Focus on shareholder value
Concentration on core competencies and outsourcing The seventh global business trend in modern logistics is based on an important management discovery and the academic science of business administration. Complex planning, management and control systems in ever larger organizational units are not the answer to the challenges of an extensive and highly networked economy, mass customization, time-based competition and new ecological demands. Such systems lead to a higher cost of complexity (e.g. in the form of increased planning and management expenses, more frequent system failures and the related costs) which in many cases erodes desired benefits and may actually erase them altogether.
Since the 1990s, this realization has strengthened the trend towards concentration on core competencies. Compact, streamlined organizational units focused on a single task or just a few tasks and for the most part self-managed are now preferred over very large, complex, multifunctional units. Activities which are not part of a company's core competencies are outsourced. This outsourcing sits side by side with a clever restructure of the remaining organizational cells (fractals). Based on uniform structural patterns, new organizations are created using smaller modules of a similar design that can be flexibly linked to one another. In turn, these organizations will serve as robust, practical building blocks in the multifaceted value chains, corporate structures and national economies of the future.
Simple structures preferredThis trend is also evident in the world of the stock markets and finance. In the sense of orientation to shareholder value, every business activity, every investment and every business unit there is to be measured according to the contribution it makes to enhancing the value of the products and other outputs for which the company's customers are prepared to pay. Stock markets and stockholders oriented to shareholder value therefore prefer focused, simple corporate structures with easily and clearly measurable investment and returns as compared to the frequently overgrown, overloaded, excessively complex corporation and cooperation structures seen in the 1970s and 1980s.
However, the economy's return to modular organizational structures resembling building blocks (referred to as loosely coupled systems in organizational theory) also increases the number of interfaces and therefore the importance of coordinating these modules in value chains - making the importance of logistics apparent once again.
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