| Chapter 1: | Objectives, methodology, approach and definition of terms |
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The continuous process of globalization in the procurement and distribution markets, when coupled with the modern trend towards a more worldwide distribution of production locations, demands not only that a business plans and optimizes its value-generating processes20 and business logistic networks as a whole, but also that it develops greater levels of effective customer management. This represents a great challenge for those responsible for such areas of a company’s life because they must both realize operational improvements whilst simultaneously minimizing costs, without letting customer service suffer in the process. As there are obviously conflicting objectives in this case, the implementation methods must be perfectly balanced and all relevant aspects included into any deliberations on these issues.21
As a result of increased globalization, many companies are confronted with the challenge of having to plan and monitor their material and information flows continuously and efficiently – from procurement, through production, and up to marketing. It is often the case, however, that marketing plans are noted for their inexactness and subsequent lack of verification as to their implementation ability, and that as a result companies are increasingly forced into overstocking and cost-intensive bottleneck monitoring.22 Production and procurement can often not react flexibly enough to fluctuations in demand, resulting in an increasing inability to meet scheduled delivery times and, often, the accumulation of cost-intensive stockpiles of goods or resources.
It is now acknowledged by companies involved in such fields that success or failure is regulated by the “weakest link in the Supply Chain.” Gutenberg’s Balancing Law of Planning (Ausgleichsgesetz der Planung)23 is of great importance in this capacity. Although originally formulated around the internal structure of a business, this law can also be applied to the complete supply chain and therefore necessitates increased cooperation between those companies involved in order to displace the supply chain bottlenecks. Consequently, companies see themselves facing the following questions:24