Strategic Logistics

Management
Lecture 2 Introduction to Logistics & Strategies
Definition
Logistics is the management of the flow of things between
the point of origin and the point of consumption in order to
meet requirements of customers or corporations. (Wikipedia,
2016)
Logistics management is that part of supply chain
management that plans, implements, and controls the
efficient, effective forward and reverse flow and storage of
goods, services and related information between the point of
origin and the point of consumption in order to meet
customers requirements. (Council of Supply Chain
Management Professionals, 2016b)
Logistics is defined as the time-related positioning of
resources. It is also described as the five rights. Essentially,
it is the process of ensuring that goods or a service is: in the
right place, at the right time, in the right quantity, at the
right quality, at the right price (Chartered Institute of
Logistics and Transport (UK), 2016)
Logistics functions

The key components of logistics are

Order processing
Transportation management,
Inventory management,
Warehousing management
Packaging & Material handling
Managing outsourced functions
Reverse logistics
Network planning and designing
Coordination & Risk management
 Exploded view of logistics
Components
For most organizations it is
possible to draw up a familiar
list of key areas representing
the major components of
distribution and logistics.
These will include transport,
warehousing, inventory,
packaging and information.
This list can be exploded
once again to reveal the
detailed aspects within the
different components.
 Strategic Logistics Management

Logistics Goals and Strategies

Rapid response to changes such as new development in the market or
in particular customers need
Minimum variance in matters such as delivery times
Minimum inventory to keep expenses down
Consolidation of movement
High quality in logistics service as well as in products
Life cycle support including repair, reuse, recycling or disposal as well
as product delivery
Strategy

A general statement of how we propose to achieve our goals. For

example: Our strategy will be to offer the best products at a premium price.
A companys strategy describes how it will create value for its customers, its
shareholders, and its other stakeholders.
Developing and updating a companys business strategy is one of the key
responsibilities of a companys executive officers.
To develop a business strategy, senior executives need to consider the
strengths and weaknesses of their own company and its competitors. They
also need to consider trends, threats, and opportunities within the industry in
which they compete,
As well as in the broader social, political, technological, and economic
environments in which the company operates.
Defining a Strategy
Porter defines business strategy as

a broad formula for how a business is going to

compete, what its goals should be, and what
policies will be needed to carry out these goals.

Phase 1: Determine the current position of the

company.
Phase 2: Determine what is happening in the
environment.
Phase 3: Determine a new strategy for the
company.

Porters process for defining a company strategy

Porters Model of Competition

Porters model of the five forces driving industry competition

Industries, Products, and Value
Propositions
A value proposition refers to the value that a product or service provides to
customers.
Managers should always strive to be sure that they know what business (or
industry) their company is really in. Thats done by being sure they know what
value their company is providing to its customers.
 SERVICE SYSTEM DESIGN
Managers use this insight, along with a
knowledge of their companys value-added
capabilities, to develop attractive value
propositions.

Value propositions are the promises a company

makes to customers about how it will meet their
needs.

Value propositions serve two roles:

They shape customer expectations,
influencing customer purchase decisions as
well as how the customer will assess the
actual service experience.
They define what the company must do to
earn a customers business, setting the
parameters for the design of the companys
customer-experience system. Service system design
CREATING CUSTOMER VALUE

To win
tomorrows
competitive
battles, you must
grasp the nature
of these value
dimensions and
build the systems
to create and
deliver them.

Dimensions of value creation

Total Order PerformanceA Synergistic
Approach
To help you prioritize decisions regarding value creation, you will want to
remember three rules:
Get into the gameAcross most purchase decisions, cost and quality are the
critical value dimensions. If you want to be taken seriously as a potential supplier,
you have to perform well in these areas. Cost and quality thus tend to be order
qualifiers.
Differentiate yourselfIf your cost and quality positions are good enough to get
you consideration as a supplier, you need to differentiate yourself along the lines
of one of the other dimensions. That is, customers must view your delivery,
responsiveness, and/or innovation as an order winner.
Avoid disqualificationYou must meet minimum requirements across all five
value dimensions. Even if you rate well on cost, quality, and a differentiating
characteristic, you could still disqualify yourself via unacceptable performance
elsewhere. Your customers are keeping score.
Strategies for Competing - Porter

Cost leadership. The cost leader is the company that can offer the product at the cheapest
price. In most industries, price can be driven down by economies of scale, by the control of
suppliers and channels, and by experience that allows a company to do things more efficiently. In
most industries, large companies dominate the manufacture of products in huge volume and sell
them more cheaply than their smaller rivals.
Differentiation. If a company cant sell its products for the cheapest price, an alternative is to
offer better or more desirable products. Customers are often willing to pay a premium for a
better product, and this allows companies specializing in producing a better product to compete
with those selling a cheaper but less desirable product. Companies usually make better products
by using more expensive materials, relying on superior craftsmanship, creating a unique design,
or tailoring the design of the product in various ways.
Niche specialization. Niche specialists focus on specific buyers, specific segments of the
market, or buyers in particular geographical markets and often offer only a subset of the
products typically sold in the industry. In effect, they represent an extreme version of
differentiation, and they can charge a premium for their products, since the products have
special features beneficial to the consumers in the niche.
Touch Points

Acquisition touch points, which are consistent with the economic concept of
value-in-exchange, occur as customers learn about and make purchase
decisions.

Utilization touch points, the equivalent of value-in-use, occur as the service is

experienced.
Orchestration

Orchestration consists of three core steps:

1. Select team membersKnowing what value you need to
create, you need to identify the right playersthose with key
resourcesto participate as members of your value-added
team.
2. Assign team rolesBased on a correct understanding of each
players skills, you must assign the right roles and
responsibilities to each team member to create optimal value.
3. Build team cohesionYou need to remember that having the
right players does not mean they will play well together. You
therefore need to invest in team chemistry by establishing the
right relationships among team members.
Supply Chain & Logistics Strategies

Lean
Agile
Responsive
Robust
Resilient