LOGISTICS & COMPETITIVE STRATEGY

Presented to: by: Dr. Alka Sharma Vipasana(40) Presented Sakshi (30)

CONTENTS

Logistics Competitive advantage Bases of success in competitive context Competitive Advantage through logistics Mission of logistics management Supply chain and competitive performance Changing logistics environment New rules of competition

LOGISTICS

Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost effective fulfillment of orders.
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COMPETITIVE ADVANTAGE & THREE Cs

Needs seeking benefits at acceptable prices Customers

Va lu e

lu va

Company

Competitor Assets & Utilization

Asset & Utilization

Cost differentials

COMPETITIVE ADVANTAGE

The source of competitive advantage is found firstly in the ability of the organization to differentiate itself, in the eyes of the customer, from its competition and secondly by operating at a lower cost and hence at greater profits.
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BASES OF SUCCESS IN COMPETITIVE CONTEXT

The most profitable competitor in any industry sector tends to be the lowest cost producer or the supplier providing a product with the greatest perceived differentiated values. Successful companies either have a productivity advantage or a value advantage or a combination of both. The productivity advantage gives a lower cost profile and the value advantage gives the product or offering a differential plus over competitive offerings.
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PRODUCTIVITY ADVANTAGE

In many industries there will typically be one competitor who is the low cost producer and has the greatest sales volume. Big is Beautiful, when it come to cost advantage. It is partly due to economies of scale which enable fixed costs to be spread over a greater volume but more particularly to the impact of the experience curve.

EXPERIENCE CURVE
Real costs per unit

Cumulative volume

VALUE ADVANTAGE

Customers dont buy products, they buy benefits Product is purchased not for itself but for the promise of what it will deliver. Companies scrutinizes markets closely to find the different value segments. Adding value through differentiation is a powerful means of achieving a defensible advantage in the market.

EXAMPLE

A model such as the Ford Mondeo is not only positioned in the middle range of European cars but within that board category specific versions are aimed at defined segments. Thus we find the basic, small engine, two-door model at one end of the spectrum and the four-door, high performance version at the other extreme.

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LOGISTICS AND COMPETITIVE ADVANTAGE

Service leader Cost & Service Leader

Value Advantage

Commodity Cost leader market

Productivity Advantage
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COMMODITY MARKET

Low productivity advantage, low value advantage. World is an uncomfortable place. The manufacturers products are indistinguishable from their competitors offering and they have no cost advantage.
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COST LEADER

High Productivity advantage, low value advantage. Cost leadership strategies have traditionally been based upon the economies of scale, gained through sales volume. The higher your share relative to your competitors, the lower your costs should be. (Experience curve) Cost advantage can be used to assume a position of price leader & if appropriate , to make it impossible for higher cost competitors to survive.

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SERVICE LEADER

High value advantage, low productivity advantage. Market have become service-sensitive. So companies seek differentiation through service excellence. Customers in all industries are seeking greater responsiveness and reliability from suppliers; they are looking for reduced lead times, just in time delivery and value added services that enable them to do a better job for serving their customers.

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COST AND SERVICE LEADER

High value advantage, high productivity advantage. Companies who occupy this position have offers that are distinctive in the value they deliver and are also cost competitive. It is a position of some strength, occupying high ground which is extremely difficult for competitors to attack. The challenge of logistics is to seek out strategies that will take the business away from the commodity end of the market towards a position of cost & service leadership.

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VALUE CHAIN
Firm Infrastructure Support Activities Human Resource Management
in rg Ma

Technology Development Procurement

Outbound Inbound Operations Logistics Logistics Marketing And Service Sales

Ma r gi n

Primary Activities
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GAINING COMPETITIVE ADVANTAGE THROUGH LOGISTICS

Value Advantage Logistics leverage Opportunities Tailored services Reliability Responsiveness, etc The goal: Superior Customer Value

Productivity Advantage Logistics leverage opportunities Capacity utilization Asset turn Co-maker ship/Schedule integration, etc
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MISSION OF LOGISTICS MANAGEMENT

The mission of logistics management is to plan and coordinate all those activities necessary to achieve desired levels of delivered service and quality at lowest possible costs. Logistics must therefore be seen as the link between the market place and the operating activity of the business. The scope of logistics span from the management of raw material through to the delivery of the final product.

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LOGISTICS MANAGEMENT PROCESS

Material Flow

Suppliers

Procurement

Operations

Distribution

Customers

Requirements information flow

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SUPPLY CHAIN

The supply chain is a network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumers. A network of connected and interdependent organizations mutually and cooperatively working together to control, manage and improve the flow of materials and information from the suppliers to the end users.

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ACHIEVING AN INTEGRATED SUPPLY CHAIN

Stage 1: Baseline Material flow Purchasing Material control Production Customer Service Sales Distribution

Stage 2: Functional integration Material flow Materials Management Manufacturing Management Customer Service Distribution

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ACHIEVING AN INTEGRATED SUPPLY CHAIN

Stage 3: Internal Integration Material flow Material Management Manufacturing Management Customer Service Distribution

Stage 4: External Integration Material flow Suppliers Internal Supply Chain Customer Service Customers

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SUPPLY CHAIN MANAGEMENT

It is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole. The focus is upon the management of relationships in order to achieve a more profitable outcome for all parties in the chain.

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CHANGING LOGISTICS ENVIRONMENT

Changing environment is bringing with it a number of challenges in the area of logistics. Some of these are:

The customer service explosion Time compression Globalization of industry Organizational integration
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CUSTOMER SERVICE EXPLOSION

Customer service may be defined as the consistent provision of time and place utility. Products dont have value until they are in the hands of the customer at the time and place required. Customer service should be to enhance valuein-use, meaning that the product becomes worth more in the eyes of the customer because service has added value to the core product.

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CUSTOMER SERVICE EXPLOSION

EXAMPLE:

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TIME COMPRESSION

Product life cycles are shorter than ever, industrial customers and distributors require just-intime deliveries, and end users are even more willing to accept a substitute product if their first choice is not instantly available. Another issue is of the extended lead time.
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GLOBALISATION OF INDUSTRY

The global company seeks to achieve competitive advantage by identifying world markets for its product and then developing a manufacturing & logistics strategy to support its marketing strategy. Example: Caterpillar has dispersed assembly operations to key overseas markets and uses global logistics channels to supply parts to offshore assembly plants and after markets.

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GLOBALISATION OF INDUSTRY

The challenge to a global company is how to achieve the cost advantage of standardization whilst catering for the local demand for variety. Whirlpool is responding to this challenge by seeking to standardized on parts, components and modules and then, through flexible manufacturing and logistics, to provide the specific products demanded by each market.

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ORGANISATIONAL INTEGRATION

To achieve a position of sustainable competitive advantage, tomorrows organizations will be faced with the need to dispense with outmoded labels like marketing manager, or production manager. Instead we require broad-based integrators who are oriented towards the achievement of marketplace success base upon managing processes and people that deliver services.

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NEW RULES OF COMPETITION

Strategies focus upon seeking innovative ways to create more value for the customers. These strategies will be vertical rather than horizontal in the organisation, will seek to do more for fewer customers rather than looking for more customers to whom to sell.

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NEW RULES OF COMPETITION

Transition from volume-based growth to value-base growth. Competition model in the past relied heavily on the product innovation but there is an increasing shift towards process innovation.

tive Advantage=Product Excellence*Process Ex

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NEW RULES OF COMPETITION

100

Product Excellence (%)

Revised Emphasis

Current Emphasis

Process Excellence (%)

100

Investing in process excellence yields greater benefits

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IMPLICATION OF NEW RULES

Responsiveness

Ability to respond to customers requirement in shorter time frames has become critical. Agility- move quickly &to meet customer demand sooner. Organisations must be more demand driven than forecast driven.

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IMPLICATION OF NEW RULES

Reliability

A key to improving reliability in logistics processes is enhanced pipeline visibility.

Relationships

More companies are discovering the advantage that can be gained by seeking mutually beneficial, longterm relationship with suppliers. From suppliers point of view, such partnership can prove a formidable barrier to entry for competitors.

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CONCLUSION

Companies are now seeking to create more value in their product by product and process excellence. They are trying to create more value in their product so as to retain and create new customer. With the concept of logistics and supply chain the suppliers too are becoming a part of the organizations, which are now in a better position to cater to the needs of customers in shortest possible lead time.
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