Good practices?
Environmental performance
Social performance Sustainability
Economic performance Best practices
Better practices Better practices
Figure 2.1 The best practices in light of the Triple Bottom Line concept Source: devised on the basis of Carter and Rogers, 2008
and sustainability; and stakeholders’ increasing sensitivity with regard to social responsibility. failure to tackle these problems may mean that economic growth and effective development of the continent are threatened. The project is part of the eu policy context and the dG TreN transport policy context.
The first context draws particular attention to: the ‘Transport white Paper’ subordinating transport to economic interests as well as those of european citizens (transport at the service of european industry and citizens); lisbon strategy assumptions leading to the creation of jobs by making europe the most competitive and knowledge-based region of the world; sustainable development goals establishing the harmoniza-tion of economic growth and transport (decoupling economic growth and transport growth); and eu enlargement – continual integration of new member states.
The dG TreN political transport context aims to pay particular atten-tion to the following: intermodal transport needs ‘door-to-door’ logistics solutions to be successful and compete in real terms; co-modality, with the assumption improvement of efficiency of all modes separately and together in intermodal chains; and shippers, who should take all modes of transport (not just road transport) into consideration.
although the bestlog project concentrates on the promotion of
‘green’ transport solutions in logistics and supply chain management, it is closer in its assumptions to J elkington’s concept (a parallel consideration of three key microeconomic goals), which is illustrated in figure 2.2.
Sustainability
Environmental
Emissions
Natural resources utilization Waste and recycling Economic
Quality Efficiency Responsiveness Social
Health and safety Noise Employees
Figure 2.2 The scope of best practice assessment in the bestlog project – with benefits analysed in social, economic and ecological categories
Source: http: // www.bestlog.org /; department of logistics at wse, 2009
where do CeNTral aNd easTerN euroPe CouNTrIes Come from? from The world
of worsT PraCTICes!
Accepting the existence of best practices brings with it the necessity of accepting the thesis that their opposites also exist, namely – worst practices.
‘Worst practice’ is the synergistic combination of many elements of bad practice. Having just one or two elements of bad practice does not lead to worst practice status, but a range of bad practices that can ‘support’ and
‘multiply’ each other does. The economic and business environment of Central and East European countries before 1990 was a breeding ground for the emergence of worst practices in various business activities, including logistics.
With the end of the Second World War in 1945, Europe found itself divided into two spheres of power. Decades of separation during the Cold War resulted in different logistics systems and management attitudes in Western and Eastern Europe.13 There is an obvious danger in general-izing about Central and Eastern Europe (CEE) as if it had been one place.
CEE countries were not homogenous either in political or economic dimensions. Typically, however, under the centrally planned system, con trol over the entire economic system resided with state-owned enter-prises (SOEs), which had dominance over raw material supplies, manu-facturing, wholesaling and retailing, as well as warehousing. Government control of the economy meant that industry structures and management practices were not focused on efficiency. A persistent imbalance between demand and supply caused constant shortages.14 Production was based on available raw materials, instead of customer orders. Because of short-ages, managers’ purchasing behaviour was inconsistent with the basic rules of logistics. Customer service was an unknown field. In fact, centrally planned economies did not need logistics. Therefore, logistics as a function was immaterial under the old system because whatever and whenever goods were available, they were sold.15 Achieving legendary worst practice business and logistics practices in CEE must have exceeded expectation in a number of areas!
Logistics, if any, was oriented towards purchasing, not towards selling, and its characteristics were:
no or poor customer focus;
z z
no or poor sales forecasting / order processing (customers went ‘shop-z
z
ping’ in production);
lack of information systems;
z z
no or poor management of finished goods;
z z
no or poor material flow structures (internal and external);
z z
no or poor quality focus on warehouses and transportation;
z z
no third party available (either own truck fleet, or customers’ trucks);
z z
very high stocks of raw materials (… if available, buy as much as z
z
you can);
very high stocks of packaging materials;
z z
very long lead times, with loading times up to 12 hours;
z z
scarce palletization of products, leading to double and triple handling;
z z
people not familiar with Western logistics management tools, but with z
z
very good technical preparation.
Centrally planned economies generally put little emphasis on the retail sector. The communist government in Poland, for example, worked with an ‘economy of shortages’, where demand for most goods was greater than supply and there was no incentive to develop an efficient distribution system.16 Furthermore, physical distribution of goods was primarily the responsibility of a government-run railroad and over-the-road carriers.
Where more efficient private enterprises existed, they were very limited in both their operations and their influence on the overall system. Because of the overwhelming role of SOEs, this was a major hindrance not only for domestic firms, but also for most foreign companies wishing to develop business opportunities in Poland.17
where are Cee CouNTrIes GoING?
The Case of PolaNd
The fall of the Berlin Wall in 1989 served as both a literal and a symbolic catalyst for communism’s decline in Europe and the emergence of social and economic freedom throughout Eastern bloc countries. The sudden collapse of the centrally planned institutions initiated the transition of Central and Eastern Europe into a market economy. New market forces transformed logistics structures and created a competitive environment for distribution services. Government regulations on developing sales and distribution networks did not exist beyond those needed to establish a business. Poland’s new retail sector played a major role in bringing the country through a period of transition and into the subsequent period of growth. During this period the retail sector changed from having no power at all, simply following central government plans, to becoming a major force in the economy with increasing control of supply chains.
Though the logistics revolution in Poland began in the retail industry, its relevance to other businesses has become ever more apparent. The appearance in Poland of global businesses with long supply chains has created new logistics challenges. As multinationals started expanding in
the region, so did the global logistics firms. They were hoping to pick up business from the grocery, automotive, electronics, pharmaceutical and furniture sectors, now playing an important role in Poland. Global com-petition also poses a big challenge to Polish firms. If they are to find a place in the new pan-European supply chains that have begun to straddle Central and Eastern Europe, they will need to bring their logistical organization and technology up to the standards of multinationals. And, more generally, they will only stay competitive if they can keep pace with the state-of-the-art concepts and techniques now revolutionizing logistics and supply chain management in the West.18
The results of this transformation and privatization in Poland created a rapid expansion of logistics business opportunities. In the 1990s logistics was barely considered in the long-term plans of even major companies:
now its strategic role is recognized in almost every organization. In the past decade, logistics in Poland has undergone a Cinderella-like trans-formation. This is hardly surprising. Recent years have seen a growth in international trade, strategic alliances, e-commerce and increased out-sourcing of non-core activities. Add to this the increased emphasis on customer satisfaction, flexible operations, time compression and concern for the environment, and it becomes clear why organizations are concen-trating on getting their logistics and supply chain management right.
They are fast becoming a real focal point, as companies come to see them as a key battleground for gaining competitive advantage.19 Meanwhile, logistics and supply chain management have become a fully fledged
‘science’, complete with their own vocational schools, university depart-ments, research institutes, consulting firms, journals and newspapers.
Poland is the largest of the CEE countries. It has the largest landmass, the largest population and the largest economy. Poland’s integration with the global economy has been highly dependent on foreign capital. Since the beginning of the 1990s there has been a huge increase in foreign direct investment in Central and Eastern Europe, with Poland topping the list of investment destinations.20 This should be no surprise bearing in mind Poland’s geographical location and the shift of production to this part of the world. According to the latest European Attractiveness Survey pre-pared by Ernst & Young, in 2007, Poland ranked as the most attractive destination for new foreign investment in Europe.21
Direct foreign investment in Poland involved not only the transfer of capital, but also machines, devices and technology, as well as modern systems of management and technological, marketing and organizational knowledge. These spread through the economy and were also incorp-orated by native companies with Polish capital. This contributed to the increase of competitiveness and innovation of all Polish enterprises, which at the same time improved their organizational culture and business
ethics. The worst business practices were replaced by good and acceptable ones. This allowed Polish firms to enter European and global markets.
Their practices became not just good, but the best, unique on a global scale, and worthy of being copied abroad.
The research projects carried out by the Department of Logistics at Warsaw School of Economics (WSE) have covered many of the latest examples of leading-edge companies and practices. In the authors’ view, the content of the cases developed within these projects perfectly reflects the spirit of the smart opinion of D Blanchard on best practices’ essence:
‘“Best practices” don’t just happen by throwing a lot of money at your supply chain problems. … It takes money, but it also takes time, talent, energy, focus, commitment from senior management, and a lot of guts to pull off a supply chain transformation. Those are the qualities that the best-run companies in the world share, and it’s why they’re on top.’22 The knowledge and abilities of huge global corporations, together with entre-preneurship, imagination and an innovative approach to the business practices of corporations on the part of Polish managers and employees, led to an unexpected effect – the best practices ‘Made in Poland’.
The benefits that Poland has gained from being a late entrant have enabled it to skip many interim best practices that were implemented by companies before the collapse of communism in the region. This quantum leap has allowed Polish logistics and supply chain managers to develop their own best practices. Moreover, no longer is Poland an importer of best practice. It is now an exporter, with its examples holding their own and available to the rest of the world.23 The Polish small car producer Fiat Tychy provides an excellent example of how Polish best practices can influence automakers of other countries and continents.