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B. Jereb
ISSN 1648 - 4460
Issues of Logistic Management: Smart Operations
TRANSFORMATIONS IN BUSINESS & ECONOMICS, Vol. 16, No 1 (40), 2017
100
Jereb, B. (2017), “Mastering Logistics Investment Management”,
Transformations in Business & Economics, Vol. 16, No 1 (40), pp.100-
120.
MASTERING LOGISTICS INVESTMENT MANAGEMENT
1Borut Jereb
Faculty of Logistics
University of Maribor
Mariborska 7
3000 Celje
Slovenia
Tel.: +386 41 781-887
E-mail: borut.jereb@um.si
1Borut Jereb, PhD, is associate professor at the University of
Maribor, Faculty of Logistics. He received his Ph.D. degree in
Computer Science in 1991. In 1991-1992 he was Visiting Professor
at Oregon State University, USA. Upon his return to Slovenia he
gained extensive experience by managing and consulting for
companies and government agencies. His current research interests
include risk, investments and environmental management.
Received: August, 2016
1st Revision: August, 2016
2nd Revision: November, 2016
Accepted: January, 2017
ABSTRACT
. Management should bear in mind that logistics
resources and strategy should be related to the needs of any private
or public organisation. Effective management cannot operate
without effective control. Both practice and empirical research
suggest that the investments managed within a chosen supervisory
framework achieve significantly better results than those
implemented without supervisory approaches and frameworks.
Firstly, this paper provides an evaluation of the status of
investments in logistics as reflected in professional literature. With
the literature review, the authors sought to identify current trends
of investments in logistics. The statistics of manuscripts’ content
revealed how authors view and are aware of the topic of
investments in logistics.
Secondly, the article presents a survey carried out in organisations
regarding their governance of logistics investments, whose results
reveal important information needed to assess the actual current
state of the topic and serve as a starting point of formulating
insights in the field. The main finding is that in this area, no useful
framework, standard or tool is being used to manage these
investments. Furthermore, it has become evident that the
companies face lack of knowledge and awareness of their
importance. The survey results also show that, in the terms of
investments in logistics, there is much room for further
development, innovation and change of existing practices. Finally,
a framework for managing investments in logistics called ValLog,
is proposed. It is based on the Val IT framework, which provides
approaches needed to successfully manage IT investments. The
authors consider that Val IT can be adapted in a manner where its
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BUSINESS & ECONOMICS
© Vilnius University, 2002-2017
© Brno University of Technology, 2002-2017
© University of Latvia, 2002-2017
B. Jereb
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structure is kept intact, but the IT-specific parts are adequately
adapted to the field of logistics. The authors believe that this will
provide an appropriate framework for managing investments in
logistics.
KEYWORDS
: investments, logistics, management, supply chain,
value, IT.
JEL classification
: G11, E22, F21, P33.
Introduction
The authors regard that investments render possible the maintenance of existing
business operations, their increase or change. In business environment, it can be presumed
that by selecting right investments and by effectively managing them, organisations can
contribute to achieving their desired and expected business benefits. Investment management
involves the whole investment life cycle, from the conceptual stage of an investment through
its implementation, and eventually includes evaluation of consequent business benefits that
are relative to the values expected from the investment. Moreover, investment management
cannot operate without effective control. To prevent investments that have benefits or even
have negative effects, both effective management and control need to be thoughtfully
implemented and adequately used.
Today, logistics is most often regarded as a function that “entails the process of
planning and controlling the flow and storage of goods and services from the point of origin to
the customer, conforming to customer requirements” (Lummus et al., 2001). As such, it is an
“organisational function that can conserve and improve the flexibility and reactivity of the
firm to its environment” (Fabbe-Costes, Colin, 2007).
One of the main predispositions for efficient logistics is different technologies, which
can only be implemented through the thought out investments. As Vasiliauskas and
Jakubauskas (2007) note, investments into logistics assets of an organisation usually require
large and lump sum costs, which means greater financial risks. As claimed by Hammant
(1995) the field of logistics faces a pressure to invest in technology, and “while there are
business benefits for successful investment, the penalties of under investment or of poorly-
thought-through investment decisions are also high”. The importance of successful
management of logistics investments was therefore crucial even two decades ago, and it is
even more important for any organisation in contemporary business environment. Therefore,
it can be noted that implementation of procedures, frameworks or metrics of managing
investments in the field of logistics of all organisations that deal with or make use of logistics,
is imperative for their successful existence and business operations. Here, a gap in the
literature can be found, since existing literature has, to the best knowledge of the authors, not
yet concluded a satisfactory analysis of logistics investments and their management practices
or offered a potentially useful framework.
In most cases, the common denominator of business investments is that a great or even
major part of business investments consists of investments in logistics, since in most cases,
logistics processes can be seen as critical components of any business. Therefore, the
importance of concretised business benefits derived from investments can be seen as crucial
to an organisation. Even more important is the management of investments throughout its life
cycle within the investment management of an organisation, therefore investments in logistics
should not be regarded as a single whole, but only as investments, which are integrated into a
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network of other business investments. Any investment in logistics must have a clear business
benefit, should contribute to business objectives and must be assessed through the prism of
contributing to the overall business objectives. Val IT (ISACA, IT Governance Institute,
2008) was the basics of this research, due to the fact that according to the work by Jereb et al.
(2013; 2012; 2016) Jereb et al. (2013), IT and logistics are similar in their position and
relation to other processes in an organisation and especially in reference to the perception of
the management. Its eligibility must be assessed through an expected correlation between
inputs and utility of the investment.
Sum, Teo et al. (2000) showed that exploitation of IT and other technologies in
logistics processes is perceived as crucial by most companies, thus confirming the basic
proposition of this research that there are indisputable connections and parallels between IT
and logistics of any organisation. Moreover, the most successful organisations now recognise
the need of integrating logistics and IT strategies (Bourlakis, Bourlakis, 2006), which further
point to the interconnection between these two functions and supports the idea of adapting IT
procedures for logistics processes, which also represent one of the starting points of this
research, i.e. the notion that procedures, commonly used and even standardised in the IT field,
can be transferred and successfully used in the field of logistics.
Therefore the aim of this paper is threefold:
1. An updated literature overview on investments in logistics is presented. The term
logistics is used as described in the manuscript (Halldorsson et al., 2008), which is the
traditional definition of it. By analysing the information about and from the manuscripts, a
statistical structure which is the source of information showing the current state of
investments in logistics is built.
2. A status report on the investments in logistics shows the current state of
investments and their management in the field of logistics. The research is based on a survey
that was made using a questionnaire, whose answers reveal some important information on
the need to assess the actual state of investments in logistics.
3. The use of Val IT in logistics, which is the proposed solution for managing
investment in logistics called ValLog, is presented. ValLog provides a means of bridging the
misunderstanding between management and logisticians of an organisation regarding
investments in logistics, which are unfortunately witnessed too often. Both practice and
empirical research suggest that the investments, managed within a chosen supervisory
framework, achieve significantly better results than those implemented without supervisory
approaches and frameworks (ISACA, IT Governance Institute, 2008).
Currently, the framework of logistics investment management has not been thoroughly
studied. At the same time, no equivalent research on the state of the art of logistics investment
management was found in the accessible literature. This work shows that it is possible and
even necessary to raise investments in logistics to a higher level of management. This idea
derives from previous research on logistics investments and their role in different aspects of
business and its continuity. Research on the effects of investments in logistics as a means of
increasing shareholder value can be found as early as in 1999, when Walters (2013) identified
investment management in logistics companies as one of the four essential elements of
shareholder value planning. Similarly, Lambert and Burduroglu (2000) identified the
importance of value creation through investments in logistics functional area, especially in the
view of ensuring that a company receives adequate rewards for its investments, innovations
and performance in logistics (for this reason, the value derived from investments and
innovations must be properly measured). Some authors, (Wagner, 2008), find that
investments, especially those in infrastructure and capital goods, can help logistics companies
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generate innovative products or services and processes. Finally, the importance of investments
in logistics as a building block of efficient logistics is well described by Christopher (2011),
who defines a continuous programme of improvement, innovation and investments in the
framework of logistics (consisting of quality, service, cost and time) as a prerequisite of
gaining and maintaining competitive advantage in logistics.
1. Methods
1.1 Literature Review
The analysis is based and defined by the following parameters of each manuscript:
1. Title
2. Author(s)
3. Abstract
4. Keywords
5. Year of publication
6. The origin (country/continent) of the manuscript
7. The ownership (private, public, both, no data) as the subject content of the
manuscript
8. Type of investment in logistics characterised according to the technological or
business aspects
9. Size of described organisation(s)
10. Mentioning of the role of the top management or the CLO (Chief Logistics
Officer) in the investment in logistics
11. Mentioning of the reason for investment in logistics
12. Mentioning of the cost of investment in logistics
13. Is the success of the investment in logistics defined?
14. Measurement of the consequent overall business benefits of investment in
logistics
15. Mentioning of the risk levels of investment in logistics
16. Mentioning of any frameworks, tools and/or models in the life cycle of investment
in logistics
17. Mentioning of obstacles in the life cycle of investment in logistics
The nature of assessing particular parameters introduces some degree of subjectivity
into the database. The parameters of the pooled manuscripts compose a database whose
source is:
1. Base statistics based on the first six parameters.
2. Statistics of the content of manuscripts that yields both simple and complex
information of investments in logistics. The information is based on the set of the following
eleven parameters.
A short overview of the activities and facts of this research is as follows:
1. Manuscripts from journals, academic and professional proceedings, reports and
other sources from the Internet were pooled. 349 manuscripts were analysed, 187 of which
were withdrawn during the procedure of processing (reading); 162 manuscripts remained the
foundation of our research.
2. Manuscripts are published in 103 different sources.
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1.2 Status Report on the Governance of Investments in Logistics
The research is based on a survey exploring the current state of investments in
logistics in the selected companies in Slovenia and Croatia. The survey covered 42 companies
in 2 countries (Slovenia and Croatia), from many different industries, both large and small,
including public and private organisations. The questionnaire that was used to interview the
selected organisations was modelled according to the Global Status Report on the Governance
of Enterprise IT in 2011 (ISACA, IT Governance Institute, 2011).
The questionnaire consists of 40 questions (15 pages), ranging from more general to
specific ones. Special emphasis has been put on the placement of every company (first 9
questions), their understanding and knowledge of logistics (from 10th to 20th question),
logistics management (with outsourcing, implementation of mechanisms and change of
business), innovations and investment management in logistics. The complete survey with the
questionnaire as well as all the answers are recorded in Technical Report (Gros et al., 2012).
1.3 ValLog
Both, logistics and IT sectors are necessary for the implementation of other business
processes in organisations. Being the main infrastructural processes, they have much in
common with other business processes within the organisation. They have similar challenges
related to the required quality of service, to investments, risks, business ownership and their
management. Business processes usually define requirements for IT or logistics. IT is a field
which represents a part of logistics infrastructure. In lesser extent, vice versa version can be
applied, however generally speaking informatics is regarded as a foundation of logistics,
especially since IT processes enable the implementation of logistics processes.
ValLog is based on the hypothesis that both IT and logistics are similar to the extent
that – depending on the position and relationship with other business processes within the
organisation and in particular with regard to the perception of management – it is possible to
appropriately use frameworks, primarily developed for IT, in logistics. Thus, the authors
suggest using the same approaches to address the challenges associated with investments in
logistics that have been successfully used for investments in IT. Thus, the awareness is needed
that when adapting solutions from one field to another, specifics of a certain field should be
accounted for. Therefore, it is not enough to simply replace phrases including IT with phrases
that contain the term logistics. The main issue is the definition of resources of logistics
operations in supply chains. Based on this research, different definitions of logistics and also
consultations with a logistics expert, four primary logistics resources, without which logistics
processes cannot take place, are defined.
The approach that investments in logistics use guidance from the related field of IT
can be particularly meaningful due to the fact that there is currently no framework available in
the field of investments dedicated to logistics, even though it is needed in practice.
2. Results
2.1 Literature Review
The number of pooled and analysed manuscripts by year of publication is shown in
Figure 1. The level of awareness of the importance of investments in logistics is growing
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statistically, although in 2015, a significant decrease of published manuscripts is observed and
only the first half of 2016 is considered in the research.
Source: created by author.
Figure 1. The Number of Pooled Manuscripts per Year, 1994-2016
The majority of the published investments are from Europe (35%) and America (32%),
while Asia remains in the third place (20%). Based on the results, it can be concluded that
logistics (as a service) is better developed, based on the assumption that more investments in
logistics mean more developed logistics. In the authors’ perspective, Europe and America lead
over Asia, while Africa (4%) is less developed.
A total of 41% of manuscripts describe the investments in logistics in the private
sector, 31% consider the public sector, while 14% defines both. In 14% of the manuscripts,
the authors of this article were unable to determine the sector, or the manuscripts avoid
mentioning a specific sector and describe investments in logistics on a general level.
35% of manuscripts represent investments from the business point of view, and 26%
of them represent investment from the technological point of view, while 39% cover both
views. The authors believe that according to ValLog, investments in logistics should be
managed considering both aspects.
2.1.1 Titles, Abstracts and Keyword Analysis
During the title analysis, the statistical frequency of the appearance of terms was
analysed with Texalayser. The list of twenty most commonly used words in the titles are the
following: investment (as predicted, the word investment leads significantly over others),
logistics, supply, chain, transport, infrastructure, technology, information, management,
performance and others. These words extracted from the titles represent key issues in the topic
of investments in logistics.
The analysis of phrases is more descriptive. The phrase supply chain is the most
frequently used. Perhaps unexpectedly, the phrase information technology is in the second
place. It probably points to the fact that investments in the area of logistics are realised by the
investments in IT. The titles also include such phrases as infrastructure investments, reverse
logistics, transport infrastructure, investment evaluation, e-logistics and IT investment. The
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phrases that consist of terms impact, transport infrastructure, investment evaluation, and
customer solution came from both technical and business vocabulary. However, such phrases
as investment management, ROI point, which are taken directly from business vocabulary, are
not present in the resources. Thus it can be stated that the technical aspect dominates the
business aspect of investments in logistics, which is against the recommendations of ValLog.
The term reverse logistics is included in the list of the most frequently used phrases as well.
This suggests that organisations have recognised the importance of investments of reverse
logistics, which are going to become one of the most challenging segments of logistics in the
future. Abstracts are more descriptive than titles, since they summarise the content of
manuscripts, using more words. The most commonly used term is investment, which
corresponds to the frequency of its use in the titles. The second and fourth places are occupied
by the terms supply and chain (134 and 118 occurrences respectively). The term logistics (133
occurrences) appears in the third place. It seems that the term logistics is used more frequently
than the term supply chain (see the discussion (Halldorsson et al., 2008)). The term cost is
used rather frequently (57 occurrences), yet the term investment was four times more frequent
(204 occurrences). It can be concluded that the authors respect the connection between
investments and costs, however this connection is not as strong as expected (see (ISACA, IT
Governance Institute, 2008)). The list also includes the terms model and system, which leads
to believing that some authors are applying process approaches for investigation of
investments in logistics. Other conclusions about the position of the terms, which exceed the
purview of this paper can also be made.
The use of phrases that refer to information technology and investment shows that this
is one of the most important issues and consequently one of the most important parts of
investments in logistics (and/or supply chains) that delivers business value. The term risk
management is missing from the above-mentioned list, although it is one of the most
important activities in the process of investment. Furthermore, RFID and electronic support of
business seems to be a current hot issue in logistics.
The keyword analysis, allows to investigate the authors’ point of view on the
importance of the terms. The terms investment, supply, logistics, chain, management,
technology, information, transport, food, energy, public and phrases supply chain, chain
management, information technology, reverse logistics, logistics service, renewable energy,
food traceability, public transport, performance measurement, capital investment represent
the most frequently used terms and phrases. The hierarchy of the words here is not surprising,
however is different from before.
2.1.2 Statistics of Manuscript Contents
Statistics regarding the content of manuscripts shows more sophisticated information
about their content. These results are based on human-made inspections and, therefore, may
include some subjectivity in contrast to the previously presented results based on the
statistical approach. Table 1 presents eight topics that reflect the states of interests of
contemporary manuscripts about investments in logistics. The table reflects statistics of 162
sources, however only the latest sources, created in the period of 2014–2016, are quoted in
this article.
According to the results of this analysis, almost all authors of manuscripts (94% of
them) show that they are aware of the reason of investment. However, 6% of manuscripts
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does not mention the reason for investment. It is possible that either the authors did not
recognise it, or they did not mention it since they considered it to be unimportant.
Table 1. Statistics of the content of manuscripts
Mentioned in
manuscripts
Yes
No
Reason for the
investment in
logistics is
mentioned
152, among others in
(Catalano & Migliore, 2014; Cho, 2014; Dennis,
2014; Dimakopoulou, Pramatari, & Tsekrekos,
2014; Faivre d’Arcier, 2014; Feess & Thun, 2014;
Guerrero, 2014; Kronborg Jensen & Govindan,
2014; Lagoudis, Rice, & Salminen, 2014; Lee,
Palekar, & Qualls, 2011; Lowe, 2013; Lukas &
Welling, 2014; de la O & Matis, 2014; Munoz,
Batarce, & Hidalgo, 2014; Neeraja, Mehta, &
Chandani, 2014; Quak, Balm, & Posthumus, 2014;
Ramanathan & Gunasekaran, 2014; Sharpe, 2014;
Engineering & Magazine, 2014; Vinokurov, 2014;
Singh, Dalei, & Raju, 2016; Zhang, Q, & Chen. Y.,
2016; Araujo, Oliveira, Marins, & Muniz Jr., 2015;
Jalowiecki & Jalowiecki, 2014; Sikka, 2015; Bereau,
2015; Abbasi & Nilsson, 2016; Rau & Spinler,
2016; Kayser, 2016; Liu, Deng, & Le Vine, 2016;
Flannery, 2016; Interfax, 2016; Newswire, 2015;
Group, 2014; Hach & Spinler, 2014; Xiao, Fu, Ng,
K., & Zhang, 2015; Song & Geenhuizen, 2014;
Liao, Wang, Wang, & Tu, 2015; Panova & Hilmola;
O., 2015; Schwanitz, J., & Wierling, 2016; Kastner
& Matthies, 2016; Mignon & Bergek, 2016; Chiang,
Keoleian, Moore, & Kelly, 2016; Danilovich &
Croucher, 2015)
10, among others in
(Aguezzoul, 2014; Interfax, 2014; Li & Chang,
2015; S Business Wire, 2015)
Risk levels of
the investment
in logistics are
mentioned
32, among others in
(Araujo et al., 2015; Chiang et al., 2016;
Dimakopoulou et al., 2014; Kayser, 2016; Lagoudis
et al., 2014; Liao et al., 2015; Lukas & Welling,
2014; Schwanitz et al., 2016; Song & Geenhuizen,
2014; Xiao et al., 2015)
130, among others in
(Catalano & Migliore, 2014; Cho, 2014; de la O
& Matis, 2014; Dennis, 2014; Engineering &
Magazine, 2014; Faivre d’Arcier, 2014; Feess
& Thun, 2014; Guerrero, 2014; Kronborg
Jensen & Govindan, 2014; Lee et al., 2011;
Lowe, 2013; Munoz et al., 2014; Neeraja et al.,
2014; Quak et al., 2014; Ramanathan &
Gunasekaran, 2014; Sharpe, 2014; Singh et al.,
2016; Vinokurov, 2014; Zhang et al., 2016)
Obstacles in
the life cycle of
the investment
in logistics are
mentioned
57, among others in
(Araujo et al., 2015; Dimakopoulou et al., 2014;
Kastner & Matthies, 2016; Kayser, 2016; Kronborg
Jensen & Govindan, 2014; Lagoudis et al., 2014;
Lee et al., 2011; Mignon & Bergek, 2016)
105, among others in
(Abbasi & Nilsson, 2016; Aguezzoul, 2014;
Bereau, 2015; Catalano & Migliore, 2014;
Chiang et al., 2016; Cho, 2014; Danilovich &
Croucher, 2015; de la O & Matis, 2014; Dennis,
2014; Engineering & Magazine, 2014; Faivre
d’Arcier, 2014; Feess & Thun, 2014; Flannery,
2016; Group, 2014; Guerrero, 2014; Hach &
Spinler, 2014; Interfax, 2014, 2016; Jalowiecki
& Jalowiecki, 2014; Li & Chang, 2015; Liao et
al., 2015; Liu et al., 2016; Lowe, 2013; Lukas
& Welling, 2014; Munoz et al., 2014; Neeraja
et al., 2014; Newswire, 2015; Panova &
Hilmola; O., 2015; Quak et al., 2014;
Ramanathan & Gunasekaran, 2014; Rau &
Spinler, 2016; Business Wire, 2015; Schwanitz
et al., 2016; Sharpe, 2014; Sikka, 2015; Singh
et al., 2016; Song & Geenhuizen, 2014;
Vinokurov, 2014; Xiao et al., 2015; Zhang et
al., 2016)
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Table 1 (continuation). Statistics of the content of manuscripts
The role of the
top management
or the CLO in
the investment
in logistics is
mentioned
33, among others in
(Araujo et al., 2015; Engineering & Magazine,
2014; Group, 2014; Kronborg Jensen & Govindan,
2014; S Business Wire, 2015)
129, among others in
(Abbasi & Nilsson, 2016; Aguezzoul, 2014; Bereau, 2015;
Catalano & Migliore, 2014; Chiang et al., 2016; Cho, 2014;
Danilovich & Croucher, 2015; de la O & Matis, 2014;
Dennis, 2014; Dimakopoulou et al., 2014; Faivre d’Arcier,
2014; Feess & Thun, 2014; Flannery, 2016; Guerrero, 2014;
Hach & Spinler, 2014; Interfax, 2014, 2016; Jalowiecki &
Jalowiecki, 2014; Kastner & Matthies, 2016; Kayser, 2016;
Lagoudis et al., 2014; Lee et al., 2011; Li & Chang, 2015;
Liao et al., 2015; Liu et al., 2016; Lowe, 2013; Lukas &
Welling, 2014; Mignon & Bergek, 2016; Munoz et al.,
2014; Neeraja et al., 2014; Newswire, 2015; Panova &
Hilmola; O., 2015; Quak et al., 2014; Ramanathan &
Gunasekaran, 2014; Rau & Spinler, 2016; Schwanitz et al.,
2016; Sharpe, 2014; Sikka, 2015; Singh et al., 2016; Song
& Geenhuizen, 2014; Vinokurov, 2014; Xiao et al., 2015;
Zhang et al., 2016)
The success of
the investment
in logistics is
defined
64, among others in
(Bereau, 2015; de la O & Matis, 2014;
Dimakopoulou et al., 2014; Feess & Thun, 2014;
Interfax, 2016; Lee et al., 2011; Munoz et al., 2014;
Quak et al., 2014; Schwanitz et al., 2016; Sikka,
2015; Song & Geenhuizen, 2014)
98, among others in
(Abbasi & Nilsson, 2016; Aguezzoul, 2014; Araujo et al.,
2015; Catalano & Migliore, 2014; Chiang et al., 2016; Cho,
2014; Danilovich & Croucher, 2015; Dennis, 2014;
Engineering & Magazine, 2014; Faivre d’Arcier, 2014;
Flannery, 2016; Group, 2014; Guerrero, 2014; Hach &
Spinler, 2014; Interfax, 2014; Jalowiecki & Jalowiecki,
2014; Kastner & Matthies, 2016; Kayser, 2016; Kronborg
Jensen & Govindan, 2014; Lagoudis et al., 2014; Li &
Chang, 2015; Liao et al., 2015; Liu et al., 2016; Lowe,
2013; Lukas & Welling, 2014; Mignon & Bergek, 2016;
Neeraja et al., 2014; Newswire, 2015; Panova & Hilmola;
O., 2015; Ramanathan & Gunasekaran, 2014; Rau &
Spinler, 2016; Business Wire, 2015; Sharpe, 2014; Singh et
al., 2016; Vinokurov, 2014; Xiao et al., 2015; Zhang et al.,
2016)
The cost of the
investment in
logistics
80, among others in
(Bereau, 2015; Chiang et al., 2016; de la O &
Matis, 2014; Dennis, 2014; Dimakopoulou et al.,
2014; Engineering & Magazine, 2014; Flannery,
2016; Guerrero, 2014; Interfax, 2014; Kastner &
Matthies, 2016; Kayser, 2016; Kronborg Jensen &
Govindan, 2014; Li & Chang, 2015; Liu et al.,
2016; Lowe, 2013; Neeraja et al., 2014; Newswire,
2015; Panova & Hilmola; O., 2015; Quak et al.,
2014; Rau & Spinler, 2016; Schwanitz et al., 2016;
Sharpe, 2014; Sikka, 2015; Singh et al., 2016; Song
& Geenhuizen, 2014; Vinokurov, 2014; Zhang et
al., 2016)
82, among others in
(Abbasi & Nilsson, 2016; Aguezzoul, 2014; Araujo et al.,
2015; Catalano & Migliore, 2014; Cho, 2014; Faivre
d’Arcier, 2014; Feess & Thun, 2014; Group, 2014; Hach &
Spinler, 2014; Interfax, 2016; Jalowiecki & Jalowiecki,
2014; Lagoudis et al., 2014; Lee et al., 2011; Liao et al.,
2015; Lukas & Welling, 2014; Mignon & Bergek, 2016;
Munoz et al., 2014; Ramanathan & Gunasekaran, 2014;
Business Wire, 2015; Xiao et al., 2015)
The
frameworks,
tools and/or
models in the
life cycle of the
investment in
logistics
113, among others in
(Aguezzoul, 2014; Araujo et al., 2015; Catalano &
Migliore, 2014; Chiang et al., 2016; Cho, 2014;
Dimakopoulou et al., 2014; Faivre d’Arcier, 2014;
Feess & Thun, 2014; Guerrero, 2014; Hach &
Spinler, 2014; Jalowiecki & Jalowiecki, 2014;
Kastner & Matthies, 2016; Kayser, 2016; Kronborg
Jensen & Govindan, 2014; Lagoudis et al., 2014;
Lee et al., 2011; Li & Chang, 2015; Liao et al.,
2015; Liu et al., 2016; Lowe, 2013; Lukas &
Welling, 2014; Mignon & Bergek, 2016; Munoz et
al., 2014; Panova & Hilmola; O., 2015; Quak et al.,
2014; Ramanathan & Gunasekaran, 2014; Rau &
Spinler, 2016; Schwanitz et al., 2016; Sikka, 2015;
Singh et al., 2016; Song & Geenhuizen, 2014; Xiao
et al., 2015; Zhang et al., 2016)
49, among others in
(Abbasi & Nilsson, 2016; Bereau, 2015; de la O & Matis,
2014; Dennis, 2014; Engineering & Magazine, 2014;
Flannery, 2016; Group, 2014; Interfax, 2014, 2016; Neeraja
et al., 2014; Newswire, 2015; Business Wire, 2015; Sharpe,
2014; Vinokurov, 2014)
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Table 1 (continuation). Statistics of the content of manuscripts
The size of the
organisation(s)
in the
manuscript
43, among others in
(Dimakopoulou et al., 2014; Engineering &
Magazine, 2014; Group, 2014; Kronborg Jensen &
Govindan, 2014; Lee et al., 2011; Newswire, 2015;
Business Wire, 2015; Sharpe, 2014)
119, among others in
(Abbasi & Nilsson, 2016; Aguezzoul, 2014; Araujo et al.,
2015; Bereau, 2015; Catalano & Migliore, 2014; Chiang et
al., 2016; Cho, 2014; Danilovich & Croucher, 2015; de la O
& Matis, 2014; Dennis, 2014; Faivre d’Arcier, 2014; Feess
& Thun, 2014; Flannery, 2016; Guerrero, 2014; Hach &
Spinler, 2014; Interfax, 2014, 2016; Jalowiecki &
Jalowiecki, 2014; Kastner & Matthies, 2016; Kayser, 2016;
Lagoudis et al., 2014; Li & Chang, 2015; Liao et al., 2015;
Liu et al., 2016; Lowe, 2013; Lukas & Welling, 2014;
Mignon & Bergek, 2016; Munoz et al., 2014; Neeraja et al.,
2014; Panova & Hilmola; O., 2015; Quak et al., 2014;
Ramanathan & Gunasekaran, 2014; Rau & Spinler, 2016;
Schwanitz et al., 2016; Sikka, 2015; Singh et al., 2016;
Song & Geenhuizen, 2014; Vinokurov, 2014; Xiao et al.,
2015; Zhang et al., 2016)
Source: created by author.
Furthermore, the topic of considering risks is explored as well. It is well known that
investments are related to risks. This research focuses on the question of whether the authors
of manuscripts were aware of any risks. The risks are described as occurring on an
operational, tactical or strategic level. According to the results of this research, 80% of authors
did not mention the importance of risk.
Obstacles in the life cycle of investment in logistics are connected with risks. The
authors of the article aim at finding any indications of whether the authors of the manuscripts
had considered the reasons for risks. In more than one quarter of manuscripts such reasons are
not mentioned; 65% of authors did not mention the obstacles. Of course, the list of possible
obstacles is a mandatory element of assessing risk management in the life cycle of investment
in practice.
Even more surprising are the results about the top management or the role of Chief
Logistics Officer (CLO) in the investment in logistics. It appears that 80.% of authors ignore
the fact that investment in logistics should be managed as a business investment and that any
investment should be managed as a node in the network of investments. Top management
should be responsible for the whole portfolio of investments and for every single investment.
As a manager, the CLO should be a part of investment management team. If our investigation
reflects the state of real projects, many opportunities of improvement can be made in the field
of managing investments in logistics.
The success of an investment is also a mandatory part of every management body. The
results of this research show that success is not mentioned in more than one-half of the
manuscripts. It may be due to fact that business success is: too complex to describe for
technically-oriented writers; recognised as unimportant or merely beyond the focus of the
manuscripts. If so, how is this possible? Is this true in actual business practice or do the
manuscripts simply not reflect the reality of the practice?
The same questions about the complexity, importance, and focus of investments in
logistics are relevant when analysing the results of the costs. In more than half of the cases,
this topic is not mentioned.
In approximately one-third of the manuscripts, the frameworks, tools and/or models
are not mentioned as being of assistance in the life cycle of investment management in
logistics. The topic of the size of organisation has a similar share; only approximately one-
third of manuscripts mention the size of the organisation.
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2.2 Status Report on the Governance of Investments in Logistics
Out of 42 acquired questionnaires, the authors of this article mostly communicated
with the leaders on the strategic level, which is most directly related to logistics, this was the
case in 62% of organisations. Mostly, the direct respondents are responsible for logistics or
they are a part of the companies’ board. The companies are in the majority of cases from the
manufacturing sector (57%), transport and retailing (19%) and healthcare/pharmacy (7%).
40% of companies are listed among medium-sized enterprises and 36% – among large
enterprises. Mostly they are privately owned (71%), 21% are in the public sector, and 8% can
be considered mixed property. Two most important business objectives that influenced the
companies’ choice to invest in logistics are service quality (67%) and production
efficiency/cost reduction (60%) (Uranjek et al., 2013).
Specific results of the survey, which we find most interesting and crucial to the
research, are presented below in charts and explanations.
2.2.1 Maturity of Logistics Investments Management
One of the most important information that can be obtained from organisations is their view
on how logistics investments are managed. Therefore, the goal of the authors of this article
was to determine if and how these investments are managed and whether some measurements
and optimisation is in place. Therefore, the question the respondents were asked was: “How
would you evaluate the maturity of your business to manage investments in logistics?” The
results are shown in Figure 2.
Source: Uranjek et al., 2013.
Figure 2. Evaluation of Maturity of the Organisation to Manage the Investments in Logistics
The respondents were required to give only one answer to this question. Almost one-
third of organisations claim to be aware of their risks and are dealing with the tasks that must
be done to mitigate them. The answer that they have functional management of logistics
processes and performance management takes the second place with 21%. It is important to
note that 7% of respondents thought that the maturity of business approaches to investment
management is not important. However, it can be seen that mostly, organisations are aware of
7%
14%
21%
14%
5%
31%
7%
0% 5% 10% 15% 20% 25% 30% 35%
Do not know
Our processes related to logistics man agement
are always optimised according to the results of
performance measurement
We have functional management of logistics
processes and performance measurement
Our logistics management processes are very
well defined
We are aware of the importance an d have
prepared some "ad hoc" solutions
We are aware of the risks and are ju st dealing
with the tasks that must be done
We think that it is not that importan t
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the importance of managing logistics investments and have at least some basic procedures of
the field in place.
2.2.2 Innovations in Logistics
In order to determine the scale and need for future investments, expected innovations
in logistics are important, due to the fact that innovations must be supported by planned and
managed investments. Therefore, the respondents were asked “Are you planning or will you
plan to implement any initiative to promote innovation in logistics?”
In contrary to the expectations of the authors, 41% of companies are planning (or are
going to plan) to implement some initiatives to promote innovations in the field of logistics
and 36% of companies have no such plans. Together with those that do not know whether
they are going to plan innovations in logistics in the near future (23%), they represent a major
part of all organisations that are going to need to focus on managing logistics investments in
the future. Therefore, we can assert that a large number of organisations is going to experience
the need for a structured approach towards this management aspect.
2.2.3 Promotion of Innovations in Logistics
As stated earlier, innovations in logistics must be supported by investments. In order to
implement strategic innovations, some procedures and plans must be in place. The question
“Please specify the mechanisms that have been introduced or you are planning to introduce
them in the next year for the promotion of innovation in logistics in your company” was asked
regarding the above-mentioned factors. The results are shown in Figure 3.
Source: Uranjek et al., 2013.
Figure 3. Introduction of Mechanisms to Promote Logistics Innovations
This question did not require the respondent to answer with only one question. It
seems like training of managers (for better understanding of innovation in logistics) and
assigning responsibility for the control of emerging technologies are the main two
mechanisms that have been (or plan to be) introduced for the promotion of innovations in
logistics. Interestingly, more specific mechanisms, such as evaluations or testing, are not so
19%
3%
16%
7%
10%
22%
22%
0% 5% 10% 15% 20% 25%
Do not know
Other
Programmes of cooperation where logistics and managerial staff can
work together to identify innovations
Allocation of time that was spent to working on experiments or
testing ideas
A specific evaluation of investments and funding mechanisms for
the implementation of pilot projects with emerging logistics…
Assigning responsibility for the control of emerging technologies
and their potential application in the company
Training of managers to better understand how innovation in
logistics could create business benefits
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commonly in place and the fact that raises concerns is that 19% of respondents do not know
how they plan their innovations.
2.2.4 Evaluation of Investment Performance
The assessment of the usefulness and expected outcomes of every investment should
be a priority of organisations, which strive to optimise their business operations and expenses.
Therefore, some metrics or procedures of this evaluation need to be in place, and that was the
subject of the next inquiry. The question, asked was: “Do you have an evaluation metric of
performance of investments in logistics?” and the results are presented in Figure 4.
Source: Uranjek et al., 2013.
lL Figure 4. Existence of Evaluation Metrics for Logistics Investments
Half of the organisations do not have any evaluation metric of performance of
investments in logistics, as well as 7% of them do not know about this matter. Only 19%
claim to have metrics in place to evaluate investments in logistics, which shows a large deficit
of awareness and control procedures.
2.3 ValLog
In IT, the following resources are available to implement IT processes; they can be
“seen” as invested into and ultimately protected (Jereb et al., 2016): information, applications,
infrastructure, people.
Similarly, the definition of basic or primary resources, which are specific to logistics
and can be seen as an object of quality of service, investments, risks, business ownership and
their management, is needed. Therefore, the authors suggest the following logistical resources
(Jereb et al., 2016; Jereb, Ivanuša et al., 2013):
1. The flow of goods and services should be managed from the point of origin to the
point of use in order to meet the requirements of customers.
2. Information is the data, in all their forms, input and output processed by the
information systems in whatever form it is used by the business.
3. Logistics infrastructure and supra-structure are regarded as basic physical and
organisational structures needed for the operation of logistics.
4. People are the personnel required to plan, organise, acquire, implement, deliver,
support, monitor and evaluate the logistics systems and services. They may be internal,
outsourced or contracted as required.
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Yes, entirely Partially No Do not know
19%
24%
50%
7%
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Definition of logistics resources is a prerequisite for the use of Val IT in logistics.
2.3.1 The Importance of Investments in Logistics
Table 2 shows the amended introductory part of Val IT, adapted for the use in
logistics. The term “Val IT” was changed into “ValLog” wherever it refers to investments in
logistics.
Table 2. A portion of the introductory part of Val IT, tailored to logistics
A prerequisite for determining the business benefits of investment in logistics is to achieve an understanding
with those, responsible for business investments (i.e. management) on how logistics contributes to achieving
business objectives. At all the levels of management and all consequent levels of management of each
investment, it must be made clear how and to what extent the investment in logistics can contribute to
accomplishing specific business goals.
A ready access to a structured approach, i.e. a comprehensive, proven, practice-based structured governance
framework that can provide boards and executive management teams with practical guidance on making
logistics investment decisions and using logistics to create enterprise value, has been missing for many
years. ValLog allowed the authors of this article to produce a much needed framework for managing
investments in logistics.
The views on logistics have changed over time, and until just recently, the authors of this article have
evaluated the quality of logistics in the light of factors that point to its success in supporting the
implementation of business processes. Since nowadays logistics performance as well as the updated means
of performance evaluation are regarded through the prism of investment in logistics, the focus is no longer
just on the implementation of logistics solutions. Increasingly, we are aware that the goal is to implement
some business changes, which allow for investments in logistics. Investment in logistics becomes an activity
that is necessary to achieve business results. Through performance evaluation of business investments, we
are starting to assess the effectiveness of investment in logistics. This is the focus of interest (in the world of
logistics) that is being further expanded to monitor the performance of investments in logistics. The new
value gained by investing in logistics becomes a central concept in logistics. We wonder about the benefits
that such investments can bring to a new business value. In doing so, let us not forget that with investment in
logistics we aim for both, maintenance as well as an increase or change in operations.
Due to the evaluation of investments in logistics, we are starting to realise that risks in logistics are
substantially more complex and more important than we have been accustomed to seeing and taking in the
past. On the one hand, evolution allows us to recognise and acknowledge the impact of new elements in
logistics operations; on the other hand, it is a fact that logistics represents a growingly large and important
part of business and thereby the increase of impact of logistics on business operations is clear. A further
consequence is reflected in the request for revision of management practices including management
practices in logistics. Practices that were current not long ago, are becoming insufficiently complex and
inadequate. In the past, less attention was given to investments in logistics as is required by the present time.
It looks as though the study of the performance of investments in logistics is becoming a crucial topic, which
engages or will engage leaders in the logistics business. This applies to both public and private
organisations.
The only difference between the above-mentioned is that the performance evaluation of investment in
logistics in the public sector proves to be more difficult, due to the more apparent complexity and multi-
layered characteristics, which contributes to increased complexity of evaluation.
Source: adapted from ISACA, IT Governance Institute, 2008.
The authors believe that the text in Table 2 is essential for understanding the
importance of investments in logistics. It refers to the relationship between business
investments and investments in logistics and concludes that ultimately, they are still business
investments and as such are in the domain of management. Therefore investment can be
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considered as a complex matter, which requires new skills and changed attitude towards such
investments. Although it was originally dedicated for investments in IT, the text is also
relevant for logistics.
In Table 3 another portion of the adapted ValLog framework is included, which
describes the role of leadership in business as well as the relevance and need for guidelines for
management of investments in logistics.
Table 3. A portion of Val IT, which refers to the need for guidelines for the management of investments in
logistics
Investments in business solutions that are supported by logistics or mainly by logistics can be repaid many times over,
but only while ensuring the implementation of appropriate control and management activities and full support and
involvement of business management at all levels. The past leadership did not have a good overview of investment in
logistics. The practice of reporting and evaluating investments in logistics has been deficient. Such a bad practice
prevails even today, however with the evaluation of performance of investments in logistics the practice itself is
changing. Investment performance, which includes investment in logistics, is well understood by organisation
management that expresses a wish to have reports on their performance.
Due to the lack of knowledge on what IT investment and the problems which arise when evaluating the performance
of IT investments are, the IT Governance Institute investigated options for improving the situation. They cooperated
with experts from business and IT community. The result was the so-called Val IT initiative. The aim was to make this
initiative lead organisations through providing various guidelines, which are associated with IT investments. The
policies are prepared so that more optimal IT investments can be provided as a part of business solutions with known
and acceptable risk. (ITGI, 2007) We use the analogy of the guidelines for investment in logistics (this sentence is an
addition to the original text).
ValLog is a framework with complementary and mutually connected processes as well as with other guidelines for
managing investments in logistics, which are adapted for top leadership of the management pyramid. Processes and
instructions are written in the language of leadership in a way that a leader can understand and use. At the same time it
distinguishes the respective roles of members of the management of such investments.
Source: adapted from ISACA, IT Governance Institute, 2008.
In Table 3, the claim that could be controversial in practice is: “leadership in the past
have not had a good overview of the investment in logistics”. This is especially likely to be
controversial for more specialised logistics organisations. However it is important to realise
that logistics processes occur not only in specialised logistics organisations, but also in every
organisation, which together far surpass the number of specialised logistics organisations.
Practical experience shows this fact to be true, although this article does not provide objective
empirical evidence that this is the case. In future research, a thorough investigation of the
situation and the position or the role of logistics in the hierarchy of different organisations will
be needed.
In Table 4, a fragment of the work is given, which more accurately describes what can
be expected from ValLog.
In the definition provided in Table 4, we dared to replace the term CobiT with SCOR.
Perhaps at the moment, this move may seem too brave and unfavourable reactions can be
expected. Therefore the question arises what, if any, definition can be regarded as the second,
complementary, framework, standard or any other form of guidelines that complements the
adapted Val IT framework in the field of logistics. The authors of this article have decided
that it would be more suitable to choose an actual framework, which is SCOR, than to talk
about an imaginary document. Studies of the generally adopted documents for the
management of logistics, which are complementary to ValLog, remain the subject of future
research.
Table 4. A detailed description of ValLog mission and differences from SCOR
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ValLog is useful when focusing on the following investment-related questions:
1. Are we doing things right? Are the chosen investments right? These are strategic questions, among which the following
questions are asked:
a) Does the chosen investment still contribute to the set vision of business and logistics?
b) Are we still consistent in our business principles?
c) Are we contributing to the strategic goals of the organisation?
d) Are we ensuring an optimal and/or expected increase in business benefits, taking into account the acceptable input at the
acceptable levels of risk?
2. What and how extensive are the real benefits of the investment? What and how extensive are the real benefits in
comparison to the expected? This is a question of business benefits, where we ask ourselves:
a) Is it understandable to all the interested parties, what we expect from the investment? Is it completely clear what we wish
to gain from the investment?
b) Is it understandable to all the interested parties, what should be done, what and how much will be invested in the
realisation of investments in logistics in order to obtain the intended benefits?
c) Is the metric of performance evaluation of investments in logistics relevant?
d) Is the process of achieving the business benefits implemented well?
On the other hand, SCOR (Supply Chain Council, 2012) (originally CobiT (ISACA, IT Governance Institute, 2007)) focuses
on the implementation of logistics processes, which raise the following questions:
1. Are we working properly?
2. Are we performing logistics processes well enough?
With the above-mentioned issues, the focus on the two frameworks, namely ValLog and SCOR, is shown. It is clear that
ValLog presents an upgrade of SCOR in terms of business and financial perspectives. Thus, both ValLog and SCOR can be
combined into the most comprehensive system of knowledge and best practices that are currently available in the field of
logistics.
Source: adapted from ISACA, IT Governance Institute, 2008.
Table 5 provides a brief overview of the contents of ValLog.
Table 5. Contents of ValLog
Log Val deals with:
1. Basic concepts, such as: business benefits, project, programme and portfolio.
2. Principles, which are focused on logistics resources and characteristic of investments, as well as of achieving (expected)
business benefits.
3. Fields within which we manage the business benefits of individual processes of ValLog, logistics portfolio and
investments in logistics.
4. Processes that are defined by ValLog.
5. Guidelines for management (who, what, when, where, how, why, etc.) of each process separately as defined by ValLog.
Source: adapted from ISACA, IT Governance Institute, 2008.
Proposal of ValLog is a new concept and a case, where it would be applied in practice,
is to this day unknown. It is more widely described in Jereb et al., 2016.
Conclusions and Discussion
The alignment of business processes and logistics remains a big challenge for
organisations, particularly in the case of investments. To establish effective logistics
investments in an organisation it is essential to involve relevant members. The investment
goals of management and logistics staff, start with the planning stage, and attempt to reach an
agreement among staff by sharing and acknowledging their information, interests and
challenges.
This article reviewed more than one hundred manuscripts of investments in logistics
that were published in the period of 1994–2016; most of them since 2009. We analysed
different trends and approaches to managing them. The gaps between recognised trends and
the state, proposed by ValLog framework, were determined. The use of frameworks, tools and
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models is growing; they are mentioned in almost 70% of manuscripts. In the future, this
research should be continued in order to monitor the trends of published manuscripts
mentioning the topic of investments in logistics and supply chains. We also propose that the
authors who discuss investments in logistics follow the recommendations set out by ValLog.
The survey of the status of governance of investments in logistics and its analysis
revealed a significant degree of accord on the contribution of logistics to business success, the
challenges and opportunities related to logistics. The survey findings lend themselves to a
variety of conclusions and issues that can be considered. There are still significant
opportunities for many enterprises to transition the logistics role to a more pro-active one.
This can be done through the use of an appropriate organisation structure encompassing the
roles of managing business relationships, and standardised process to effectively bridge the
business demand with the logistics supply. Innovations in logistics offer ample opportunities
for logistics to play a more pro-active role. The right governance enablers can ensure the
transparency of logistics supply and demand and facilitate decision-making about demand and
its prioritisation in pursuit of value delivery to the enterprise by a framework of managing
investments in logistics – by adapting the guidelines of IT to Val Log framework as a possible
approach.
Assuming that in the field of logistics, investments can use the same general guidelines
and approaches as those used in IT, we produced a good management framework with
ValLog. Similar frameworks do not exist in logistics therefore it is very welcome. It also
contains a maturity model, which can be used at a higher or lower level. Portfolio of
investments is the considered field, which includes logistics services, logistics assets and
resources, therefore it is based on a holistic approach of investment managing.
In general, ValLog is a fairly short document, which contains relatively few, i.e. only
22 processes. It may be considered compact and concise form, which can be seen as its strong
point. Nevertheless, it brings a new view into logistics business and gives managers and other
business leaders a new starting point to see the investments in logistics from a different
perspective. According to ValLog, investment goals should be clearly identified, therefore the
investment stakeholders and all members involved in the investment can share the same focus
and consequently intentions of the management should be defined in the first phase of the
investment.
The authors of this article believe that ValLog is a promising methodology compared
to other general methodologies while talking about investments in the field of logistics. Its
advantage is the fact that it is complementary to SCOR and consequently understandable to
people in the field of logistics. On the other hand, it introduces the language of business to
investments in logistics and achieves a new perspective in logistics performance. This shows
the effectiveness of a business investment that include investments in logistics. Such a view is
not new, it has often been tested in practice, however in the field of logistics it is used in a
systematic way, which is new on the specific field.
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INVESTICIJŲ Į LOGISTIKĄ VALDYMO TOBULINIMAS
Borut Jereb
SANTRAUKA
Įmonės valdytojai turėtų atkreipti dėmesį į tai, kad logistikos ištekliai ir jos strategija turi būti susieti su
kiekvienos privačios ar viešos organizacijos poreikiais. Valdymas negali būti veiksmingas, jei nėra veikiančios
kontrolės. Atsižvelgus į praktinius pavyzdžius ir atliktus empirinius tyrimus, galima daryti prielaidą, kad, valdant
investicijas pagal pasirinktą priežiūros sistemą, įmanoma pasiekti žymiai geresnių rezultatų, nei netaikant jokių
priežiūros metodų ir sistemų.
Pirmoje straipsnio dalyje, remiantis moksline literatūra, pateikiamas investicijų į logistiką padėties
vertinimas. Atliekant mokslinės literatūros apžvalgą, nustatytos dabartinės investicijų į logistiką tendencijos.
Atlikta apžvalga atskleidė autorių požiūrį į investicijas, logistiką ir šios temos informacijos sklaidą.
Antroje straipsnio dalyje pristatoma organizacijų apklausa apie logistikos investicijų valdymą. Gauti
rezultatai atskleidžia svarbią informaciją, kuri būtina norint nustatyti dabartinę temos padėtį. Ji paskatins
tolimesnių šios srities įžvalgų plėtotę.
Atlikus tyrimą išsiaiškinta, kad šioje srityje investicijų valdymui nėra taikoma jokia naudinga sistema,
standartas ar įrankis. Susiduriama su žinių ir informavimo apie investicijų svarbą trūkumu. Apklausos rezultatai
taip pat rodo, kad, kalbant apie investicijas į logistiką, yra daug galimybių tolimesnei plėtrai, inovacijoms ir
ligšiolinės praktikos pokyčiams.
Paskutinėje straipsnio dalyje siūloma sėkmingo investicijų į logistiką valdymo sistema „ValLog“, kuri
paremta „Val IT“ principu. Tikimasi, kad „Val IT“ sistemą bus galima pritaikyti logistikos sričiai išlaikant jos
struktūros vientisumą ir keičiant tik tam tikras su IT susijusias jos dalis.
REIKŠMINIAI ŽODŽIAI: logistika, valdymas, tiekimo grandinė, vertė, IT.
