Logistics Essential to Strategy

As is the case for any system, as it grows so does its impact on societies and day-to-day life. The increased growth of usage of the transportation systems across all modes can change to be better suited for each society and that time period in which it is needed. This chapter explains the different types of transportation systems along with cost and effectiveness. As discussed here, the logistics of a transportation system must be considered thoroughly in order to fully comprehend its effectiveness and quality to meet the needs of a society. Logistics plays a vital role in determining the competitive advantage of the supply chain in terms of cost, customer satisfaction and market share.

Inevitable energy allocation and conservation programs will involve significantly higher costs of one sort or another. Energy-intensive activities of transportation and materials handling will represent increasingly important methods of gaining competitive advantage in costs and of improving the quality of earnings. The most effective means for obtaining such results will not be through tactical decisions such as a shift from one method of transportation to another.


If an organization’s inbound logistics management is inefficient it causes a chain reaction within their outbound logistics processes and eventually disrupts the entire supply chain. Is a vital and essential function for all types of organizations, while only recently its importance in the rationalization and efficiency of economic and production processes have been acknowledged in Greece. Greece’s financial crisis that followed the world economic crisis of 2008–09 led to high unemployment rates, decreased investments, and decreased demand for services and products. In this context, companies had to pay closer attention to their costs, functions, and performance to ensure that they will survive. Both public and private entities invested in optimizing their operations through logistics and supply chain management techniques. Fierce competition in today’s market has forced business enterprises to invest in and focus on supply chains.

Inventory management:

Demand forecasting supports expansion by realistically calculating inventory needs and ordering, transporting and stocking accordingly. Further, logistics management best practices help companies scale to fulfill more customer orders on time. Its survey revealed that end-users perceived no significant differences in the levels of service delivered by the two systems. Puzzled by these results, the study team decided to investigate comparative dealer practices as well. This investigation revealed that its competitors’ dealers had come to rely on the company’s excellent system so heavily that they had reduced their inventories of spare parts below the levels required to maintain a high level of service to customers. The concerned manufacturer’s dealers, on the other hand, had experienced such poor support from their supplier that they maintained a much larger stock of parts on their premises, thus taking up the slack in the system.

Logistics for Business Defined: Importance Role & Benefits

Many of these efforts have resulted from the realization that once a delivery vehicle stops, the costs of delivery are relatively insensitive to the size of the delivery. The increased size and complexity of business operations combined with the application of problem-solving techniques and computer technology have made it possible for many companies to consider less common logistical responses to perceived competitive cost or service disadvantages. Among these are strategies that involve postponement and speculation, standardization, consolidation, and differentiation. Suppliers, manufacturers, distributors and retailers have had to improve their logistics processes to meet the demand for quicker, more convenient delivery of a wider variety of goods.

Production Logistics: Materials Management, Distribution in Factories, Product Management, Shipping

Others are willingly incurring the risks of speculation, involving the preparation of stocks in advance of need, in order to achieve economies of scale and lower the costs of production. Automobile manufacturers, for example, have pursued strategies of both postponement and speculation at different production and distribution stages. The recent emphasis on effective inventory management through wide swings in business cycles characterized by varying rates of increase in labor costs, fluctuating interest costs, and changing rates of sale. This pressure has been accompanied by the assumption on the part of management that developments in computer-oriented inventory control methods have more than kept pace with user needs—an assumption not always borne out in practice. Another new venture in which logistics plays a major role was set up by two honors students.

Those involving large weight reductions will logically be located near sources of raw materials. Those requiring large sources of inexpensive power may obtain competitive advantage by locating producing facilities near such power sources. To employ logistics as an effective competitive lever and as a significant component of strategy, management must take two actions. First, it must adapt logistics programs to support ongoing corporate strategies in the short term.

HBR Learning’s online leadership training helps you hone your skills with courses like Strategy Planning and Execution. Of the companies with representatives at the meeting already collect these data on an informal basis. Information of this type is important in responding to the next two questions.

It represents a way in which the “80/20” relationship can be used effectively as an integral part of a company’s strategy, as suggested in the sidebar, “How the 80/20 Relationship Applies to Logistics Strategy”. Logistics is the process of planning and executing the efficient transportation and storage of goods from the point of origin to the point of consumption. The goal of logistics is to meet customer requirements in a timely, cost-effective manner. Logistics automation is the application of computer software or automated machinery to improve the efficiency of logistics operations. Typically, this refers to operations within a warehouse or distribution center with broader tasks undertaken by supply chain engineering systems and enterprise resource planning systems.

In purchasing, a technique called value analysis has led on occasion to decisions to purchase fewer items and in larger quantities. This has resulted in price discounts and logistical savings that more than compensate for the application of standard components to tasks for which smaller, less-expensive components might be suited under programs not emphasizing standardization. 集運 increasing number of alternatives for meeting cost and service standards—containerization, minicomputers, air freight, and worldwide satellite communications systems. Logistics can spell the difference between success and failure in business. For example, a few years ago a young engineer-entrepreneur began to build a company from scratch. He knew that liquid bleach is nearly all water and that the U.S. market is divided among two large manufacturers, Clorox and Purex, and a number of smaller producers that sell branded and private-label bleach on a regional basis.

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