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What does a logistics manager do in a typical day? What kinds of tasks does he have to perform, and what are the biggest priorities and challenges? How are the demands on modern logistics managers changing? We will be looking at these questions in this focus on Lars Petersen, director (group senior vice president) of Grundfos global supply chain.
Lars Petersens main daily activity is to prioritise, prioritise and prioritise. The companys long-term and short-term strategic goals need to be translated into specific priorities each day in the endless stream of communication with employees at all levels in Grundfos global supply chain. Petersens most important instruments include simplicity, action and clear communication. I am at least 50 per cent a man of action and practise rather than a theorist. Brilliant, elaborate theories are about as much use as an ashtray on a motorbike if you are not able to translate ideas into reality and results, says Petersen.
World expert on pumps
The family-owned, Danish pump group established itself based on the production and sale of circulation pumps to ordinary households throughout the 60s and 70s, and currently holds around 50 per cent of the world market for circulation pumps. The group has also made big inroads into the world market for pumps for groundwater, high-rise buildings and institutions, and for pumping all kinds of polluted water and wastewater.
In 2004, the group had a turnover of more than EURO 1.6 billion, and earnings of EURO 160 million. The group has about 12,500 employees, 20 production facilities, 10 distribution centres, and approximately 45 sales companies spread around the globe. Component production and pump assembly primarily take place in the regions in which products are sold, but a large number of components are also purchased from China to service other parts of the world. Components are transported from China to Europe by ship. And the growth rate is currently six to eight per cent per year.
Steering the ship
Grundfos supply chain is a super tanker, and Petersen is in charge of the bridge, with the responsibility for the global supply chaincovering purchasing, planning and logistics. A supply chain involving 12,500 employees, 20 factories, and 10 distribution centres is not a speed boat for which you can change course from day to day. It is a super tankerdue to its size, history, the nature of the products and the market. Grundfos has traditionally practised mass production to inventory, thereby pushing products onto the market. This is slowly beginning to change. Grundfos is a deep company which directly controls much of the value chain itself, and supplies a few specific market niches that require pumps. We are a super tanker that cannot simply change course with a click of your fingers. If we need to increase production capacity by 20 per cent, it takes between eight and 18 months, due to the extensive refinement process. On the other hand, we naturally have customers who need a pump immediately if they experience a break down," said Petersen.
Grundfos generally aims to produce its products within the region in which they are to be sold. This spreads our risk and increases our accessibility," he said.
Four-km cycling team pursuit
Petersen believes there is a difference in meaning between logistics and supply chain management (SCM). SCM is not the same as logistics. SCM has a broader strategic focus than logistics, is specifically marketing oriented, and cuts across company departments. Logistics, in contrast, is a limited area with a tactical and operational focus. But logistics is a very important ingredient of SCM.
He uses the metaphor of a 4-km cycling team pursuit to explain the mission of Grundfos' supply chain work. It is primarily about coordinating the flow of products and information in our supply chain. In all large companies with global reach, there will be a natural tendency to sub-optimise the efficiency of departments, companies, countries and regions. Supply chain initiatives have to abolish this sub-optimisation and replace it with super-optimisation, which increases the efficiency of the group of companies as a whole, said Petersen.
Grundfos consciously uses goal management and incentive programmes to ensure that behaviour throughout the group supports the efficiency of the total group. But it is also very important to consider cultural aspects. Being the manager of a global supply chain requires great anthropological insight. The differences in culture and organisational maturity between countries such as Germany, China and Mexico are huge, said Petersen.
Communicating and sparring
Meetingswhether by telephone, video conference or in personare a major part of Petersens daily work. And this is very natural and necessary. Management is about achieving results together with and through other people. What I can achieve by myself in terms of results is very limited. I am completely dependent on a large staff of directors, middle managers and employees. My job is therefore to serve as a sparring partner and coach for my organisation, to make sure it is as well equipped as possible to achieve the results we have affirmed in the strategy, said Petersen. He also explained that his approach to organisation is more network-based than hierarchical. And that it sometimes causes a stir when he directly approaches an ordinary employee or middle manager without going via the organisational hierarchy.
Petersens team focus was one of the reasons he received the Value Creator of the Year award at the Danish Supply Chain Day 2005 award presentation conference.
Part of the motivation behind the award was explained as follows: Lars Petersen is receiving this award because he has actively contributed to the spread of the supply chain approach in Denmark for many years. Lars Petersen previously worked for Oticon, where he succeeded in transforming a function and logistics oriented approach to a more holistic approach, with a focus on the optimisation of four important supply chain elements: integration, reaction, relationship leadership and focus on the person. At Grundfos, Lars Petersens team-oriented and practical initiatives have already resulted in major savings, particularly in the area of purchasing.
Email is another important communication channel. The number of emails is huge. It is actually impossible to properly examine all the emails I receive. The ability to sort and prioritise is therefore very important. I have pretty much developed that ability after two years at Grundfos, said Petersen.
The abundance of information is clearly one of Petersens greatest challenges in his daily work. Prioritising information in nice-to-know and need-to-know categories is one of the keys to tackling this challenge. Familiarity with and an appreciation of the informal network organisation and all the informal decision paths that exist in an organisation is another key area that he highlights.
If I ever have a twinge of conscience in my work it is normally because I do not have time to comment on everything I would like to, he said.
Keep it simple
According to Petersen, logistics and SCM are not rocket science. It is not possible to set up bullet-proof systems that can handle any situation. It is necessary to differentiate between customers and products, and to change, adjust and improvise along the way. We are a very engineer-driven company, and it is a challenge to hold onto simplicity and common sense in our solutions. Unless we are very focussed on keeping it simple, the solutions quickly become so advanced that they are difficult to implement and anchor in the world of reality. Clear communication in everything we do is extremely important. Everyone has to make themselves as easy to understand as possible for colleagues, suppliers and customers, he said.
SCM and the effect on the bottom line
Grundfos is working with a dual strategy that contains the groups list of the 10 to 12 most important short-term strategic goals. These are called handles, and handle number 1 and 2 both relate to the SCM organisation. This indicates how important SCM is to Grundfos competitiveness, and Petersen can report with satisfaction that the aggressive goals he has committed to in relation to the strategy look like being achieved ahead of schedule. The goals are savings, primarily in the optimisation of purchasing processes, valued in the tens of millions of EUROs, over a two-year period.
Greater education required in the future
Petersen highlights two expectations of the future. Firstly, that management of the supply chains of global companies will become more centralised. There will be a greater need to harmonise activities in complex global supply chains in the future, he said.
Secondly, it will be necessary to improve the level of education for logistics, purchasing and planning employees in the future. The challenges will simply get bigger and more complex, and that will require a more advanced skill level than we currently see, said Petersen. Grundfos has therefore established the Poul Due Jensen Academy, where employees undergo further education. Petersen is also in the process of introducing CPIM (Certified in Production and Inventory) certification as the standard for education in Grundfos supply chain organisation. The advantage of CPIM is that it is widespread around the world, making it possible to train in the concept anywhere. This means that the global SC organisation will gain common terminology and a professional framework for understanding.
Poul Breil-Hansen is a journalist. Here he writes on behalf of Consafe Logisticsone of Europe's largest system providers in the supply chain execution business. The company headquartered in Lund, Sweden, develops and implements IT solutions, consulting services and training for leading companies in Europe, the USA and Asia.