Supply Chain Management and Agility Logistics Essay Example

in 100 countries worldwide and over $5. 6 billion in annual revenue Agility is a leading global logistics provider (Agility, 2008). Furthermore, it is a publicly traded company with comprehensive network of warehousing facilities, transportation and freight management services, which offers its customers a truly personalized service and flexible solutions to meet their individual business needs.

Agility’s customers include industries from technology and retail to consumer products and oil and gas.In addition, it has three specialized business units: Defense & Government Services, Project Logistics, and Fairs & Events Logistics, where each unit has a dedicated team to meet the complex requirements of its customers in these markets (Kuwait Times, 2008). Also, Agility’s “people first” approach extends personal service to its customers and the expansion worldwide is increasing as it invests in people through education, professional training, and leadership development and ongoing infrastructure improvements in emerging markets.Throughout ten countries in the Middle East, Agility is a leading provider of supply chain solutions to companies and government organizations. Its services are contract logistics, in other words warehouse management, fleet management, international freight, transportation, inventory management and order processing and other solutions related to supply chain and value added service.

Overall, Agility operates over 2,500 trucks throughout the Middle East and manages approximately 12 million square meters of real estate of warehouse space of 600 thousand square meters (Agility, 2008) Internationally, in Iraq Agility was active on humanitarian logistics delivering critical life support materials to 500 displaced families. In addition to that, in Darfur, Sudan, through Medical Corps, Agility financed a primary health care center to serve 13,000 refugees, and helped transport food to feed 43,000 people in Indonesia for

the World Food Program.

After a major cyclone happened in Bangladesh in November, Agility worked with the local government of Bangladesh to secure and transport food and bottled water to reach over 1,500 people (Kuwait Times, 2008). The vision of Agility is to assist in humanitarian projects, especially in terms of operational readiness and response to emergencies through the use of its strength as a company and its expertise in contingency logistics operations.The goal of Agility is to become one of the top-eight leading logistics providers and the revenue target to be reached by the year 2008 is US$8 billion through continuous investment and development in its existing infrastructure and capabilities. Main Activities Agility’s main activities are warehousing, transportation and freight management.

Demand planning; procurement; inventory management; order processing and fulfilment; delivery to the distributor, retailer or end-consumer; reverse logistics; and invoicing are the end-to-end solutions of Agility.In addition, product labelling, packing, co-packing, bundling, kitting, light assembly, and reverse logistics are the further value-added services offered by Agility to its clients. Exceed 4000 WMS (Warehouse Management System) is used in all Agility facilities, which offer on-line visibility to inventory level and event information. Additional services of Agility are packaging, assembly, inspection and quality control (Dubai Financial Markets, 2006). Specialized Business Units Agility has three specialized business units including Defence and Government Services, Project Logistics and Freight Management.

Each business unit will be discussed in the following section. One of the business units of Agility is Defence and Government Services, which includes the following:

• Third party logistics – with its full series of services, third party logistics allow its customers to fully outsource its distribution requirements.
• Prime Vendor Program
  

– troops get their supplies through one stop solutions that are provided to defence and government customers.

Second, the company provides Project logistics, which includes the following:

1. Heavy Lift – through worldwide network of local Agility offices, all specialized heavy-lift activities from beginning to end are being handled.
2. Inland Transport – inland transport of project cargo either departure from point of origin or delivery to final destination is provided to customers.
3. Custom House Brokerage – all cargo customers get arrangements of legal documents, surveys, physical inspections and delivery.
4. Turnkey Project Management – from beginning till the end, every aspect of logistics project, as well as plans and surveys, booking, tracking, consolidating and so on are being handled.
5. International Freight Forwarding – to best meet the service and pricing needs of its customer, Agility arrange movement of cargo by
   

sea or air.

The third business unit of Agility is Freight Management, it includes the following:

1. Air – highly configurable air freight options, as well as frequent charters and consolidations at major gateways can be chosen.
2. Road (FTL,LTL) – Europe, the Middle East, North Africa and Central Asia are being crossed with Road Freight Services with weekly departures and 1,000 plus schedules.
3. Charters – vessels and planes are being chartered and provided for special schedules and routes along with special needs that require heavy lift aircrafts, vessels, submersibles, tugs, and barges.
4. Household Goods – anywhere in the world every detail of customers’ move, door to door is handled by Account Coordinator.
5. Sea (FCL, LCL) – with its portfolio of Sea Freight Services, Agility allows its customer to hit the optimal balance between transit time, service, reliability and price.
6. Customs Clearance & Security – to insure rapid clearance of customer’s products through customs, Agility has global expertise in both commodity classifications and local government rules and regulations.
7. Bulk Liquid Transportation – throughout the Middle East with its fleet of oil and water tankers, Agility is a leader in moving bulk liquid and petroleum products (Agility 2008).

Agility AwardsFor the first time the Middle East Logistics Awards (MELA) was held as a celebration of performance excellence in

the logistics industry. Second, in 2006, at the MELA, Agility was voted the best and won four major awards in four categories: Best Road Hauler (Best Land Transport Company), Best Land Freight Forwarder and Best Logistics Service Provider in 3PL and perishable goods (AME info, 2006).

Third, on January 22, 2008, at the Sheikha Salwa Al-Sabah Balroom agility won Kuwait’s first Corporate Social Responsibility (CSR) award for the services sector (AME info, 2008).Formal Organisational Structure At Agility logistics, the core function involves interfacing and interacting with suppliers, vendors, customers, freight service providers (carriers). They have to ensure timely movement of goods from one location to another, which not only includes till the customer door step but also to various other manufacturing departments, warehouses, and more.

Therefore in order for the work to run effectively and economically, it is crucial that the organisation has a structure that ensures a smooth flow of all its internal communications and operations.Furthermore, operations in a Supply Chain industry require a lot of quick decision making which has to happen at even the lower level; therefore keeping this in mind, the structure is relatively kept flat.

As according to the principle of minimum chain of command “The organization should choose the minimum number of hierarchical levels consistent with its goals and the environment in which it exists (Jones, 2007). Agility has deliberately maintained a flat structure, to ensure that the number of intermediate levels is removed within the hierarchy.Having too many hierahical levels hinders the process of communication within the organisation.

As the number of intermediate levels increases, the communication gap between the top and bottom level increases as well. In the process the decision

making slows down and invariably affecting the performance of the organisation. At Agility logistics, the demands of the clients keep changing almost frequently.

This requires the organisation to ensure the decision making does not lie just in a few hands. Also, as the information is communicated within various levels within the organisation, it tends to get distorted.Flat structure also helps ensure that performance of its team is closely monitored. Therefore, at Agility logistics, care has been taken to ensure, the structure adopted remains flat.

From 200 employees to more than 1200 employees currently, the structure has been modified to ensure effective decision making, faster communication, and better service keeping cost involved economical. Integrating is the process of not just co-ordination of various tasks, function and divisions so that they work together but also between outside stakeholders.The sole reason for integrating is to promote innovation, flexibility and improvement in customer service. The overall structure followed by agility is that of a Mechanistic Structure – where rules and regulations are set out . The motive behind deploying a Mechanistic structure is to exert proper control of costs.

Any kinds of innovation certainly have a cost associated with it. All major decisions on transactions having a significant cost implication are still handled by the top management. More of a centralised structure is still adhered by Agility.However efforts are being made to empower the lower level, especially in terms of decision making that relates to customer satisfaction. Integration among different functions under the Operation head is strong, however looking at a macro level – the various departments such as the HR, Public Relations, and Sales are less integrated. Information flow still takes

a lot of time and decision tends to slow down at certain times.

Existing Structure and Relevance to Work Flow The way logistics organizations operate is not merely for transportation of goods from one location to another.It involves more complex processes as well. The main focus is on cost cutting, and increasing customer satisfaction. Therefore a lot of quick decision making and forecasting is involved in terms of ensuring the availability of goods. The existing structure ensures that all the major and critical functions are looked upon by Operations Head. A closer look at the structure shows, the inventory control, IT services, as well as the Warehouse departments are reporting to the operations manager, this ensures quick decision flow among the various internal departments.

Movement of information needs to be quick. For example, at certain times, there could be a demand for certain stock, so it is important to know how much and where it is exactly located so that necessary steps could be implemented to rectify the situation. To ensure this, the organisation is such designed to keep information flow not just among the departments internally but also between suppliers, customers and so on. The earlier structure that was followed had the – departments reporting to the General Manager directly.Each of the core process was fragmented and information collected was send to the General Manager who made the final decision making. But as the organisation grew, it was difficult to maintain such a structure as crucial information was lost along with valuable customers.

Agility logistics felt the need to create an organisation structure to enable faster decision making. The Operation Head had is currently responsible for monitoring

the performance of Accounts department, IT services, Inventory Control department and operations. Furthermore, the structure developed ensures integration of information with customers as well.The more information that could be gathered from the suppliers and customers, the better the chance of improving the services offered and helps get a competitive advantage.

Key Account teams have constant feedback received on deliveries, warehousing and other services which is constantly monitored by the Operations Head with the help of the existing Warehouse Management System (WMS), Exceed. Organisational Environment The demands of the customers and supplies keep changing. Agility faces threats from the increasing competition in the UAE market. Competition makes resource necessary for the organisation scare.Now resources for Agility includes – customers , suppliers ,freight carriers and more .

Changes in customer requirements are frequent at Agility and therefore the organisation tends to be in a more dynamic environment , that constantly requires to change according to the needs and requirements of the external environment. Besides customers, Agility also needs to ensure that it maintain a steady and strong relationship with its suppliers. A recent incident at Agility was to redesign the reporting structure of a Warehousing team of six managing the account of MMI (a key client) .The team who previously reported to the Agility Operations Manager now reports to the MMI Location Manager stationed at Agility. Needs and demands vary from country to country and therefore it becomes difficult to satisfy all the customers, suppliers, vendors equally at all times.

Apart from these, Agility also loses a considerable number of its employees who join their competitors for higher pay packages. It faces a high rise in turnover. To sum up,

Agility has to survive in a highly dynamic industry by realizing that it has to engage in transactions with the internal and external stakeholders whose demands are ever-changing.Technology at Agility Technology at Agility is one of the most recognised and best in the industry. They are currently using ERP – Oracle HRMS and Oracle Financials, which binds functions such as HR and Finance respectively.

For the core operations, Agility uses Exceed (a recommended Warehouse Management system for the industry. )Since information flow is critical and crucial for the company, IT plays a great role for the corporate effectiveness. A strong IT would ensure how the billing, purchasing, forecasting as per requirements, distribution, and various other requirements are carried on time.The structure is so designed that IT services fall under the supervision of operations head.

This ensures that the core department is updated with all relevant information’s at all times. Apart from this, faster service delivery also requires excellent technology, which in turn involves cost. State -of –the- art equipments for storage, shipment and tracking have a high cost associated with it. But to remain in the industry, they have to forego the slight variations in costs while trying to out beat competitors. Organisational Structure and EnvironmentAs organizations grow and expand we can notice changes in its structure, which in turn helps organizations to respond well to competition, facilitate quick decision making and also satisfy changing customer needs.

Any significant change in the organizational environment may demand consequent changes in the structure. In the case of Agility logistics, the former structure which existed was such that all the departments had a direct line reporting to the General Manager. This

structure had several flaws. One of the major drawbacks was the delay in decision making.Since decision making authority was vested solely with the General Manager, there was a considerable time lag between a request from the departments and obtaining consent.

Also the General Manager was getting involved in daily operational issues and was not able to dedicate ample time for strategic issues. A new structure was then designed and all the operational staff including Warehousing and Key Accounts Management teams were to report to the Operations Head. The Operations Head was also given the authority for decision making for activities pertaining to his sphere of Operations.The new structure facilitated quick decision making and also helps the General Manager to concentrate on strategic issues of Agility Logistics. Another notable change in the structure occurred when MMI, one of the key clients of Agility Logistics proposed a change in the reporting structure for the warehousing team responsible for managing their account.

MMI proposed that the warehousing team of 6 reports directly to the MMI Location Manager who is placed at Agility Office. The warehousing team who formerly reported to the Operations Manager at Agility Logistics now report to MMI Location Manager.This is a classic example of how a part of the structure had to be redesigned owing to external environment (Customers). Organisational Culture Organization structure evolves integrating the above factors.

Agility has a well defined organizational structure and prescribed Code of Ethics in place. Characteristics of employees do play a pivotal role in framing the culture. At Agility logistics, some managers prefer the ‘Open Door policy’ encouraging their staff to have open discussions and 360 o feedback though some departments

disagree with these type of practices.This, as we understand is because of the discrepancy in the personal likes and interests of managers.

Also there are Semi-formal gatherings on a quarterly basis for the Senior Management to ensure that they are on the predetermined track to achieve the set goals. Agility Logistics employs a mechanistic structure thereby having a close watch and control over its activities. Agility Logistics, being a Multi National Company with about 100 Global offices attempts to harmonize and create a balanced culture.Moreover, Agility does not have an efficient Motivational strategy in place, except for the Sales and Business Development teams who are given incentives on targets, although constant efforts are made to enhance motivational tools. Key Challenges Being a service provider, Agility Logistics has to constantly strive to keep competition under control and maintain the existing clientele.

Customers are constantly on the pursuit of quick services at least cost. When a service provider like Agility logistics tries to be innovative in providing supply chain solutions at reduced time, there are quite a lot of uncertainties and cost associated with it.Since Agility is not a manufacturer, they cannot immediately comprehend the value of an innovation just by sale (as in case of products), it takes due course of time. Listed are a few major challenges Agility Logistics encounters: Competition: As in the case of any other growing company, Agility logistics faces tough competition from other major market players like DHL-Danzas, GAC, Swift Freight Logistics, Al Futtaim Logistics etc. Being in the Supply Chain industry, these companies are on a constant trial to offer customized and quick services while also considering the changing demands of their

customers.

The challenge for Agility is to retain their existing clientele and capture new clients. Cost impact: When Agility Logistics attempts to customize transactions suiting changing customer needs, there is a cost attached to it. While trying to be highly customer focused, Agility Logistics incurs certain transaction costs. “According to Transaction Cost theory, the goal of the organization is to minimize the costs of exchanging resources in the environment and the costs of managing exchanges inside the organization. Since Agility logistics is in a highly volatile and competitive industry, certain inevitable costs are bound to be incurred while trying to retain their scarce resources which in this case are the customers. Time: The key to succeed in the Supply Chain industry is to ensure efficiency with regards to time.

‘Time’ with regards to the Supply Chain industry is directly proportional to smooth information flow between departments across locations, effective and efficient tracking systems in place, implementation of latest technologies, safe delivery of customer’s stock.So one of the key challenges Agility faces is to integrate all these functions in the least time to sustain and stay ahead of competitors. Retention Policy: Another key challenge Agility faces is with the high rate of employee turnover. Since the HR does not possess a strong and effective retention policy nor motivation strategies, Agility loses quite a lot of its staff who move to competitors for better career prospects. Conclusion The report has analysed the organizational structure of Agility Logistics with the help of primary and secondary data sources.

First, the report looked at the background of the company, its main activities and three specialized business units of the company. Second, the organizational

structure, work flow and the environment of Agility Logistics was analysed with the help of the organizational chart of the company as well as information obtained during the interviews with executives of the company. The report also looked at the culture of the company and the key challenges faced by Agility Logistics.

References

1. Agility, 2008, ‘A New Logistic Leader’.Available: http://www. agilitylogistics. com/EN/GIL/Pages/Default. aspx [Accessed: 18 February 2008].
2. Agility, 2008, ‘Defence and Government Services’. Available: http://www. agilitylogistics. com/EN/GIL/Pages/Agility_ServiceRollup. aspx? p=2 [Accessed: 22 February 2008].
3. Agility, 2008, ‘Investor Relations. Available: http://www. agilitylogistics. com/EN/GIL/Pages/Agility_AboutUs_InvestorRelations. aspx [Accessed: 18 February 2008].