The role of logistics in formulating and implementing
...d founctional level strategy (mostly marketing strategy) as depicted in Figure 1.1 will now be discussed. â… .The role of logistics in corporate level strategy (â…°)The role of logistics in formulating corporate strategy Comprehensive planning helps firms configure and coordinate their international operations more effectively and thus avoid some of the pitfalls found in managing complex international networks. Firms choosing to be in the forefront of today's market must methodically formulate and successfully implement competitive strategies. According to recent articles, more and more firms will decide that integrating logistics into the corporate strategy offers more opportunity to bring value to the corporate mission than does any other business process. The horizontal relationship between logistics and other business process could be illustrated as Figure 1.2: Nowadays, integrating logistics into formulating corporate strategy is widely recognized as a means to reducing costs, entering markets and creating customer service, however, the concept wasn't always widely accepted. Not until the mid-to-late-1970s was integrated logistics acknowledged as a possible strategy for improving corporate performance. Before then, strategic planning meant investment planning. In the logistics context, Cooper et al. define strategic formulating as "the process of identifying the long-term goals of the entity (where we want to be) and the broad steps necessary to achieve these goals over a long-term horizon (how to get there), incorporating the concerns and future expectations of the major stakeholders." Here is an example about a pharmaceutical firm benefits from European Union: A large pharmaceutical company faced the classical issue of doing business in the countries of the European Union (EU). Historically, there was a manufacturing operation or distribution centre (DC) in almost every country of Europe. This was largely for tax and duty reasons, but also because of national perceptions and cultural differences. Formation of the EU and its eco-political implications justified a review of the logistics strategy for Europe. Should there be one large, centrally located plant or DC that supplies all countries? This would require significant investment but save considerable operating costs. Labelling, and perhaps packaging, would have to be customized for each country because of language, local customers, etc. The firm discovered that greatly reduced handling and inventory costs could well make having a larger, more complex facility a big contributor to profit margin in Europe. Companies that incorporate logistics into their formulation of corporate strategy are able not only to increase revenue and profit margin but also to reduce costs. IKEA, the Swedish furniture store, used customer focus and logistics to succeed in the 1990s. Montgomery Ward, for example, called upon logistics to produce service improvements and a $100 million cost savings. The legendary Sam Walton used logistics to improve efficiency and create cost reductions at his Wal-Mart conglomerate. These companies and several others have realized and used the benefits of logistics to expand markets while streamlining costs. Moreover, enhanced logistics management are associated with significant improvements in firm performance and therefore catch greater managerial attention. Bowersox et al. specifically found that the active participation of logistics managers in the strategy planning process is beneficial to establishing logistics excellence. The resourcedependent nature of critical capabilities means that top management must recognize the importance of the role of logistics in formulating corporate strategy. The above discussion and examples provide the motivition or the “WHAT” is the role of logistics in fomulating corporate strategy. It remains to describe the “HOW” of doing it. Given demand for all products we make or sell at any level, what logistics infrastructure will maximize profit and capital turnover while meeintg customer service objectives is a vital question for a company. This question, which presents the mission or goal of a corporate strategy and plan, could be broken down into a series of specific issues or questions need to be answered: (1) Should we make or buy certain products or components? This question include such issues as: •       How many manufacturing locations should we have •       What products should be made at each manufacturing location? •       Which sources of raw materials and components should we use? •       What modes of transportation should be used for various product lines •       Should we have...