Networked logistics on all levels

Given the complexity of today’s supply chains and their network-like structure, a more fitting term for them would be “supply networks.” In fact, the individual elements of a supply network interact on various levels - including on the finance and goods levels. For this reason, the analysis and design of efficient supply networks should address these various levels.

The supply network

Today’s supply chains Supply chain are very complex, interdependent structures, a fact that is reflected by the number of linked suppliers, service providers and customers who, in turn, are members of other supply chains. Given the frequently network-like nature of cooperating companies, a supply chain could be more fittingly described as a supply network.
The participating companies are linked not only on the goods level, but also on the finance, institutional, relationship and information levels.

Network levels in the supply chain

Goods network

The level of the goods network encompasses the spatiotemporal change of goods. Here, the core processes are the functions of transport, handling and warehousing. Supporting processes are the functions of packaging and marking. Acting as spokes, transport systems link the hubs of the goods network - that is, the production, warehousing and handling systems. Handling can be broken down into consolidating, separating and sorting of goods [1].

Information network

The information network encompasses the sum of all information and communication systems in the broadest sense. In addition to computer networks, these include mail, faxes, telephones and all resources required for information and communications. These information and communication systems are connected by communication channels through which data and information flow as objects of exchange. As a result, this level also involves aspects like language, conventions or standards [1].

Social network

Networks are created and maintained by people. The employees on the decision-making and execution level create a network of professional and personal relationships with employees from other companies - the social network. Relationships hold these networks together. They are both the result and basis for interaction among people in and between companies in a network. [1].

Institutional networks

Institutional networks are legal and formal alliances governed by contracts and agreements between business units. Rights and duties between the partners arise from these agreements. While the social network consists of human relationships, the institutional network is linked by relationships between companies.
One feature that clearly distinguishes the institutional network from the social network is that the institutional network is independent of the people working in it. It encompasses all organizational links that would remain the same even if all employees associated with it were replaced [1].

Finance network

The purpose of the flow of goods on the goods level is to generate a monetary stream to a company through commercial activity. To develop and maintain added value in networks, investments and the funding to finance them are needed. Many links in the institutional network are based on capital investments, loans, receivables and liabilities. The sum of these financial transactions between companies in a network forms the finance network. [1].

The interplay between network levels

The five network levels are closely intertwined. The objective is to generate profits through the exchange of goods. Here, the top and bottom network levels - that is, the finance and goods networks - are expressions of the market. The three levels in between only serve to facilitate, plan and manage the provision of goods and services. They are the means to the end of profit maximization in the marketplace and, as a result, are essential. The information and communication levels facilitate the coordination of activities in the goods and finance networks, and serve as the basis for the creation, maintenance and use of actors in the companies. The question concerning those with whom added value and, ultimately, profits are achieved depends on the companies on the institutional level.
Many findings and optimization recommendations have already been made in the area of the information and goods networks. On these levels, the fundamental questions primarily involve implementation and execution.
In terms of the social, institutional and finance networks, companies are uncertain about which areas of responsibility will be important in the future. For instance, companies are facing challenges related to the use of joint logistics service providers with competitors or the management of international partnerships. Other future challenges that are frequently mentioned are the necessity for cooperating with competitors and the determination of areas where this cooperation is possible [1].
Other aspects that are mentioned include continued cost pressures as well as questions concerning joint financing of fixed assets and working capital in the area of logistics. One other frequently discussed point is the depiction of logistics’ value proposition [2].

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References

[1] Netzwerke in der Logistik | Gomm / Trumpfheller 2004. In: Netzkompetenz in Supply Chains | Pfohl (Hrsg.)
[2] Supply Chain Finanzierung | Gomm 2008