Logistics, Supply Chain and Competitive Strategy

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Logistics and supply chain management are not new ideas. From the building of the pyramids to the relief of hunger in Africa, the principles underpinning the effective flow of materials and information to meet the requirements of customers have altered little.

Throughout the history of mankind wars have been won and lost through logistics strengths and capabilities – or the lack of them. It has been argued that the defeat of the British in the American War of Independence can largely be attributed to logistics failure. The British Army in America depended almost entirely upon Britain for supplies. At the height of the war there were 12,000 troops overseas and for the most part they had not only to be equipped, but fed from Britain. For the first six years of the war the administration of these vital supplies was totally inadequate, affecting the course of operations and the morale of the troops. An organization capable of supplying the army was not developed until 1781 and by then it was too late.1

In the Second World War logistics also played a major role. The Allied Forces’ invasion of Europe was a highly skilled exercise in logistics, as was the defeat of Rommel in the desert. Rommel himself once said that ‘… before the fighting proper, the battle is won or lost by quartermasters’. However, whilst the Generals and

Field Marshals from the earliest
times have understood the critical
role of logistics, strangely it is only in
the recent past that business organizations
have come to recognize the
vital impact that logistics management
can have in the achievement of
competitive advantage. Partly this lack of recognition springs from the relatively low level of understanding of the benefits of integrated logistics. As early as 1915, Arch Shaw pointed out that:

1 LOGISTICS, THE SUPPLY CHAIN AND COMPETITIVE STRATEGY
3
It is only in the recent past that
business organizations have
come to recognize the vital impact
that logistics management can
have in the achievement of
competitive advantage.
The relations between the activities of demand creation and physical supply … illustrate the existence of the two principles of interdependence and balance. Failure to co-ordinate any one of these activities with its group-fellows and also with those in the other group, or undue emphasis or outlay put upon any one of these activities, is certain to upset the equilibrium of forces which means efficient distribution.

… The physical distribution of the goods is a problem distinct from the creation of demand … Not a few worthy failures in distribution campaigns have been due to such a lack of co-ordination between demand creation and physical supply …

Instead of being a subsequent problem, this question of supply must be met and answered before the work of distribution begins.2
It is paradoxical that it has taken almost 100 years for these basic principles of logistics management to be widely accepted.
What is logistics management in the sense that it is understood today? There are many ways of defining logistics but the underlying concept might be defined as:
Logistics is the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfilment of orders. This basic definition will be extended and developed as the book progresses, but it makes an adequate starting point.

Supply chain management is a wider concept than logistics
Logistics is essentially a planning orientation and framework that seeks to create a single plan for the flow of product and information through a business. Supply chain management builds upon this framework and seeks to achieve linkage and co-ordination between the processes of other entities in the pipeline, i.e. suppliers and customers, and the organization...
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