location Location Fig 21.13 Centralized vs distributed structure Location Managing Human Resources 575 21.7.4 Implementing and using collaborative tools When their people’s daily business is to work with colleagues they don’t know and seldom see, international organizations must make sure not only that they carefully select the right persons with the necessary skills, but also that they obtain the necessary organizational support This includes implementing a consistent, global project management methodology and promoting the use of collaborative tools at all hierarchical levels Telephones – including mobile phones – and email are the basic tools for collaboration, available virtually everywhere, as are more and more instant-messaging instruments How to use these tools seems self-evident However, in a global environment, behavioral rules regarding availability, “netiquette,” and confidentiality have to be defined or re-defined Some simple examples: • Project stakeholders may frequently travel across time zones and, as a result, sometimes may not answer emails quickly, so it is important to have an automated “out of office” message • Humor, slang, and local acronyms might not be properly interpreted and must be avoided • It is important to know whether persons other than the addressee – for instance, personal assistants – can read confidential emails or not • Email should not be used as a file transfer tool Projects should have a shared workspace where documents may be accessible to all project team members who need them Similarly, for video-conferencing, it is important to make sure that all participants have the same quality of connection and that they get the same opportunity to express themselves, even if they are speaking in a foreign language One final caveat: electronic media will only work on a motivated team on which mutual confidence reigns and when the team members are willing to openly communicate with each other 21.8 Check-list: do’s and don’ts In order to offer an operational tool to improve the management of human factors in logistics project management, we propose a brief list of things to and not to during the different phases of the project 21.8.1 Starting up a project To Not to • Understand thoroughly the needs of the client • Not know the potential enemies of the project • Define which factors are critical for the success of the project • Consult all the people who will be affected by the project • Understand the needs of the final users • Assure yourself of management support • Define the milestones with the person who has given the mandate 576 The Essentials of Logistics and Management 21.8.2 Definition of the review board To Not to • Make sure that the members will be able to • Treat the review board like an enemy make a large contribution • Consider the review board sessions to be a • Define deliveries with the review board chore • Fix the sessions well ahead of time • Consider the review board to be an enemy or • Consider the review board as a resource for an overbearing, controlling entity • the project 21.8.3 The construction of the team To Not to • Choose the team members according to their • Let project enemies onto the team skills • Let doubt reign • Choose motivated colleagues • Give the impression of indecision or of being • Define from the beginning, with precision, the unsure roles and responsibilities of each person 21.8.4 Managing and motivating the team To Not to • • • • • • Compel recognition through conviction • Impose one’s point of view Provide precise objectives, with deadlines • Keep information to oneself Regularly underline what is at stake in the • Give unrealistic deadlines project Thank people for the work done Emphasize the importance of each delegated task • See one’s colleagues very regularly • Spend time with one’s colleagues • Celebrate achievements (deliveries, milestones) 21.8.5 In case of conflicts between the group To Not to • Deal with the conflict immediately • Hope that things will get better by themselves • Listen to each side • Underline the fact that everyone has a common aim: the success of the project • Find a solution in which no one loses face 21.9 Bibliography Baker N., Murphy D & Fisher, Factors Affecting Project Success, Editors Cleland, D and King W., Van Nostrand Reinhold, New York, 1988, pp 902-919 Bauhaus R., Cultural Communication on Global Project Teams, Project Management Institute, Seminar/ Symposium, 1995, pp 432-440 Managing Human Resources 577 Couillard, J “The Role of Project Risk in Determining Project Management Approach,” Project Management Journal, December 1995 Deming, W.E The New Economics for Industry, Government, Education, The MIT Press, 2000 Dinsmore, P.C., Cabinas-Brewin, J (Editor) The AMA Handbook of Project Management, AMACOM 2010 Elmes M., Wilemon, Organizational Culture and Project Leader Effectiveness, PMI Seminar/Symposium, 1986, pp 369-379 Gemill G., Thamhain H.J., “Influence Style of Project Managers: Some Project Performance Correlates,” Academy of Management Journal, June 1974, pp 216-224 Graham R.J., Project Management as if People Mattered, Primavera Press, 1989 Graham R.J., Creating an Environment for Successful Projects, 2nd Edition, Jossey-Bass, 2003 Harrison, F L, Lock, D Advanced project management: a structured approach Gower Publishing, 2004 Heider, F The psychology of interpersonal relations New York: Wiley, 1958 Hill R.E, & Somers, T., Project Teams and the Human Group; Handbook of Project Management, Editors Cleland D and King W., Van Nostrand Reinhold, New York, 1988, pp 772-801 Kerzner, H Project Management Metrics, KPIs, and Dashboards: A Guide to Measuring and Monitoring Project Performance Wiley 2011 Kezsbom D., Edward, K The New Dynamic Project Management John Wiley & Sons, 2001 Klatt, L., Murdick, R & Schuster, F., “Career management,” Human Resource Management, Merrill, Columbus, 1985 Losoncy, L The Motivating Team Leader DC Press 2010 Martin D M., Wysocki J., Selecting a Leadership Style for Project Team Success; Project Management Institute, Seminar/Symposium, Calgary Alberta, October 1990, pp 748-752 Melanson C., The Human Side of Project Management, Project Management Network, March 1993 Munns A.K., “Potential Influence Of Trust On The Successful Completion Of A Project,” International Journal of Project Management, Vol 13., N° 1, pp 33-38, Muller, 1995 Murdick R., Schuster F., “Managing Human Resources in Project Management,” Project management Quarterly, June 1976, pp 21-25 Owens, S D., Martin, D Project Team Connections Between Job Satisfaction and Productivity, Project Management Institute, Seminar, Calgary Alberta, 1990, p 238-243 Peters, T., Waterman, R., Auf der Suche nach Spitzenleistungen Redline Wirtschaftsverlag 2004 Pinto J.K., Project Management Prentice Hall, 2009 Ploughman, T.L., Assenzo, J.R., Appraisal of project manager performance in a pharmaceutical R&D organization PMI Seminar/Symposium Proceedings, 1990, p 287-290 PMI A Guide to the Project Management Body of Knowledge Project Management Institute, 2008 Russel, D., Succeeding in the Project Management Jungle: How to Manage the People Side of Projects Mcgraw-Hill Professional, 2011 Sauter, R., La modélisation des facteurs humains dans la gestion de projet, thèse, Ecole Polytechnique Fédérale de Lausanne, 1996 Sommerville J., Langford V., “Multivariate Influences on the People Side of Projects: Stress and Conflict,” International Journal of Project Management, Vol 12, N° 2, 2002, pp 234-243 Thamhain, H.J Management of Technology: Managing Effectively in Technology-Intensive Organizations Wiley, 2005 Wilemon D.L., “Project Management Conflict: A View from Apollo,” Proceedings of the Third Annual Symposium of the PMI, Houston, Texas, October 1971 Wilemon D.L., Barczak, G “Leadership differences in new product development teams,” Journal of Product Innovation Management, 2002 Yourzak P.E., Measuring Successful Motivators, PMI Seminar/Symposium 1986, pp 412-418 21.10 The authors Alberto Lenz has a master’s degree in mechanical engineering and organizational sciences and a post-graduate master’s in Global Economics from the ETH in Zurich, and a master’s 578 The Essentials of Logistics and Management degree in psychology from the University of Zurich He has been in charge of major projects at different companies and has also worked as an expert and consultant on projects, and in particular global virtual projects, that were especially challenging in their aspects of human resource management In addition, Mr Lenz gives courses on project management at several universities His current research interest is in the implementation of collaborative tools at a major television company Dr Roland Sauter has a master’s degree in electrical engineering and a Ph.D from the Ecole polytechnique fédérale de Lausanne He also has an MBA from the University of Lausanne Dr Sauter has been in charge of major IT projects at various different European companies He is the founder of STS, a company specializing in the development of computer-based training tools for the field of soft skills and project management Couv_Perret_2012_Couverture 12.11.12 16:40 Page1 EPFL Press ESSENTIALS OF The Global Supply Chain Edited by Philippe Wieser, Francis-Luc Perret and Corynne Jaffeux PHILIPPE WIESER is Director of IML, the International Institute for the Management of Logistics (EPFL – Lausanne and Ecole des Ponts-ParisTech) and professor at EPFL FRANCIS-LUC PERRET is Vice-President of the EPFL in charge of Planning and Logistics, Professor of Logistics and Management of Technology at EPFL, and founder of the International Institute for the Management of Technology (IML) CORYNNE JAFFEUX is professor at the Montesquieu-Bordeaux IV University Since 1991 she has been adviser of the AFT-IFTIM general direction for questions of higher education She is also Co-Director of IML Paris G16839 N10721 Philippe Wieser, Francis-Luc Perret and Corynne Jaffeux The logistician plays a critical role in the growth of his or her company – in this third edition of Essentials of Logistics, the conceptual framework in which all the stakes and themes of logistics is systematically analyzed, with a strong focus on the role of the supply chain Indeed, many elements are critical to the successful logistical strategy: customer relation management, interactive information support, production optimization and process development, vision, strategy and operations management, and human resources and resource allocation Growing out of a successful course given by the International Institute for the Management of Logistics (IML) of the Swiss Federal Institute of Technology (EPFL), in Lausanne, and by the Ecole des Ponts-ParisTech (ENPC), the purpose of this book is to present a methodology allowing the reader to understand and act based on the critical factors embedded in the design of strategy Concepts are thus combined with practical examples Transversal vision and detailed case studies highlight the main themes of modern logistics and daily preoccupations of logisticians The book is addressed to all professionals of logistics: managers, planners and engineers; as well as to graduate students specializing in the field ESSENTIALS OF LOGISTICS AND MANAGEMENT LOGISTICS & MANAGEMENT ESSENTIALS OF LOGISTICS & MANAGEMENT The Global Supply Chain Edited by Philippe Wieser, Francis-Luc Perret and Corynne Jaffeux THIRD EDITION EPFL Press EPFL Press Distributed by CRC Press ... (Kiabi, Camaieu, Promod and so on) 10 The Essentials of Logistics and Management In that perspective of “controlling” the value chain, the capture and the management of the Point -of- Sales (POS) data... design and the implementation of optimal supply chain solutions, trading off contradictory objectives of the supply side and the demand side The level of constraints and risks; the expectations of. .. Fragmentation of the value chains • Outsourcing of the logistics operations Fig 1.1 Key strategic evolutions of the demand side and the supply side On the demand side, the retailers have pushed the change