Introduction
The logistics strategy is an essential component of an organization’s overall strategy or corporate strategy. Logistics strategy planning is a comprehensive and integrated process to achieve an organization’s competitive advantage through increased value and customer service. As a result of this process, a higher level of customer satisfaction is achieved by predicting future demand for goods and logistics services and managing resources throughout the supply chain. The formation of a logistics strategy is carried out, considering the goals and plans of the enterprise.
Logistics Value
The logistics strategy is built based on the organization’s plan and the logistics mission. It shows how a higher-level system can be implemented. Thus, the effectiveness of the logistics is assessed by those parameters incorporated into the organization’s overall strategy. To form a logistics strategy, it is crucial to understand the customers and the uncertainty in the supply chain. For a better understanding of consumers, segmentation is performed.
It should be borne in mind that when developing a logistics strategy, segmentation mustn’t be exclusively marketing; it should be applicable in logistics. For example, consumers can be divided into groups depending on the waiting time for an order, sensitivity to the cost of service, or other significant logistics characteristics. Uncertainty is also an essential factor influencing logistics strategy. So, in case of high uncertainty, it is necessary to provide for reserve capacities, reserves and their location, and time budget. In addition, in the event of uncertainty, much attention is paid to working out the interaction and coordination of partners in the supply chain.
Logistics is essential for every organization, including those that provide intangible services. This strategy involves major decisions with clear strategic impact, as in supply network design, infrastructure sizing, location, relationships with other organizations, partnerships, and alliances. It refers to large consumers of resources, including transport and storage purposes; it affects the organization’s performance, including profit, and the financial indicator of the return on assets. Logistics involves the lead time, perceived value of products, reliability, and other customer service parameters. It is often used to judge the company’s activities as a whole, i.e. it works on how the public perceives the company. This function is closely related to safety and environmental issues, stimulates the implementation of some operations, and, conversely, prohibits some others.
For many organizations, recognizing that logistics has a strategic impact has become one of the most important ideas to emerge in recent years. This idea has changed the way companies manage their supply chain and take logistics more fully into account when making other strategic decisions. Logistics is now playing a new, more prominent role and receiving the same management attention as other vital functions.
Top-level managers make decisions based on the broadest possible information, reflecting the entire business situation. The recognition that logistics has a long-term impact on overall performance is becoming more and more widespread, and logistics, which previously received little attention, is now at the center of the decision-making process (Bayarçelik & Doyduk, 2020). The logistics strategy is determined by all long-term solutions related to logistics. This organization’s system consists of all the strategic decisions, techniques, plans, and culture associated with supply chain management.
Organizations can only continue to operate if they supply products that consumers feel are superior to competitors. Logistics affect lead times, product availability, cost, customer support, damage, and more. Thus, the strategy on how consumers generally perceive the product of a particular organization. In this sense, logistics contributes to the design, characteristics, perceived value of the product, and degree of its success. Traditional marketing assumes that the competitive basis of different companies is based on the four Ps (product, promotion, place, price). In this case, logistics plays several roles at once: “product,” where logistics contributes to the overall package. In the part of “place,” logistics delivers material resources and “prices,” where the strategy affects transaction costs. A logistics strategy can better emphasize all of these characteristics.
However, suppose logistics in business is viewed from a broader approach. In that case, it should be borne in mind that consumers are interested in many more characteristics. These features include costs, quality, service level, reliability, availability, flexibility, delivery speed, placement, work with sources of materials (sourcing), supplier relationships, environmental impacts, waste recycling, and several other aspects (Carbone et al., 2017). These details depend on logistics and must be considered when developing a strategy. Therefore, in different circumstances, almost any part of logistics can be important for customer satisfaction, which becomes associated with implementing a logistics strategy. In practice, the logistics strategy should reflect the following directions.
One of the main areas that logistics should reflect is costs. Most organizations want low costs, although only a few adopt a strategy to minimize costs. Its implementation leads to higher profits, the organization’s benefits, and lower prices that are beneficial to consumers. Moreover, the strategy should reflect such a critical area as customer service. Logistics controls the volume of inventory, delivery time of products, the speed of response to customer requests, and other service characteristics. By channeling a strategy towards serving customers, organizations can achieve sustainable and long-term competitive advantage.
Logistics allows an organization to adjust the timing of production and delivery to customers. Consumers usually want to receive the ordered products as early as possible. Thus, mainly the logistics strategy guarantees fast delivery to meet the buyer’s needs. Timeliness also means that new products are quickly delivered or delivered by the time specified by the customer. When building logistics strategies, it is essential to consider such a parameter as quality. Consumers demand higher quality in all types of products in the company. Typically, a logistics strategy guarantees high-quality services, although it may be challenging to articulate what exactly is meant by âhigh-quality logistics.â
For costumers, and therefore for the organization, the flexibility of the offered products is essential. Companies can manufacture products to meet the requirements of an individual consumer (Azmi et al., 2017). The logistics strategy can be based on the provision of specialized services or services tailored to the needs of a particular purchaser. The approach also considers and regulates the flexibility of the volume of products offered. The changing level of business activity can cause severe problems for logistics services, which can be seen in any major city in the morning hours when traffic jams on many roads occur. The flexibility of the scope of the offered product allows the organization to respond quickly to changing levels of demand.
Logistics strategies are necessary for the company as technology is in charge. Logistics uses a wide range of technologies, applying them for communications, cargo tracking, package sorting, product identification, stock tracking, etc. Some organizations are adopting a strategy to develop and use state-of-the-art technology. Moreover, logistics are necessary for the organization’s location, points of issue, and delivery. Consumers generally want products to be delivered as close to them as possible. For example, it is beneficial for a wholesale buyer to have a regional logistics center near large cities. One of the logistics strategies is based on the fact that it is better to consistently provide services located in the most advantageous place, for example, at bus stations in city centers.
The main challenge for organizations is to do everything as best as possible with low costs, good customer service, fast delivery, flexibility, high technology, and more. In practice, however, this is impossible, so trade-offs have to be made, balancing the level of services with the cost of providing them. Ultimately, organizations choose one or another direction for their logistics strategy, showing which factor they consider most important for themselves.
Each organization develops its own logistics strategy, but they often work in much the same way. Michael Porter has suggested two basic approaches to deliver in the first place. The first is cost management, i.e., cheaper production of the same or comparable products (Anca, 2019). The second strategy is product differentiation, i.e., releasing products that consumers cannot obtain from other suppliers. In logistics, these two approaches are commonly referred to as “lean” and “dynamic” strategies. Lean logistics organizations aim to reduce costs, and those who prefer dynamic logistics primarily seek to achieve a higher level of customer satisfaction.
The goal of lean logistics is to perform each operation using less of each type of resource: people, space, inventory, equipment, time, etc. To do this, an efficient flow of resources is organized to eliminate waste, ensure the shortest lead times, and minimize inventory and overall costs (VidrovĂĄ et al., 2019). Lean strategy tries to find ways to eliminate wasted resources. The most typical approach for this is to analyze the current operations in detail and then eliminate non-value-added processes, eliminate stoppages, simplify movement, and reduce complexity. This strategy is characterized by using better technology to increase efficiency, looking for opportunities to achieve economies of scale, placing capacity closer to customers to save on transportation, and removing unnecessary links from the supply chain.
A dynamic strategy aims to provide high-quality customer service, responding quickly to new or changing conditions. The central aspect of the strategy is the speed of response to external conditions; dynamic organizations closely and continuously monitor customer requests and respond quickly to their changes. The second aspect is the ability to adjust logistics characteristics to suit the needs of individual consumers. Of course, there are different aspects of customer service, and first of all, the level of satisfaction of the end customers should be considered, even if this has to be charged a higher price. Organizations with a strong focus on customer satisfaction are said to be customer-focused. The rationale behind this strategy is clear – the importance of having satisfied customers. Without consumers, organizations will have no sales, no profit, no business, and the organization itself.
Conclusion
A logistics strategy should be developed with constant mindfulness of the goals set in the higher-level process, the strengths of the organization, and the environment in which the business is conducted. There is no single âbestâ strategy that applies equally to all situations. Although there are some recommendations, there is no single, standard method for developing a logistics strategy. Managers need to analyze and balance several factors before making a decision.
References
Anca, V. (2019). Logistics and supply chain management: An Overview. Studies in Business & Economics, 14(2). pp. 206-215.
Azmi, I., Hamid, N. A., Hussin, M. N. M., & Ibrahim, N. I. (2017). Logistics and supply chain management: The importance of integration for business processes. Journal of emerging economies and Islamic Research, 5(4). pp. 73-80. Web.
Bayarçelik, E. B., & Doyduk, H. B. B. (2020). Digitalization of business logistics activities and future directions. In Digital Business Strategies in Blockchain Ecosystems. pp. 201-238.
Carbone, V., Rouquet, A., & Roussat, C. (2017). The rise of crowd logistics: a new way to coâcreate logistics value. Journal of Business Logistics, 38(4). pp. 238-252. Web.
VidrovĂĄ, Z., Ceniga, P., & Ĺ ukalovĂĄ, V. (2019). Business logistics and its importance in companyâs competitiveness. Business Logistics in Modern Management. pp. 3-7.