Reflection on Logistics Module
Logistics is a critical consideration in strategy development; creating and marketing the greatest products, and stimulating a high demand with an effective strategy will provide a firm with little value unless there is the ability to satisfy the demand created. The satisfaction of that demand requires a suitable logistics strategy, with the firms’ ability to manage the inflow of inputs required to create products and then manage the outward flow so that the customers will be able to access the finished goods. The study of logistics has highlighted the degree to which this is often overlooked as a key competition of strategy formulation, with the logistics processes taken for granted.
Logistics is an interdependent competent of general strategy creation, a little research on the topic shows that it has the potential to play an important supporting role in major strategies; the Toyota method of production which is very lean and efficient, requires the use of just in time inventory management, which helps to reduce costs (Fiestras-Janeiro, Garcia-Jurado, Meca, & Mosquera, 2011). Without strategy logistics processes Toyota would not be able to use just in time inventory management (Fiestras-Janeiro et al., 2011).
In modern logistics strategy there have been three specific trends being seen in recent years; these trends are centralization, outsourcing and the use of the internet (Wheelen & Hunger, 2008). The topic of outsourcing is one that is familiar and this familiarity increase comfort level when applying the existing concepts associated with outsourcing to logistics management. The basic concepts of outsourcing, where another party provides the resources needed for task to be completed, selling their services to the firm, has the potential to reduce costs as specialist firms providing the outsource services may gain the advances associated with economies of scope and scale, which may also improve quality of the tasks undertaken due to specializing of the outsource supplier, as seen with the case of HP, where it only took 140 staff to take on the jobs that had occupied 250 HP staff (Wheelen & Hunger, 2008). One may also argue that the outsourcing of logistics (as well as other tasks), have also been key to the efficient operations of Apple, and their delivery of products to customers, often direct from the outsource manufactures without the need of the products to enter the companies own inventory.
Another comfortable subject within the logistics management subject area is the use of the internet and the way technology is able to improve logistics management. The internet has been empowering for all areas of businesses and consumers, not only bringing together the different players, but increasing transparency through tracing and monitoring (Wheelen & Hunger, 2008).
The concept of centralization within logistics has provided a few more challenges in terms of the overall understanding (Wheelen & Hunger, 2008). Centralization has some benefits, and has been seen in other areas of strategy, but just as centralization has benefits, there may also be some dangers and false economies. Centralization may decrease some costs, but if all goods are sent to one location prior to sending out, this may also increase the time and resources required. An interesting parallel may be the way airlines decide on how to operate flights. In many areas the hub and spoke model has been used, with larger aircraft for long distance flight to major areas, and then short connecting flights. However, many passengers may have desired a point to point service, without the need to change. There are advantages and disadvantages, which appear to be more complex, especially as some of the costs and issues may be difficult to asses, such as the time issue if there is a need to divert resources. Cost benefit analysis may be applied, but there are some aspects, such as the service levels and time taken which may be difficult to quantify. However, even with the complicities, this is still a subject that I believe I understand.
Fiestras-Janeiro, M.G; Garcia-Jurado, I; Meca, A; Mosquera, M.A. (2011), Cooperative game theory and inventory management, European Journal of Operational Research, 210(3), 459-466
Wheelen, Thomas L; Hunger, David L, (2008), Strategic Management and Business Policy: Concepts and Cases, Pearson