Management of facility and human resources in materials and logistics management

Journal of Business Logistics, 1996 by Rinehart, Lloyd M, Ragatz, Gary L

Materials and logistics (MLM) managers have responsibility for the facilities and associated processes that comprise the materials and logistics system, the people that initiate MLM activities, and the financial decisions that impact MLM opportunities. Managing MLM facilities requires an understanding of the processes involved in such throughput activities as fabrication, assembly, and packaging in manufacturing operations; receiving, stock location, order selection, and loading in warehouse operations; and trailer unloading, cross dock movements, and trailer loading at transportation terminals. Each of these activities requires human resources. New technology has reduced but not eliminated the need for human resources in some situations. The primary change has been to reassign those responsibilities to other MLM operations that are labor intensive, or to the operation of the technology that has been implemented (such as operators of numerically controlled robotics equipment). This reallocation may also result from the skill level and knowledge base required of the human resources in the firm and throughout the channel. Finally, none of these activities can take place without a financial structure that creates the organizational assets or resource base necessary for logistics operations.1

This article presents the MLM decision areas that are related to the two basic economic foundations referred to as land and labor. These foundations will be presented along with appropriate demonstration of the interaction of these concepts to establish the managerial perspective necessary for logistics managers, as well as the interface that the materials and logistics discipline must have with other traditional disciplines.

RESOURCE FOUNDATIONS

Resource foundations evolve from the traditional disciplines of operations management, personnel management, financial management, and marketing management. This section borrows concepts from these disciplines and demonstrates their use within an overall conceptualization of materials and logistics management.2 This approach develops concepts from these disciplines that are applicable in traditional and nontraditional logistics environments.

Resource management includes all of those decisions and processes that allocate and manage productive inputs and assets of the firm and channel. Therefore, MLM managers must understand the elements that directly affect the operations processes in the facilities they manage, as well as the operations processes that they influence in facilities at other levels of the channel system. As part of that understanding, the manager must utilize human resources (people) to accomplish the organizational and interorganizational objectives established for the operations processes. This requires knowledge of how to interact and motivate people in order to accomplish the objectives of the firm and channel. The following sections address the specifics of these facility and human resource foundations.

Facility Resource Management

Facility resource management involves the management of the physical assets of the firm and channel (i.e., plant and equipment) used in producing the firm's products and services. This includes decisions such as facility layout, technology choice, and equipment selection, as well as decisions dealing with the design of the processes used for the production of products and services. These operationalbased decisions are closely related to, and impact the facility location decision presented in the area of, the materials and logistics infrastructure.3

Facility resource management decisions can be considered as isolated optimization problems-finding the most cost efficient layout or choosing the equipment that maximizes return on investment. However, facility resource management can also affect the firm's competitiveness. Process design or equipment selection, for example, affects not only direct costs, but also quality, response time, and customer service. Facility resource management should therefore be viewed not in the narrow context of isolated optimization problems, but rather in the broader context of its role in the competitive strategy of the firm. The objective should be to manage the firm's facility resources so as to meet its strategic objectives at minimum total cost to the firm and channel.

Market Environment

A critical issue in managing facility resources is the market environment in which the firm operates. Two important environmental characteristics are the volume and variety of demand placed on the firm. These two characteristics affect the complexity of the environment and the ability of the firm to standardize its outputs, and therefore its ability to standardize processes, dedicate facilities, equipment and labor, and achieve scale economies. With higher volume and lower variety, the firm is more likely to be able to justify dedicating facilities and/or workers to specific products or customers. When such dedication is possible, the firm can take advantage of learning effects and can spread fixed costs over a greater volume of output, resulting in economies of scale.