EVALUATION OF LOGISTICS ORGANIZATION IN FOOD SUPPLY CHAIN ​​COMPANIES – INDUSTRY AND TRADE

The aim of this article is to present research results on the stage of development of the logistics organization of industrial and commercial companies, belonging to the food supply chain. For this purpose, the analytical model developed by Bowersox (1992) and adapted by Lavalle (1995) was used to verify which segment of the chain would have a more sophisticated logistics organization. The analysis of the results aims at a better understanding of the food supply chain, seeking to identify the existence of compatibility between the segments, considering the dimensions of the adopted model. Industrial companies, being more complex, seek a greater level of flexibility in their operations, which, in turn, is achieved through greater sophistication of the logistics organization. At the end, a set of perspectives for the development of the logistics organization in the food chain is presented.

Thematic Area: Operations, Logistics and Services

INTRODUCTION 

The food supply chain has experienced significant changes in the 90s due to increased competition imposed by the opening of the market to imports and economic stabilization.

The elimination of inflationary gains implied a redirection of managerial focus to core business activities, in search of profitability. On the other hand, the greater availability of similar products, with the arrival of imported products, further increased competition in the market.

It is observed that companies have responded to these challenges by adopting a series of changes both in managerial and operational aspects. There is a growing importance of a closer relationship between industry and commerce, which has been materialized through the integration of logistic systems. In this sense, logistical issues appear on the top management agenda as an integral part of competitive strategies to face competition and, consequently, earn greater profits. The integration of the supply chain came to be seen as a key objective for obtaining productivity gains within companies.

Graph 1 presents the result of research carried out by the Center for Studies in Logistics (CEL) – COPPEAD/UFRJ, which points to the growth in importance of the physical distribution service in the purchase decision-making process of commercial companies in relation to consumer goods industries. Negotiations based fundamentally on price start to consider the distribution service as an important differentiating factor in purchase decisions by the trade.

If, on the one hand, there is an appreciation of logistics in business strategy, on the other hand, a series of other questions arise to be answered, which are related to the way in which companies in the same supply chain are organizing themselves to face the new challenges. According to Bowersox (1996), logistics executives can benefit from understanding the organizational development process of companies.

This article aims to present results on the level of development of the logistics organization of sets of companies that relate within the same supply chain (see Figure 1). The food production/marketing link was chosen because it represents several segments (industry, retail and wholesale) of the Brazilian economy with a high degree of dynamism and which, as a consequence, has been developing a great effort in the operational and managerial improvement of logistical activities. An expressive evidence of this dynamism is the Movimento ECR Brasil (1998), which in November 1998 organized its congress; during which results already achieved by companies that adhered to programs aimed at greater efficiency in the supply chain were presented.

It is worth mentioning that the entry of new international competitors with high logistic capacity has contributed even more to the acceleration of the changes mentioned above, and should be seen as a determining factor for the reflection and repositioning of the sector under study.

The production/marketing link undergoes radical changes with the introduction of new information and communication technologies, and managerial approaches focused on the logistical process, capable of generating profound impacts on the current way of doing business. Increasingly, the quest for efficiency has as a prerequisite the high quality of services provided to the end customer. However, to fully achieve these objectives, it is essential that there is a high level of integration and coordination between the logistics processes of companies in the same supply chain. Companies are increasingly becoming aware that it is not possible to meet customer service requirements and simultaneously meet the company's cost objectives without working in coordination with other participants in the supply chain. Companies don't work in a vacuum. Actions of one company positively or negatively affect the costs of other companies in the supply chain.

In recent decades, the US has been the scene of strong integration movements such as ECR, Quick Response and CRP. Vanguard companies have used logistics as a core capability in their competitive strategies. Success in implementing integration programs is directly related to the ability of companies to perform joint activities and share information. These companies need to have a well-developed internal logistics organization. In addition, it is important that the structures of different companies in the same supply chain are compatible with each other. In this sense, it is important to consider the differences in nature between the logistical systems of industry and commerce.

Industry is characterized by more in-depth production and logistics processes than commerce. It is common to observe a production chain with several staggered stages, as is the case, for example, in the pasta food sector. In this sector, the logistical process ranges from planting and harvesting grains, through intermediate processing, to the final industrialization stage and delivery to commercial establishments. In the case of commerce, the depth is significantly smaller, since it basically deals with the distribution of finished products. On the other hand, the logistical process of trade is characterized by its great amplitude due to the multiple transactions associated with the large number of items traded, compared to industry. These differences, when not properly considered, can be sources of obstacles for the supply chain integration movements.

The next section presents the conceptual model that served as a reference to verify the stage of development of the logistics organization in commercial and industrial companies belonging to the food chain. Next, the research results are analyzed in light of the model used.

THE CONCEPTUAL MODEL

The conceptual model used in this research (Lavalle, 1995 ), presented in Figure 2 illustrates, is an adaptation of the model developed by Bowersox (1992), which was based on extensive research called LEADING EDGE LOGISTICS carried out in the North American market in 1989 .

According to the conceptual model, vanguard companies stand out for the high level of flexibility in their logistics system, aiming to meet the requirements of key customers and contingency situations. However, the ability to be flexible results from the level of sophistication of the logistics organization, which can be decomposed into three dimensions: formalization, performance monitoring and adoption of information technology. Finally, the level of sophistication required for the logistics organization is directly related to the level of complexity of the logistics activities of the companies considered.

Formalization refers to the way in which logistical functions are organized in terms of coordination, authority and planning. Performance monitoring is the dimension that deals with the systematic control of logistical processes, a key part for their continuous improvement. The adoption of technology is associated with the intensity of use of software and hardware in logistical processes, which enables the manipulation and transmission of large amounts of operational and managerial information in a timely manner, which, in turn, enables greater agility in the process. decision-making process. Flexibility reflects the ability of companies to quickly identify and respond to market needs and opportunities in an innovative and customer-oriented way. Finally, the operational complexity is related to the characteristics of the business, such as: number of customers, suppliers, physical installations and SKU's.

The formalization of the logistical structure in an integrated manner enables the full orchestration of the routine process, freeing top management to dedicate itself to strategic issues and to mobilize logistical efforts in extemporaneous situations with great precision. Senior management's fundamental responsibility is to create an organizational environment within which the operating executive is best able to achieve corporate objectives. In this sense, the organizational structure plays a vital role in the art of management. Traditionally, responsibility for managing logistical processes has been fragmented, generating vulnerabilities due to duplication of efforts, wasted resources, conflicts of authority and incompatibility of objectives.

The adoption of suitable technology, by making available accurate and timely information, allows a more realistic assessment of the situation, which consequently minimizes the response time and increases the company's possibility of success. The decision-making process becomes more agile; shorter operating cycles; and the less traumatic adaptations in the system.

Permanent monitoring of the performance of logistical processes makes them more stable. The systematic analysis of indicators associated with costs, customer services and product quality results in greater knowledge of the process as a whole, which in turn enables greater flexibility in operations. The practice of benchmarking assumes that there is no reason to reinvent the wheel; Observing how other organizations carry out similar activities or deal with adverse situations can save time and resources.

The company that has flexibility in its operations can benefit in special situations, either by the greater ability to satisfy the customer, or by the ability to perform them at a lower cost. The central idea is to remain creative, taking advantage of market changes. A company with flexible operations is able to customize its services and capitalize its efforts on the most profitable opportunities. In some cases, logistical flexibility can be used to take advantage of fluctuations in demand, in others to respond positively to the unique demands of key customers. Regardless of the reasons, superior performance is related to the company's ability to quickly identify and respond to market opportunities.

The results of this research made it possible to verify the analytical model proposed by LAVALLE (1995), which relates the logistical complexity with the level of sophistication of the logistical organization and the companies' flexibility. That is, the analysis of the results aims to answer the following research questions:

• How are industrial and commercial companies in the food and beverage sector structuring the organization of their logistics systems?
• Is there a pattern in the development of the logistics organization considering the trade and industry of the consumer goods sector?
• Is there a radiating pole of technology adoption between industry and commerce?
• What are the prospects for the development of the logistics organization in companies belonging to the food supply chain?

THE FIELD RESEARCH AND THE MAIN CHARACTERISTICS OF THE SAMPLE

The research was carried out through a structured questionnaire, through which a series of questions related to the dimensions of the conceptual model were evaluated. The questions were basically of a qualitative nature, for which the Likert scale was used.

The companies were first grouped according to their nature and then the results for the variables that make up each dimension of the conceptual model were calculated. For example, in the case of the operational complexity dimension, the following variables were considered: number of SKU's, number of suppliers, number of warehouses, number of customers, the level of perishability of the products and the existence of manufacturing facilities.

The data collection phase of this research was carried out in 26 companies in the food sector, between April 1996 and June 1997. In general, industrial companies are characterized by being larger than commercial companies. That is, while the turnover of the 15 industrial companies surveyed, measured by the median, is R$ 435 million, with 2.757 employees, in the case of the 11 commercial companies, this turnover is R$ 300 million, with 1.675 employees.

As they are, in general, large companies, leaders in their respective sectors, it is expected that the sample reflects the stage of development of the logistics organization of companies that, to some degree, realize the importance of logistics for the success of the business. In this sense, as they are successful companies, the conclusions of this work should reflect the pattern of development of the logistics organization of commercial and industrial companies.

AS TO THE EVALUATION OF THE LOGISTICS COMPLEXITY

The following analysis aims to establish, comparatively, the level of logistical complexity among the surveyed commercial and industrial companies.

Table 1 presents the final result for the operational complexity dimension, where it appears that industrial companies are, in general, more logistically complex than commercial companies. If, on the one hand, commercial companies generally have a greater number of suppliers and SKU's in their stocks, industrial companies, with their factories, serve a larger customer base, with more perishable products, through a greater number of warehouses. It is important to point out that industry, unlike commerce, has a complex manufacturing support logistics, which interfaces between the supply process and the distribution process.

According to the model adopted, it is expected, therefore, that industrial companies, compared to commercial companies, seek to develop a greater level of flexibility in their logistics systems to face greater operational complexity, through a more sophisticated logistics organization.

AS TO THE EVALUATION OF LOGISTICS FLEXIBILITY

This session will assess how commerce and industry value flexibility in their logistics systems, which is the dimension that best portrays vanguard logistics companies, according to the conceptual model adopted. The flexibility dimension was evaluated according to the desired and actual level. Chart 2 indicates that the flexibility items can be of a more operational nature, such as the supply crisis and the failure of the computer system, or related to the company's ability to meet the specificities of customer segments, such as the customization of the level of service and compliance with special packaging conditions and order receipt times.

According to Table 3, industrial companies, in addition to being more flexible, also want a higher level of flexibility when compared to commercial companies.

It is important to emphasize that logistical flexibility seeks the establishment of contingency plans aimed at maintaining operations in untimely situations. On the other hand, we also seek to develop the ability to provide differentiated service to key customers. However, what characterizes the appropriate level of sophistication of the logistics organization is the achievement of flexibility with a high level of efficiency. In this sense, it appears that companies in both sectors are willing to increase the flexibility of their logistics systems, aiming at a more focused service to customer requirements. The greater bargaining power of trade can be a motivating factor for the development of logistics organization by the industry.

In short, as expected, industrial companies, experiencing a higher level of complexity in their operations, have developed more flexible logistics systems than commercial companies, in order to face the challenges related both to maintaining the physical flow and to those related to the needs of market differentiation.

AS TO THE EVALUATION OF THE SOPHISTICATION OF THE LOGISTICS ORGANIZATION

Next, we intend to establish the level of sophistication of the logistic organization of commerce versus industry. The level of sophistication of the logistics organization was obtained from the resulting dimensions of formalization, performance monitoring and technology adoption, according to the adopted conceptual model.

Level of Formalization - The formalization dimension was determined from two variables, the level of control that is attributed to the units responsible for logistics over the logistics components, and the level of formalized organizational structure, obtained according to the hierarchical position of the main logistics executive, the level participation in strategic decisions and the existence of a mission and logistical planning.

Table 4 indicates that in 50% of the commercial companies, the main logistics executive is located in the 1st echelon of the organizational structure, while in the industry, this was verified in only 29% of the cases. Regarding the level of strategic participation, the main logistics executive has direct participation in 80% of commercial companies and 71% of industrial companies. On the other hand, the percentage of companies with formalized logistics planning is similar for both sets of companies. Industrial companies only stand out in relation to commercial ones with regard to the existence of a logistical mission. In other words, on balance, commercial companies develop a level of formalized organizational structuring of logistics superior to industrial companies.

According to Table 5, the level of control of the logistics functional unit over the logistics components is greater in industrial companies than in commercial ones. This table presents the percentage of companies in the sample that have total, partial or no control over the logistics components. As for the level of total control exercised by the functional structure responsible for logistics, it appears that there are no significant differences between the two sets of companies. However, it is observed that there is a higher percentage of industrial companies with partial control over the logistical components than the commercial ones. Another interesting issue is that commerce concentrates its control on storage and transport activities, while in industry the control over logistics activities is more homogeneous.

In short, both commercial and industrial companies have a similar level of formalization of logistics.

Performance Monitoring Level - The performance monitoring dimension was evaluated according to the average level of dissatisfaction with the system of indicators shown in Table 6 below. The results indicate that the level of dissatisfaction with the performance monitoring system is approximately 30%, both for commerce and industry.

High levels of dissatisfaction are associated with all classes of indicators, with commerce seeing the greatest shortcomings in benchmarking and quality, while industry points benchmarking and customer service in second place. It is interesting to note that these classes of indicators are more focused on the interface of companies, while the others refer to the traditional measurement of the performance of resources used by companies. These data reflect a greater concern with aspects related to the supply chain as a whole. That is, the management of logistical activities gains a broader approach by including, in the executives' agenda, the search for best practices and customer orientation.

Level of adoption of information technology – The information technology adoption dimension was evaluated based on six measures, which are presented in Chart 7.

Regarding the number of EDI applications, industrial companies have 60% more than commercial companies. This measure determined the highest level of technology adoption by industrial companies.

No significant differences were found between the groups of companies surveyed when evaluating the other variables of the technology adoption dimension. However, it is worth noting that, with regard to software, the level of dissatisfaction with respect to the areas of application, the quality of available information and the implementation process is quite high, that is, between 32% and 43%.

Despite the similar level of dissatisfaction, the commercial company has an average of 23 application areas with installed software, while for the industrial company this number rises to 27. With regard to the operational and computational hardware surveyed, although no significant differences were found either. among the surveyed segments, dissatisfaction levels are very high, around 48% and 40%, respectively. The operational and computational hardware considered are related to the stages of capturing, communicating and distributing information, which are inputs or outputs of the installed software.

Conclusion - The general analysis of the results demonstrates that there is a high level of dissatisfaction with the flow of logistical information of the companies, generated from operational and computational hardware, and software. These levels of dissatisfaction are consistent with the levels found in the performance monitoring dimension, since indicator systems are outputs of the information flow generated by software and hardware.

In this sense, it is important to consider that there are several obstacles, both internal and external to the company, that hinder the process of adopting new technologies and contribute to the high levels of dissatisfaction observed. The research identified that the lack of key figures in companies that “sponsor” the internalization of new technologies and the delay in solving problems are among the most important for both commerce and industry. In the case of industry, incompatibility with existing systems appears as the main obstacle to the adoption of new information technologies. This fact highlights the greater tradition in the use of technology by industrial companies compared to commercial ones.

GENERAL EVALUATION OF RESEARCH RESULTS

The research results also made possible the aggregated analysis in order to establish a comparison between commercial and industrial companies, in the light of the proposed conceptual model. This analysis was carried out based on 2 X 2 matrices, which seek to relate operational complexity, desired and real flexibility, and sophistication of the organization of the logistic systems. The sophistication of the logistics organization resulting from the formalization, performance monitoring and technology adoption dimensions. This session aims to schematically assess the level of general consistency of research results against the adopted conceptual model.

Figure 3 and Figure 4 show the 2 X 2 matrices with the aggregated results, considering the set of commercial companies and the set of industrial companies, which relate the operational complexity to the actual and desired flexibility of the logistics system. In fact, it is observed that industrial companies, in general, have more complex operations than commercial ones and also present and want greater logistical flexibility. That is, the greater the level of operational complexity, the greater the need for logistical flexibility.

Figure 5 relates the operational complexity with the level of sophistication of the logistics organization in the companies. That is, industrial companies, which are more complex operationally, have a higher level of sophistication than commercial companies. However, it is worth mentioning that the higher level of sophistication of the industry's logistics organization is due to the higher level of adoption of information technology. And, as already highlighted, commerce has the greatest bargaining power in the supply chain and constitutes an important factor for the introduction of technology by the industry. That is, the evolution of the logistics organization in industrial companies may be driven, to a large extent, by trade requirements.

The results indicate that the industry tends to develop a higher level of sophistication of the logistics organization than the trade. According to Figure 6, the model is confirmed from the finding that a higher level of sophistication of the logistics organization is directly related to the level of flexibility of the logistics system. In this sense, the flexibility gap has great opportunities for reduction from greater investments in technology, which in turn can revert to better performance monitoring, and consequently, provide greater formalization and control of the logistics organization.

In short, the results of this research point to a series of opportunities in terms of information technology aimed at improving the logistics system of companies. However, it is important to emphasize that the success of changes is directly related to a systemic approach regarding the dimensions that result in logistics training in companies.

For example, the positive effects arising from a new information technology will have a better chance of materializing the better structured the logistics area is within the company's organization, either from a functional point of view, or through the existence of comprehensive indicator systems. The existence of difficulties for the introduction of new information technologies, as observed in the research, may have its root in the fact that there is no balance between the dimensions that characterize the level of logistical organization of companies, namely: formalization, performance monitoring and technology adoption.

As a final finding on the robustness of the conceptual model tested in this research, Chart 8 reveals the best logistical performance of industry when compared to commerce.

This result is consistent with the conclusions that point to industry as having a superior logistics organization than commerce.

PERSPECTIVES FOR COMMERCIAL AND INDUSTRIAL COMPANIES

Next, trends in the evolution of logistics organization in commercial and industrial companies are presented, based on ancillary information collected in the survey.

• The importance of the distribution service in retail purchasing decisions will continue to rise in the coming years. This trend is an important driving force for future changes, in the upstream direction, along the entire food supply chain.

As a result of this driving force, the structure of vanguard logistics organizations is more open to stable relationships along the chain, allowing for greater managerial and operational advances. The focus of the executives will be concentrated on the search for productivity, maintaining high levels of service, in mega processes that transcend the traditional borders of the companies. In this sense, the level of use of information technology will grow to support the effort to integrate processes.

• Bargaining power in the food supply chain tends to consolidate with large retail chains. As a consequence, the need for the development of mechanisms, by the industry, to better understand the demands of physical distribution services, as well as the performance perceived by the commerce, will increase.

It is important to emphasize that customer satisfaction results from the comparison between expectations and perceptions of performance, and the requirements are in an increasing spiral movement. Therefore, staying competitive means achieving something more than high operational performance. It implies the development of a logistics organization sensitive to market dynamics, capable of responding to challenges through a highly flexible structure.

• There is a strong movement in trade with regard to the improvement of logistical organization. This trend will result in pressure along the entire chain for greater efficiency. Large retail chains will demand greater focus on their operations, which will increase the need for logistics segmentation on the part of the industry, with a view to customizing the levels of services provided.

To meet the growing diversity of “packages” of distribution services, the industry must seek a greater degree of flexibility through greater sophistication in the organization of the logistics system. In this sense, the deficiencies observed in terms of performance indicator systems should be remedied through the implementation of management decision support information systems, with a view to better directing efforts to improve companies.

• The basic conditions for the implementation of the ECR begin to materialize. The high percentage of companies that stated that they were integrating the information generated by the POS to the systems associated with issuing orders to suppliers and controlling stock, and that they are interconnecting with their suppliers via EDI, indicate that important steps are being taken towards the supply chain integration.

On the other hand, there are good perspectives for the cooperative relationship between commerce and industry, according to information obtained in the survey:

– both parties recognize EDI as an important factor for partnership development;
– there is recognition, both by trade and by industry, of the importance of partnerships in the development of ECR ​​programs, namely: assortment of products at points of sale, resupply systems, promotions and introduction of new products;
– the current trade relationship with its suppliers tends towards cooperation;
– the level of communication between the parties at the operational level happens with reasonable frequency;
– there have been organizational changes to make partnerships viable.
CONCLUSION

Both trade and industry have already awakened to the importance of the concept of integrated logistics. Some indicators about this awareness are already clear in this research, notably in aspects related to the formalization dimension:

• The hierarchical level of the main logistics executive, in most cases, is in the first or second level, with effective participation in strategic decisions of the companies.
• The percentage of companies that indicate having a formalized and written logistics mission is substantial, despite the small number of companies that effectively develop strategic planning for logistics.
• Control over the logistics system is currently not restricted to the traditional areas of storage and transport. This control is already spreading widely to the logistical components of inventory, order processing, and purchasing/production planning (in the case of industries). However, customer service, to a large extent, is still outside the area of ​​influence of the formal organization of logistics in companies.

On the other hand, much remains to be done when we evaluate the dimensions of performance monitoring and adoption of information technology, both for commerce and industry:

• Levels of dissatisfaction with indicator systems are very high, ie around 30%.
• The levels of dissatisfaction with software and hardware are above 40%.

As mentioned in the previous section, these levels of dissatisfaction are coherent, since the indicator systems are generated from the flow of information resulting from software and hardware.

However, considering the general assessment of the stage of evolution of the logistics organization, the research points to evidence that industrial companies are more sophisticated than commercial ones, mainly due to the dimension related to the adoption of technology. That is, industrial companies are more developed than commercial ones in terms of technological content aimed at logistical activities.

This result confirms the expectations generated by the conceptual model adopted, namely: industrial companies, due to the more complex operating environment, developed a greater level of sophistication in the logistics organization than commercial companies, with the aim of generating a greater level of flexibility to become more competitive. That is, the conditions involving industrial companies make the pattern of development of the logistics organization more advanced than the pattern observed in commercial companies.

Considering the supply chain, if, on the one hand, industry has a greater technological content than commerce, it is the latter that is “pulling” its implementation. In other words, the demand for better levels of service and operational efficiency, on the part of the commerce, is a motivating factor for the higher level of adoption of technology, on the part of the industry. This fact is corroborated by the results obtained in the survey: the industry claims that the bargaining power in the supply chain resides in trade, as well as recognizing trade as the greatest source of influence for the introduction of new technologies. However, it is worth mentioning that there is room for improvement in this dimension, since the level of dissatisfaction found is very high, above 40%.

The general analysis carried out using 2×2 matrices schematically demonstrated the applicability of the conceptual model adopted for this research. That is, industrial companies, being more complex, seek a greater level of flexibility in their operations, which, in turn, is achieved through greater sophistication of the logistics organization.

The prospects for the development of the logistics organization in the food supply chain point to advances in the development of integration between industrial and commercial companies.

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Authors: Paulo Fleury and Cesar Lavalle