Logistics Strategy Flashcards
Four basic features service function logistics
- Reliability
- Responsiveness
- Relationship
- Rationalization
- Reliability
Influences the degree of trust, which a supplier can have, in a company’s capability for honoring commitments. The supplier has to be perceived as reliable and for this the supplier needs to exhibit certain service characteristics. A high degree of reliability in terms of inventory and material delivery is expected from the supplier end. Thus a key objective of the logistical system needs to be reliability in meeting the needs of the customer, according to the resource planning.
- Responsiveness
The speed with which customer demands are being responded. Responsiveness is expected at all levels of the supply chain. Response to pre-sales enquiry by using latest available information and communication technologies is an important strategy. Supplying material as per customer needs, and frequent deliveries in fewer lot sizes are important. Deliveries can also be made at the various assembly centers, which are in proximity to the markets. A firm will gain a winning edge in competitive markets through a responsive strategy.
- Relationship
Firms spend huge amounts in Customer Relationship Management (CRM) related activities for development of long term relationships to retain customers, and also reduce the element of risk in demand management. Partnering with the right supplier and considering the supplier operations, as an extension of its own operations will enhance the efficiency and effectiveness of the supply chain.
- Rationalization
This refers to reducing the supplier base and partnering with select suppliers. The supplier’s facility is treated as an extension of the buyer’s facility and there is sharing of information, experience and resources for mutual advantage.
Requirements for an effective Logistics Strategy
Dedicated planning resources and programs
Formal Logistics Planning Methodology
Dedicated planning resources and programs
Unless proper resources are set aside for long term planning, it will not be carried out to the level of necessity to assess ways of changing economic, technological, competitive, demographic and regulatory environments affecting long-range requirement of logistics. A dedicated logistics planning team needs to be organized. The logistics planning team should include analytical and operational backgrounds that are required to resolve complex issues.
Formal Logistics Planning Methodology
Logistics is filled with interdependent activities, which impact other areas of the organization. Planning activity goes through three important phases such as investigation, vision and implementation. In the investigation phase, a logistics audit is conducted and the company’s current performance and practices are compared with world-class practices. The vision phase involves application of world-class practices to the current environment. In the implementation phase, detailed project plans for completing the recommended initiatives are developed and monitored.
Generic Strategies for Logistics Operations
- Cost Leadership
- Differentiation
- Diversification
- Outsourcing
- Cost Leadership
Achieving cost leadership is facilitated by logistics cost reduction to a major extent. This can be achieved by many ways.
Examples of achieving logistics cost reduction are:
* Reducing transaction costs through IT support
* Warehouse operations based on scale economics
* JIT, cross docking and postponement, which results in reduction of inventory and related costs.
* Reduced vendor base and co-partnerships with suppliers.
- Differentiation
This strategy focuses on offering superior service. Examples of offering logistics services for differentiation:
- On time and consistent delivery
- Logistics solutions to suit individual requirements
- Tracking consignments
- Diversification
Firms having a lot of operations adopt this strategy. The basic objective here is the lower cost and better control over operations thus providing superior customer service.
- Outsourcing
Outsourcing services to logistics service providers having expertise in this area in order to bring efficiency and effectiveness into the logistics operations. An example in outsourcing is Customs Clearance service providers. As a majority of exporters and importers do not have a proper expertise in this area of logistics operations, many logistics service providers offer customs clearance services to their clients. This can reduce the overall transaction cost.
Generalization
Formulating a strategy is not an isolated process. Logistics strategy needs to have congruence with the overall goal and strategy of the business. A synergy with the other domains of the organization is necessary to achieve overall goals of the firm.
