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Strategic Logistics

Lecture 2 Introduction to Logistics & Strategies
Logisticsis themanagementof 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
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

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

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

Porters process for defining a company strategy

Porters Model of Competition

Porters model of the five forces driving industry competition

Industries, Products, and Value
A value proposition refers to the value that a product or service provides to
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.
Managers use this insight, along with a
knowledge of their companys value-added
capabilities, to develop attractive value

Value propositions are the promises a company

makes to customers about how it will meet their

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

To win tomorrows
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 anextreme 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

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


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