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Competitive strategy
Chapter Eleven
By Martin Christopher
Dimensions of Logistics:
Introduction
Unit 1
What is Logistics?
Logistics Management
Business Logistics Management
Integrated Logistics Management
Materials Management
Physical Distribution Management
Marketing Logistics
Industrial Logistics
Distribution
Unit 1
Definition of Logistics:
Unit 1
Logistics - Definition
Logistics is the process of strategically
managing the procurement, movement and
storage of materials, parts and finished
inventory (and the related information flows)
through the organisation and its marketing
channels in such a way that current and
future profitability are maximised through
the
cost-effective fulfilment of orders.
Martin Christopher
Logistics and Supply Chain Management
Unit 1
Unit 1
What is Logistics?:
21st Century View of Logistics (4
subdivisions)
1. Business Logistics supply chain process
that plans, implements, and controls the
efficient, effective flow of goods, services,
and related information from the point of
origin to the point of use or consumption
in order to meet customer requirements.
2. Military Logistics design and integration
of all aspects of support for the operational
capacity of the military forces, and their
equipment to ensure readiness, reliability,
and efficiency.
Unit 1
What is Logistics?:
21st Century View of
3. Event Logistics network of activities,
Logistics
facilities, and personnel
required to
Unit 1
3 major dimensions of
Logistics
1.
2.
3.
Unit 1
Unit 1
10
Unit 1
11
Figure 2-3:
Total Logistics Costs --- 1999
Unit 1
12
16 (GDP 1.12
15 (GDP 7.32
14 (GDP 5.86
13
12
11
(GDP
(GDP
(GDP
1.82
2.74
2.45
tn
tn
tn
$)
$)
$)
Unit 1
14
As indicated
in Figure
2-4, the
A Macro
Perspective
Federal Reserve measure of inventory
to sales ratios from 1991 to 1999
clearly indicate that companies are
getting better at managing inventory.
Companies have been supporting
larger amounts of sales with
decreasing amounts of inventory.
Unit 1
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Figure 2-4:
Inventory Sales Ratio
Unit 1
16
Contributing
to this
decline
A Macro
Perspective
Unit 1
17
Unit 1
18
(what)
(where)
(when)
(why)
production
logistic
logistic
marketing
Unit 1
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Unit 1
20
Unit 1
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2. Seasonal demand
Acceptance of seasonal
inventory to balance
lead production times.
Unit 1
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4. Protective packaging
Unit 1
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Unit 1
24
Carrier pricing
Generally, since the larger the shipment, the
cheaper the transportation rate, shipment sizes
should be tailored to the carriers vehicle
capacity where possible.
Matching schedules
Quantity discounts should be tied to carrier
quantity discounts.
Volume relationships
Volumes sold will affect inventory
requirements.
Unit 1
25
Unit 1
Consumer packaging
Generally, since the size, shape, weight and
other physical characteristics of the product
impact on its storage, transportation and
handling, the logistics managers should be
included in any decisions regarding these
product traits.
A minor correction in any of the above could
conceivably cost (or save) millions of dollars
in logistical costs.
Logistics costs are not necessarily
paramount, but they need to be considered
in the decision making process.
Strategic Logistics Management
26
Unit 1
27
Wholesalers
Generally, since wholesalers are combining
purchases for multiple retailers, the shipment
sizes tend to be larger and the number of
transactions that have to be processed are
fewer, with the result that logistics costs are
smaller.
Retailers
With the exception of very large retailers who
act more like wholesalers, smaller sales are the
norm. These generally cost more for
transportation and order processing.
Unit 1
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Unit 1
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Session 1 Summing Up
End of Session 1
Unit 1
30
Sources of Competitive
Advantage
Entry Barriers
Economies of scale
Proprietary product differences
Brand identity
Switching costs
Capital requirements
Access to distribution
Absolute cost advantages
Proprietary learning curve
Access to necessary inputs
Proprietary low-cost product design
Government policy
Expected retaliation
Suppliers
New Entrants
Threat of
New Entrants
Industry
Competitors
Bargaining Power
of Suppliers
Intensity
of Rivalry
Determinants of Supplier Power
Differentiation of inputs
Switching costs of suppliers and firms in the industry
Presence of substitute inputs
Supplier concentration
Importance of volume to supplier
Cost relative to total purchases in the industry
Impact of inputs on cost or differentiation
Threat of forward integration relative to threat of
backward integration by firms in the industry
Threat of
Substitutes
Substitutes
Unit 1
Rivalry Determinants
Industry growth
Fixed (or storage) costs / value added
Intermittent overcapacity
Product differences
Brand identity
Switching costs
Concentration and balance
Informational complexity
Diversity of competitors
Corporate stakes
Exit barriers
Bargaining Power
of Buyers
Buyers
Price Sensitivity
Price/total purchases
Product differences
Brand identity
Impact on quality/
performance
Buyer profits
Decision makers
incentives
31
Sources of Competitive
Advantage
new technologies
Non-availability of Wood
Unit 1
32
Service Benefits
Availability
Operational Performance
Speed, Consistency, Malfunction and Recovery
Time
Service Reliability
Quality Aspect by standards and monitoring
Manpower, Software, Training, Continuous
Improvement,
Unit 1
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Cost Minimization
Least Total Cost Concept
Airfreight, Air Travel,
Unit 1
34
What is logistics
Competitive
advantage and the
CUSTOMER
3Cs
Needs seeking benefits
At acceptable prices
VALUE
VALUE
Assets and
Utilisation
Assets and
Utilisation
COMPANY
Cost differentials
COMPETITOR
Productivity advantage
1.
2.
Productivity advantage
Value advantage
Customers dont buy products, they
buy benefits, these benefits may be
intangible (image or reputation)
In other words
Products are purchased for the promise
of what they will deliver.
Value advantage
Adding value through differentiation
is a powerful means of achieving a
defensible advantage in the market.
But How it could be achieved?
1.
Value segments approach
2.
Services augmented offers
Gaining competitive
advantage through logistics
Gaining competitive
advantage through logistics
Margin
Gaining competitive
advantage through logistics
Gaining competitive
advantage through logistics
Productivity advantage:
Capacity utilization, inventory
reduction, closer integration with
suppliers.
Value advantage:
Superior customer services
Gaining competitive
advantage through logistics
Firm VC
Channel VC
Buyer VC
Fundamentals of supply
chain management
1.
2.
3.
4.
We covered so far
Definition of logistics
Logistics and competitive advantage
(Productivity and Value advantage)
Competitive advantage and value chain
management
The mission of logistics management
The supply chain and competitive
advantage
The changing logistics environment
The challenge of logistics management
Activities
1.
2.
3.