Logistic strategy is a direction of logistics, which is a quality and long-term direction. This direction concerns the forms and means of logistics in the company, which is formulated by the senior management of the company. Formation takes place in accordance with the goals that are set for the entire company. The strategy describes a fundamental course of action that should be followed in order to achieve the goals.
General description of the concept
A logistics strategy (like any other) has goals. In this case, the goals depend on what profile and type of activity the company adheres to, on the level of economic development of the office. When developing goals, it is also important to consider the quality of providing the enterprise with information and material resources. An important role is played by the level of staff training. For example, the goal of a trading company’s logistics strategy may be the introduction of new approaches, innovative ideas, forecasting future consumer demand and the ability to satisfy it. As for other manufacturing companies, to the goals that have already been listed, you can also add such as providing high-quality logistics services.
It is worth noting that there are a huge number of logistic strategies that enterprises and firms can use. However, it is worth highlighting several basic areas that are the basis for the development of other, more narrowly targeted strategies.
Main directions
The first main type of logistics strategy is called minimizing logistics costs. To implement this direction, you must follow the following rules:
- It is necessary to start reducing logistics costs in individual logistics functions.
- The second step is to properly optimize inventory levels in the logistics system.
- The third step is the selection of the best option, for example, warehousing - delivery. The bottom line is to change the main logistics direction to a secondary one.
- Another way to implement this basic strategy is to optimize solutions in specific areas of operation. Optimization is carried out on the basis of the principle of minimum costs of the logistic type.
- If this strategy is chosen, then another way to implement it is the 3PL approach. The use of this technology suggests that the company will provide a range of logistics services that will begin from the delivery of goods and address storage to the management of these orders, as well as the provision of tracking services for the delivered goods. If the company is a 3PL-provider, then it is engaged in all types of services that relate to transportation, cargo tracking, work with documentation, and so on.
The second main type of logistics strategy is improving service quality. To implement this strategy, there are several methods that you can use:
- Significant improvement in the quality of all logistics operations that the company provides.
- Another development path is support for pre-sales and after-sales services.
- The provision of value-added services.
- Logistics technology must be used to support the product life cycle.
- It is necessary to create a system that will manage the quality of the logistics service.
- It is also possible to use benchmarking and other areas.
Another major logistics strategy is to minimize investment in logistics infrastructure. To implement this method, you must adhere to the following principles:
- Optimize the configuration of the logistics structure: it is possible to set up direct delivery of goods to consumers in order to bypass the storage phase.
- If there is such an opportunity, then it is worth using general-purpose warehouses.
- You can use logistics intermediaries in such types of services as transportation, warehousing and processing of existing goods.
- There is such a logistic method as "just in time." This is also one way to implement such a strategy.
- You can also optimize the location of objects included in the system structure.
Logistic outsourcing strategy is the fourth option. There are five ways to implement this strategy:
- You must make a decision to "make or buy."
- It is worth focusing your logistics capabilities on solving key operations. To solve the secondary logistics procedures, it is worth finding intermediaries.
- It is necessary to optimize the choice of the source of external resources.
- It is necessary to optimally place the existing industrial facilities, as well as all logistics infrastructure centers.
- Only innovative suppliers should be used, as well as optimizing the number of intermediaries and clearly distributing the functions that are assigned to them.
The logistics outsourcing strategy (like the other three options) is based on the fact that it is necessary to minimize or maximize the performance of one key area. For example, you can do the general logistics costs. However, this approach has a drawback, which is that it will have to introduce restrictions on the development of other indicators. If we are talking about the main logistics strategy, the purpose of which is to minimize logistics costs, then in this case you will have to sacrifice the quality of service. In simple terms, the higher the consumer requirements for the quality of service are, the higher will be the costs required to implement the required level.
What to consider when developing
When developing any type of logistics strategy, there are several factors that should be considered. For example, a comprehensive analysis of a strategy with a higher level will become the starting point for the development of any strategy. Thus, it will be possible to understand how to correctly and how to implement the strategy so that it can maximize the quality of service.
In addition, several points to consider:
- It is important to consider the environment in which business is conducted. It is also worthwhile to include those factors affecting logistics, however, which logistics itself is not able to manage.
- This includes the particular behavior of the organization, which is determined by several factors. The first of them are those that the company can manage, and the second are those that are used to make the company stand out from the rest of the others.
It is important to understand that the environment and special competence, as factors affecting logistics, are only those options that can indicate the current position of the company in the market. A higher-level strategy will indicate the position that the company will be able to take in the future if it moves along this path. In this case, the strategy will be able to show how the transition from the present situation to the future will take place.
To collect the necessary information about a particular competency, as well as about the environment in which a business is conducted, a procedure called logical audit is used. The purpose of this type of logistics strategy is to collect all the important information about the techniques, indicators and conditions in which the logistics activity is carried out. In addition, it is worth paying attention to the fact that the audit can be external and internal. The external one deals with the logistics environment, while the internal one is necessary in order to analyze the methods of performing the procedures within the organization, as well as determine which areas need improvement.
The main objectives of such a procedure are as follows:
- The first is to identify the strengths and weaknesses of logistics within the corporation.
- The second is the definition of threats that arise in the environment in which the business is conducted.
In the business environment, there is a key factor that is the type of demand. Depending on its position, the company's logistics strategy can be lean or dynamic. For example, a “skinny” strategy is best applied if the firm can predict or at least slightly predict the demand that will be on the services market in the future. A dynamic strategy is applied in conditions when the product range is very wide, when it is rather difficult to forecast demand and its type.
Another important factor that should be present in the company's logistics strategy at the design stage is the systematic preparation of solutions. They should be adopted not only at the level of senior management, but with the involvement of junior specialists. Their main task is the implementation of the strategy. It is also worth noting that when designing any strategy, it is necessary to consider the ability to implement the chosen strategy, as well as the consequences arising from its application.
Steps to Develop a Strategy
Today there are some basic steps that should be used when developing a logistics strategy:
- During the development of the strategy, emphasis should be placed on those logistic areas of activity that are capable of enhancing the competitiveness of the enterprise in the long run.
- Do not change your strategy often to get short-term benefits. Such a move will lead only to small fleeting improvements and nothing more.
- Care must be taken to adopt strategies that are considered tough. Rigid strategies may become obsolete, making it impossible for the enterprise to maneuver in the future.
- During the development of a logistics strategy, it is necessary to avoid those that can lead to success only if the most optimistic forecast works. It is necessary to be guided by the fact that competitors are able to take any measures that may lead to unfavorable market conditions for the company.
- Own strategy must be developed in such a way that it can harm the weaknesses of competitors.
Stages of company development and strategy formation
You need to understand that strategy is a thing that is almost individual and unique for each company. However, it must be added that there are stages in the development of a logistics strategy that any company will have to go through.
The first step is network configuration. At this stage, it is necessary to determine the structure, goals, quantity and quality of the composition of the links in the logistics chain. The second stage is the development of the organizational system of the network. In this case, it is necessary to determine the variant of the department structure that will be applied. In addition, it is necessary to resolve the issue of reengineering if necessary. This is an essential element of the strategy.
Next, you need to attend to the development of areas and technologies for coordinating the strategy. Currently, management involves the development of two areas - it is interorganizational and interfunctional. This is followed by the stage of determining strategic requirements for product quality, as well as logistic consumer service. Today, the essence of the logistics strategy in the field of product promotion is that it is fully customer-oriented. In this case, logistics requires a clear formation of the quality levels of this service. In the future, all these levels will turn into a full-fledged system of planned indicators. These indicators should be further monitored and maintained by the personnel responsible for logistics management. The main goal at this stage, which should be pursued by the employees of the logical center, is to minimize implementation costs, but at the same time maintaining the quality of service that the strategy requires.
One of the last steps was the process of integrating an inventory management system. This element has already become traditional, as it is present in absolutely any strategy, that is, in any enterprise. The last step is to choose a logistics system. This stage is one of the most important, and its main task is to develop and select an information network that can connect all the information and telecommunication links of one network.
Plan and sections of the strategy
Logistic strategy planning (as well as its development) do not have a universal method. The strategy consists of a number of factors. The general idea of developing a logistics plan contains several sections:
- The first stage is the preparation of a general summary, which sets out the exact essence of the future strategy, and also shows how it will interact with other departments of the enterprise.
- The second step is a description of the goal of logistics in the organization itself, as well as ways to measure the quality of its work and performance indicators.
- The next point should include a description of the activities that can lead to the achievement of the goals set for the company. It is also necessary to consider the options by which these goals and changes will be managed.
- The following should describe how individual logistics functions in the future will make a certain contribution to achieving their goals.
- It is important to draw up a plan that will take into account all the resources necessary for its implementation.
- It is also necessary to have a plan for planned costs and for selected financial indicators.
- The last point is a description of how the chosen logistics strategy will affect future business development. It is also very important to consider what contribution the selected development can make to improving the service and satisfying consumer demand.
Logistics Analysis
It is important to understand that, on the one hand, an enterprise is considered as part of a more developed system, that is, at the regional or national level. On the other hand, the company is also considered as a separate independent economic system. For these reasons, the concept of logical strategy and its formation is carried out on the basis of such factors as analysis of the external and internal environment of logistics.
The external environment of logistics is a combination of all factors, forces and entities that are located outside the boundaries of a particular company, but at the same time they can affect the functioning of the logistics of the enterprise. The influence of such an environment on the implementation of the strategy is irregular and not direct. External uncontrolled factors may include, for example, consumer preferences and tastes, customer habits, technological changes, the influence of competitors and other factors. All of them must be taken into account when planning a logistics strategy. In this case, the plan should be focused on maximally satisfying consumer demand, determining the possible influence of competitors, evaluating relations with various government departments, monitoring the state of the economy, etc.
It is also worth noting that the external environment of logistics will change over time, will change the components that make up its composition, as well as their relationships, their preservation between them during operation. It is also worth noting that it is impossible to cover and take into account all the factors that have a certain effect. You can only arrange them on the basis of a certain classification of logistics factors. However, it must be understood that these factors will be rather heterogeneous, since all of them will arise as a result of the interaction of systems of very different levels.
There is also an internal company logistics environment. The analysis of the logistics strategy in this case consists in studying a set of factors that can be controlled by senior management, as well as by employees of functional units.
Description of the internal logistics environment
Such indicators as, for example, capital, technologies, means of production, personnel, management system and so on can be attributed to the internal logistics environment. When examining the internal structure, it is very important to carefully consider such management actions as determining the scope of activities that management covers.
The concept of this area should include general categories of products and services.Also, as the field of activity, it is necessary to determine the territorial boundaries of logistics activities. It can be a city, region, country, and so on. It is necessary to determine the functions that will determine the position of the enterprise in this chain. The type of property is also determined. It can be either a private enterprise or a corporate one, etc. Logistic activities should have a clear focus.
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- Enterprise management bodies will be able to focus on individual logistics tasks that relate to their direction. This will provide an opportunity to assess their capabilities, as well as significance.
- It will be possible to determine the most significant factors that will help achieve the ultimate goal in this direction. It will also help to distribute all the goals according to their significance for the entire enterprise as a whole.
- There will be an opportunity to clearly determine exactly what goals it is worth focusing immediately on why. In addition, this will help determine where to invest in the first place.
- This will help identify the most problematic areas that are in the chosen strategy.
- Understanding the essence of the strategy in this case will also help to make structural changes to the logistics system.
- There will be an opportunity to achieve a balanced position in the market as a whole due to the fact that it will be possible to clearly determine the development prospects for the established main areas of the logistics activity of the enterprise.
- This will help create a solid foundation so that in the future there is an opportunity to expand the adoption of strategic decisions that will be directly related to the expansion and diversification of logistics activities.
Action examples
Examples of logistic strategies, their servicing and the impact on the development of the enterprise as a whole can be seen on held firms. For example, you can turn your attention to the company Nestle Food. This company has been represented on the Russian market since 1996. The main activity of this company is the production and sale of various food products.
The main strategic areas of this company were the following items:
- the manufacturer seeks to maintain high productivity, while spending as little resources as possible on production, but maintaining the world level of quality of its products;
- constantly developing projects that carry the idea of releasing new products;
- advanced production and information technologies are used;
- The company uses the most advanced methods to develop planning and management methods.
The key factor that makes the development of a company's logistics strategy as efficient as possible is a thorough market research. Constantly work is underway to analyze the market and the dynamics of its development, to study the relationships that arise between the company itself and its consumers. Much attention is paid to such a factor as the analysis of competitors in this area.
The main objectives of this company are the introduction of new approaches to work and solving problems, innovative ideas in strategic areas of development.
In addition, it is important to pay attention to the fact that the office is guided by three main strategies, and not one.
The main goal of the first strategy chosen is to increase the efforts made in research and development. This approach allows the company to improve its performance in the future (due to actions in the present).
The second strategy is that the company tries to use only the equipment that will satisfy market changes and will minimize the cost of production that it produces.
The last main direction is the maximum decentralization of business management in the regions. This is done in order to make it possible to get as close as possible to regional production solutions, which will be aimed at promoting brands, as well as improving customer service.
In the Russian market, this company uses a variety of ways to implement logistics strategies, market and organizational capabilities in order to maximize its separation from competitors.