Chapter 2 Competitive advantage created by logistics Chapter

Chapter 2 Competitive advantage created by logistics Chapter 11: Strategic Leadership

Competitive advantage created by logistics • Logistics linkages with the value chain • Value-added role of logistics • Customer service • Aspects of competitive advantage • Wealth creation through logistics Chapter 11: Strategic Leadership

Logistics linkages with the value chain • 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’. (CSCMP) Chapter 11: Strategic Leadership

Logistics linkages with the value chain (continued) • The point-of-origin of a supply (value) chain occurs where no primary suppliers exist – solely supporting members. • The point of consumption is where no further value is added to a product and it is consumed or used without serving as an input to another supply chain. Chapter 11: Strategic Leadership

Logistics linkages with the value chain (continued) • Flow of goods: – Raw materials – Semi-finished goods – Finished goods – Waste materials – Returned goods Chapter 11: Strategic Leadership

Logistics linkages with the value chain (continued) • Flow of services • Flow of information • Efficiency and effectiveness • Optimal level of logistics expenditure Chapter 11: Strategic Leadership

Logistics linkages with the value chain (continued) Chapter 11: Strategic Leadership

Value-added role of logistics • Form utility • Place utility • Time utility • Possession utility - All four utilities created in the supply chain process - Place and time utility created by logistics - Consumer surplus - Perceptions of value Chapter 11: Strategic Leadership

Value-added role of logistics (continued) Chapter 11: Strategic Leadership

Customer service • Components of customer service: – Pre-transaction component – Transaction component – Post-transaction component • Service performance control: – Availability • Stockout frequency • Fill rate • Orders shipped complete Chapter 11: Strategic Leadership

Customer service (continued) • Service performance control (continued) – Operational performance • Suitability • Market coverage • Goods security • Transaction time • Reliability • Flexibility – Service quality Chapter 11: Strategic Leadership

Aspects of competitive advantage Studies dealing with wealth within supply chains have indicated the following: • Enhance the competitive advantage of the entire chain (not individual members) • Create value for downstream member clients in excess of that offered by competitors • Co-operation and co-ordination • Inherent value by perceptions of customers and clients Chapter 11: Strategic Leadership

Aspects of competitive advantage (continued) • Understand customers’ value perception – different customer segments • Competitiveness of the chain improves with individual improvement. • Competitive advantage means better value to customers than competitors. • Financial performance of all the members in the supply chain is dependent on customers’ value perception of service offered. Chapter 11: Strategic Leadership

Aspects of competitive advantage (continued) Any serious quest to achieve and retain competitive advantage requires that supply chain service performance must be stated from the point of view of the customer. Chapter 11: Strategic Leadership

Critical measures • Percentage of consignments received at the correct place • Percentage of consignments received on time • Percentage of consignments received damage-free • Percentage of consignments received complete • Percentage of orders fulfilled accurately • Percentage of orders billed accurately Chapter 11: Strategic Leadership

Wealth creation through logistics • Revenue growth • Operating-cost reductions • Working-capital efficiency • Fixed-capital efficiency Chapter 11: Strategic Leadership