GIMPA-CILT Logistics and Competitive Advantage

By Charles K. Ansah ansahck@yahoo.com

Objective of the lesson

Explain the concept of Competitive Advantage Identify the symptoms of inefficient logistics management State and explain the Strategies available for achieving competitive advantages Identify the Benefit of effective logistics management

Competive Advantage
In the words of Michael Porter, Competitive advantage is the creation and substaining superior performance in the configuration of the supply chain

- Competitive Advantage is simply meeting end-customer demand through supplying what is needed in the form it is needed,when it is needed, at a competitive cost.
- Competitive advantage is more of ability of a firm to distinquish itself in the eyes of the customers from its competitors and operating at a lower cost-hence greater profit - Effective logistics and supply chain management is capable of producing competitive advange - In logistics setting competitive advantage is usually understood from quality, time ,flexibility, reliability and cost.

Logistics and Competitive Advantage

High Value Advantage Commodity market Low Cost leader High Service Leader Cost and Service leader

Low

Cost Advantage

Gaining Competitive Advantage

Value Advantage.
The goal: Superior Customer Value at less cost

Logistics Leveage opportunities: -Tailor services -Reliability -Responsiveness

Cost Advantage Logistics leverage opportunities: -capacity utilization -Asset turn over -synchronous supply

Value Chain
Competitive Advantage cannot be understood by looking at firm as a whole. It sterms from number of activities a firm perform in designing,producing, marketing, delivering and supporting its product Each of these activities contribute to cost position and service performance Value Chain looks at individual activities strategic relevant from service and cost point of view. A firm gain competitive advantage by perform strategic important activities more cheaply or better than its competitors

Symptoms of inefficient logistics Management

A System which produces defects A System which encourages execessive Inventories A System which produces poor customer to customer lead time A System which lacks the speed or the quick response and flexibility to meet the needs of the customers A system which does not encourages cooperation between the buyer and the supplier

Strategies Available for Achieving Competitive Advantage

DISTRIBUTION NETWORK CONFIGURATION. - Inventroy control - It facilitates transport - Closer to customers for better service level .INVENTORY CONTROL -Historical data to predict demand(Demand forecast) -Reduce holding cost .SUPPLY CONTRACT. -Specify pricing and Volume discount -Delivery lead time -Quality -Return

Strategies Available for Achieving Competitive Advantage -continuation

DISTRIBUTION STRATEGIES -Stockless depot-cross-dock point Supply Chain in Integration and Strategic Partnering -Information Sharing -Joint technology development -Huge Investment to serve as a barrier Outsourcing and Procurement Strategies --Deciding on internal integration or external(outsource) -Core Competencies -Private or Public internet in procurement activities

Strategies Available for Achieving Competitive Advantage -continuation

Product Design -Postpondment - Customization Information Technology and Decision Support Systems. -Electronic Commerce -ERP Customer Value -Relationship experience

Benefit of Effective Logistics Management

Service Benefit:

-Availability Having inventory to consistantly meet customer material or product requirement -High operational performace- it has to with delivery speed and consistancy in meeting customers order -Flexibility ability to satisfy customers unsual orders -Service Reliability-it involves the quality attributes of logistics. there is no room for stock out Cost Minimization Benefit: - Reduction in Inventory holding and warehousing cost - Reduction in functional cost such as transport cost

Question
You have been made a Supply Chain/ Logistics Supervisor your organization. Management want you to educate your team on the Concept of Competitive Advantage,and indicate three significant ways to achieve competitive advantage in logistics.