Basic logistics strategies: concept, types, essence and development

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Logistics strategy is the direction of logistics, which is a quality and long-term direction. This direction concerns the forms and means of implementing logistics in the company, which is formulated by the top management of the company. Formation takes place in accordance with the goals set for the entire company. The strategy describes the principal 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 take into account the quality of providing the enterprise with information and material resources. The level of staff training plays an important role. For example, the goal of the logistics strategy of a trading company may be the introduction of new approaches, innovative ideas, forecasting future consumer demand and the ability to meet it. As for other manufacturing firms, in addition to the goals already listed, one can add more such as providing a high-quality logistics service.

It is worth noting that there are a huge number of logistics strategies that enterprises and firms can use. However, it is worth highlighting a few basic areas that are the basis for the development of other, more focused strategies.

Main destinations

The first major type of logistics strategies is called logistics cost minimization. To implement this direction, you must follow the following rules:

1. It is necessary to start reducing logistics costs in individual logistics functions.
2. The second step is to properly optimize the inventory level in the logistics system.
3. The third step is the selection of the best course of action, for example, warehousing - delivery. The bottom line is to change the main logistics direction to a secondary one.
4. Another way to implement this core strategy is to optimize decisions in specific areas of operation. Optimization takes place according to the principle of minimum costs of the logistic type.
5. 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, which will start from the delivery of goods and addressstorage to the management of these orders, as well as the provision of tracking services for delivered goods. If a company is a 3PL provider, then it deals with all types of services related to transportation, tracking cargo, working with documentation, and so on.

The second main type of logistics strategy is to improve the quality of service. To implement this strategy, there are several methods you can use:

1. Significant improvement in the quality of all logistics operations provided by the company.
2. Another development path is to support pre-sales and after-sales service.
3. Providing value-added services.
4. Must use logistics technology to support the life cycle of the product.
5. It is necessary to create a system that will manage the quality of the logistics service.
6. It is also possible to use benchmarking and other directions.

Another basic logistics strategy is to minimize investment in logistics infrastructure. To implement this method, you must adhere to the following principles:

1. Optimize the configuration of the logistics structure: perhaps set up direct delivery of goods to consumers in order to bypass the warehousing stage.
2. If possible, use general purpose warehouses.
3. You can use logistics intermediaries in suchtypes of services such as transportation, warehousing and processing of existing cargo.
4. There is such a logistical method as "just in time". This is also one way to implement a similar strategy.
5. You can also optimize the arrangement of objects included in the system structure.

Logistics outsourcing strategy is the fourth option. There are five ways to implement this strategy:

1. A make-or-buy decision needs to be made.
2. It is worth focusing your logistics capabilities on solving key operations. To solve secondary logistics procedures, it is worth finding intermediaries.
3. It is necessary to optimize the choice of the source of external resources.
4. It is necessary to optimally locate existing industrial facilities, as well as all infrastructure logistics centers.
5. Use only innovative suppliers and optimize the number of intermediaries and clearly distribute the functions assigned to them.

The strategy of logistics outsourcing (like the other three options) is based on the fact that you need to minimize or maximize the performance of one key area. For example, you can deal with the overall logistics costs. However, this approach has a drawback, which is that it will be necessary 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. If to speaksomewhat simpler, the higher the consumer requirements for the quality of service, the higher the costs required to implement the required level.

Things to consider when designing

When developing any kind of logistics strategy, there are several factors to consider. For example, the starting point for the development of any strategy will be a comprehensive analysis of the strategy with a higher level. Thus, it will be possible to understand how to correctly and how to implement a strategy so that it can maximize the quality of service.

In addition, there are a few things to keep in mind:

1. It is important to consider the environment in which business is conducted. It should also include those factors that affect logistics, but which logistics itself cannot manage.
2. This includes the special behavior of the organization, which is determined by some factors. The first of these are those that the company can manage, and the second are those that are used so that the company can stand out from the crowd.

It is important to understand here 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. The 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 current situation tofuture.

To collect the necessary information about the special competence, as well as the environment in which the business is conducted, a procedure called a logical audit is used. The purpose of this type of logistics strategy is to collect all the important information about the methods, indicators and conditions in which logistics activities are 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 environment of the logistics operation, while the internal one is needed in order to analyze the ways in which procedures are carried out within the organization, as well as to determine which areas need improvement.

The main objectives of such a procedure are as follows:

1. The first is to identify the strengths and weaknesses of logistics within the corporation.
2. The second is to identify the threats that arise in the environment in which business is conducted.

In the business environment, there is a key factor that is the type of demand. Depending on its position, the logistics strategy of the company can be "lean" or dynamic. For example, the "lean" strategy is best applied if the firm can predict or at least slightly predict the demand that will be in the service market in the future. The dynamic strategy is used in conditions where the range of products is very wide, when it is rather difficult to predict demand and its type.

Another important factor that should be present in the company's logistics strategy at the stage of itsdesign is a systematic preparation of solutions. They should be adopted not only at the level of top 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 for strategy development

Today, there are some basic steps to follow when developing a logistics strategy:

1. During the development of the strategy, emphasis should be placed on those logistics areas of activity that can strengthen the competitiveness of the enterprise in the long term.
2. Don't change your strategy often to reap short-term gains. Such a move will only lead to small fleeting improvements and nothing more.
3. You need to be very careful about adopting strategies that are considered tough. Inflexible strategies can become obsolete, making it impossible for the enterprise to maneuver in the future.
4. 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.
5. Your own strategy must be designed in such a way that it can harm weak partiescompetitors.

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 the 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 address the issue of reengineering, if necessary. This is a mandatory element of the strategy.

Next, it is necessary to attend to the development of directions and technologies for coordinating the strategy. Currently, management involves the development of two directions - it is interorganizational and interfunctional. This is followed by the stage of determining the strategic requirements for product quality, as well as logistics consumer service. Today, the essence of the logistics strategy in the field of product promotion is that it is completely focused on the consumer. In this case, logistics is required to clearly form 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, whichshould be pursued by the logic center staff, this is to minimize the cost of implementation, while maintaining the quality of service that the strategy requires.

One of the last stages was the process of integrating the 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 the choice of a logistics system. This stage is one of the most important, and its main task is the development and selection of an information network that can connect all information and telecommunications links of one network.

Plan and strategy sections

Planning a logistics strategy (as well as developing it) does not have a universal method. The strategy consists of a number of factors. An overview of developing a logistics plan contains the following sections:

1. The first step is to write a general summary that outlines the exact essence of the future strategy, as well as showing exactly how it will interact with other departments of the enterprise.
2. The second step is to describe the purpose of logistics in the organization itself, as well as how to measure the quality of its work and performance indicators.
3. The next point should include a description of the activities that can lead to the achievement of the goals set for the firm. You also need to consider the options by which these goals and changes will be managed.
4. The following is a description of how individual logistics functions in the future will contribute to a certaincontribution to achieving your goals.
5. It is important to have a plan that takes into account all the resources needed to complete it.
6. It is also necessary to have a plan for planned costs and for selected financial indicators.
7. The last item is a description of how the chosen logistics strategy will affect the development of the business in the future. It is also very important to consider how the chosen development can contribute to service improvement and customer satisfaction.

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 a logical strategy and its formation is carried out on the basis of such a factor as an analysis of the external and internal environment of logistics.

The external environment of logistics is a combination of all factors, forces and subjects that are outside the boundaries of a particular company, but at the same time they can affect the functioning of the enterprise's logistics. The influence of such an environment on the implementation of the strategy is irregular and indirect. External uncontrollable factors can be, for example, consumer preferences and tastes, customer habits, technological changes, the influence of competitors and other factors. All of them must be considered when planning a logistics strategy. In suchIn this case, the plan should be focused on satisfying consumer demand as much as possible, determining the possible influence of competitors, assessing relations with various government departments, monitoring the state of the economy, and so on.

It is also worth noting that the external environment of logistics will change over time, the components included in its composition will change, as well as the links included in them, 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 some impact. You can only arrange them on the basis of a certain classification of logistics factors. At the same time, one must understand that these factors will be quite heterogeneous, since all of them will arise as a result of the interaction of systems of the most different levels.

There is also the internal logistics environment of an enterprise. The analysis of the logistics strategy in this case consists in the study of a combination of factors that can be controlled by top management, as well as by employees of functional units.

Description of the internal logistics environment

The internal environment of logistics includes such indicators as, for example, capital, technology, means of production, personnel, management system, and so on. When examining the internal structure, it is very important to carefully consider such activities of management as determining the scope of activities that management covers.

The concept of this sphere should includegeneral categories of products and services. Also, as a 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 ownership is also determined. It can be either a private enterprise or a corporate one, etc. Logistics activities should have a clear focus.

The next step is to formulate the goals and tasks of logistics management. It is important to note that only the general goals that the enterprise faces are formed in the logical service strategy. In this case, the management should formulate the main goal pursued by the development of the logistics industry, as well as set specific tasks for the fulfillment services. These tasks should ultimately lead to the achievement of a common end goal. The formation of the task is based on the strategic policy of the entire company. Only if all these conditions are met will it be possible to say whether the logistics strategy is being successfully implemented or whether it has failed. In addition, it is quite important to evaluate and research all previous strategies that have been adopted. This will help identify potential problems. When making decisions aimed at developing ways to implement a logical strategy, one clear principle must be followed: general goals must be set, after which one must move on to making specific decisions in order to achieve them. In this case, the parallel-serial principle method is excellent. Along with the development of the overall goals of the logistics strategy, intermediate solutions are also being developed that are aimed at achieving a common result.

It is very important to determine the place for logistics management in the overall management of the entire enterprise. The importance of logistics becomes apparent when it has a decisive voice and power. This is possible if the head of the logistics department has all the necessary resources.

Business Unit Strategy

It is worth adding that division into business units can be used as an implementation of a logistics strategy. For each such unit, a separate development of an individual strategy is carried out. A business unit for a network enterprise is, for example, a separate branch. If this is a diversified enterprise, then a business unit can be a different line of business, etc. It can only be added that the logistics strategy of an organization, if small enough, can be similar to that of a business unit. In this case, the enterprise itself would be that unit.

Establishing a logistics strategy at this level will unlock the following opportunities:

1. Enterprise management will be able to focus on individual logistical tasks that relate to their direction. At the same time, it will be possible to assess their capabilities, as well as their significance.
2. It will be possible to identify 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 theirsignificance for the entire enterprise as a whole.
3. It will be possible to clearly define which goals to focus on right away, why. It will also help you decide where to invest in the first place.
4. This will help identify the most problematic areas that exist in the chosen strategy.
5. Understanding the essence of the strategy in this case will also help to make structural changes in the logistics system.
6. It will be possible to achieve a balanced position in the market as a whole due to the fact that it will be possible to clearly define the development prospects for the established main directions of the enterprise's logistics activities.
7. This will help create a solid foundation so that in the future there will be an opportunity to expand strategic decision-making, which will be directly related to the expansion and diversification of logistics activities.

Examples of action

Examples of logistics strategies, their maintenance and the impact on the development of the enterprise as a whole can be seen in established firms. For example, you can turn your attention to the company "Nestlé Food". This company has been present on the Russian market since 1996. The main activity of this company is the production and sale of various food products.

The following points became the main strategic directions of this company:

• manufacturer strives to maintain high performance while spending as little resources as possible onproduction, but maintaining the world-class quality of its products;
• constantly developing projects that carry the idea of releasing new products;
• using advanced manufacturing and information technologies;
• the company uses state-of-the-art methods to develop planning and management methods.

The key factor that makes the development of the logistics strategy of the enterprise as effective as possible is a thorough study of the market. Work is constantly being carried out to analyze the market, according to the dynamics of its development, the relations that arise between the company itself, as well as its consumers, are being studied. 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 problem solving, 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, not just one.

The main goal of the first chosen strategy is to increase the applied efforts in the field of research and development. This approach allows the enterprise 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 the products it produces.

The last main direction is the maximum decentralization of business management inregions. This is done in order to be able 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 firm uses a variety of logistics strategies, market and organizational opportunities in order to maximize its lead from competitors.