Strategic Logistics Planning

Compiled by Rulzion Rattray

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 Strategic Logistics Planning
• Understand & assess the macro
environment.
• Analyse & understand the internal
capabilities.
• Combines these to set objectives in
consultation & with the support of major
elements of the organisation

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 The Resource Environment
The Value Chain Michael Porter (1985)
Firm’s Infrastructure

Secondary Human Resource Management

Activities Technology Development

Procurement

Outbound
Inbound Operations Marketing Service
Logistics
Logistics & Sales

Primary Activities

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 Overview
External Factors Organisational
•Social
•Ecological Strategic Plan
•Political
•Technological
•Economic

Manufacturing Marketing

Physical Distribution Finance

Adapted from Capacito, W., &
Rosenfield, D.B., (1984), Logistics
“Analytical Tools for
Strategic Planning”, 15(3),
pp47-61, Council of Logistics
Management USA.
Functional Strategic Plans
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 Key Issues in Logistics Planning
• Customer Service:
– Demand for improved service, quality a major element
in competitive advantage
• Logistics costs:
– Physical distribution, up to 30% of sales value
• External pressures
– Regulatory change pressures, competitive pressures of
globalisation
• Trade offs:
– Response to change requires complex adjustment.
• Organisational conflicts:
– Often no clear responsibility for logistics
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 Strategic Logistics Planning
Business goals & strategies
Quality of Individual
link of logistics system
Customer service requirements
1. Facility location
2. Operations strategy
3. Inventory management
4. Information systems Integrating logistics planning
5. Material handling
6. Traffic & transportation
7. Planning & control Design of integrated logistics
8. Organisation management system

Overall performance
Adapted from Capacito, W., & Rosenfield,
D.B., (1984), “Analytical Tools for
Strategic Planning”, 15(3), pp47-61,
Council of Logistics Management USA.
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 Pressures Influencing System
New customer Changing costs
Service requirements

Pressure for
financial
Logistics performance
Regulatory
System
change

Constantly improving Pressure to

IT availability reduce inventory
Adapted from Capacito, W., & Rosenfield, Requirement for
D.B., (1984), “Analytical Tools for
Strategic Planning”, 15(3), pp47-61,
Council of Logistics Management USA.
innovation and efficiency 7
 Conflicts of Interest
Sales & High revenue through:
Marketing  High levels of Higher
Customer
availability Service
Lower
 Rapid introduction
of new products

Cost effective production:

Production
More Disrupting
 High constant capacity
utilisation factors in
Fewer production
 Longer production runs,
Fewer set up costs

Tight budgets for: Higher

Finance
& Control  Stocks Stocks
Lower
 Cost

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Adapted from Capacito, W., & Rosenfield, D.B., (1984), “Analytical Tools for Strategic Planning”, 15(3), pp47-61, Council of Logistics Management USA.
 Analytical Methods
• Decisions support systems
– Advantage of quick analysis, & can incorporate
the complex trade offs.
• Logistics cost analysis by:
– Channel, Product, type of customer, geographic
area, logistics function, etc.
• Use of simulations:
– What if simulations, (I.think)
– Optimisation

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 Shapiro Grid framework
Breadth of product line

Cost Service Curves Narrow Broad

Decentralised
Logistics Inventory
costs

Service costs Centralised

or Delivery Time, etc Inventory

• Elbows create concentration

• away from elbow large increases
in delivery time and only • Service consists of a range
moderate decrease in costs of dimensions
• Straight steep curves
variation and niches
• A basis for competitor
• more room for differentiators comparison on two
dimensions
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 References
• Capacito, W., & Rosenfield, D.B., (1984), “Analytical Tools for
Strategic Planning”, 15(3), pp47-61, Council of Logistics
Management USA.
• Christopher, M., (1995), “Logistics the Strategic Issues”, Chapman
Hall, London.
• Aitken, J., “Supply Chain Integration within the Context of a Supplier
Association”, Cranfield University PHD Thesis, 1998. Cited in
Christopher, M., (1998), “Logistics and Supply Chain Management.
Strategies for Reducing Cost and Improving Service”, Financial Times
Pitman Publishing, London.

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Managing the Global Pipeline

Compiled by Rulzion Rattray

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 The Globalisation of Markets.
Levitt, T. (1983).

• Advances in Technology Driving the

world to a converging commonality.
– Proletarianisation of:
• Communication, transport, travel
• Global corporations which operate with
resolute consistency at low relative cost
using the entire world as a single
market.
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 Trade Offs in Global Logistics

Transport
Costs Source to User

Inventory
Material
Production

Localised Global

• Important to recognise trade offs.

• Key to recognise the service needs of
the market
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 Globalisation in Supply Chains
• Liberalisation effect of WTO, etc.
– No longer have to set up in target country, instead
can concentrate on developing economies of scale.
– Emergence of new manufacturing economies has
resulted in increased competition and oversupply.
– Companies will have to find new ways of
remaining competitive by lowering costs in other
ways.
• Supply chain efficiency will become even
more important
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 The Myth of Globalisation.
Susan Douglas & Yoram Wind.

• Attacks Levitt's view of global standardisation as naive

and over simplistic. Homogenisation not a clear &
universal trend.
• Contra Evidence of
homogenisation:
– Food firms adapt to national
characteristics.
– Growth of intra-country
segmentation:
– growing demand for
differentiated products.
• The myth of economies
of scale:
– Technical developments
lowering scale
requirements.
– cost of production often
only small part of total
costs.

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 Global Manufacture & Supply
• Focussed factories:
– Economies of scale, one factory for the world?
– May overlook crucial logistics trade offs:
• Transport costs & delivery times.
• Requirement for local packaging
• Centralised Inventories:
– Centralising Inventory = less total inventory.
Square root rule 25 to 4 5:2 i.e. 60% reduction
Christopher, M., (1998),
– However may overlook benefit of local to
customer 17
 Postponement & Localisation
• Localisation:
– Even in relatively homogeneous markets like
Europe their can be considerable variety of
local taste. This may be better catered for in a
local assembly operation.
• Postponement:
– Design products using simple common
platforms, using common components.
Assembly does not take place until required.

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 Customer Service Explosion
• Increasing perception that there is little
technical difference between products.
• Service crucial source of differentiation and
competitive advantage.
– Requirements:
• Closely integrated marketing, manufacturing and
supply strategies
• Logistics of service delivery crucial!
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Strategic Lead time Management
• Product and technology life cycles getting
shorter.
• Requirements for success:
– Ability to innovate.
– Ability to bring new products to market.
• Logistical Lead time becomes crucial.
– Time from sourcing and procurement though to
recovery of investment by selling

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 Organisational Integration
• Recognition of the importance of taking a systems
view of business.
– Difficulty of achieving integration in functionally fixated
organisations.
• Move towards a requirement for generalists
– Integration of all the different aspects of the organisation.
– Philosophy of integration beyond the confines of the
organisation.
• Supply Chain Management.
– Requires that all the players in the value system work
together.
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 Throughput Management
• The process of linking manufacturing and
procurement to the needs of the market.
• Requirement for reducing the length of the
supply chain pipeline!
• Target:
– Lower cost, higher quality, greater variety,
more flexibility, faster response times.

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 Globalisation
• Move to commodity markets and component
specialisation:
– firms shop freely amongst the nations of the world
• Singer Sewing machines: Shells from US, motors from
Brazil, drive shafts from Italy, machine assembled in
Taiwan
– Increasing need for local customisation
• Washing machines: Germans want fast spin & Italians
slow, British front loaders, French top loaders, etc
– Challenge how to achieve benefit of standardisation
at the same time?
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 References
• Christopher, M., (1998), “Logistics and Supply
Chain Management. Strategies for Reducing Cost
and Improving Service”, Financial Times Pitman
Publishing, London
• Levitt, T. (1983), “The Globalisation of Markets”,
Harvard Business Review May/Jun.
• Douglas, S., & Wind, Y., (1987), “The Myth of
Globalisation”, Columbia Journal of World
Business, Winter.
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