Creating a Logistics Strategy for Your Supply Chain Management
Why Should Your Company Develop a Formal Logistics Strategy?
What Is a Logistics Strategy?
When a company creates a logistics strategy it is defining the service levels at which its logistics organization is at its most cost effective. Because supply chains are constantly changing and evolving, a company may develop a number of logistics strategies for specific product lines, specific countries, or specific customers.
Remember, the ultimate goal of any logistics strategy is to deliver what your customers want, when they want it - and getting that done by spending as little money as possible. That means working with your logistics partners throughout your supply chain.
Why Implement a Logistics Strategy?
The supply chain constantly changes and that will affect any logistics organization. To adapt to the flexibility of the supply chain, companies should develop and implement a formal logistics strategy. This will allow a company to identify the impact of imminent changes and make organizational or functional changes to ensure service levels are not reduced.
What Is Involved in Developing a Logistic Strategy?
A company can start to develop a logistics strategy by looking at four distinct levels of their logistics organization.
- Strategic: By examining the company’s objectives and strategic supply chain decisions, the logistics strategy should review how the logistics organization contributes to those high-level objectives.
- Structural: The logistics strategy should examine the structural issues of the logistics organization, such as the optimum number of warehouses and distribution centers, or what products should be produced at a specific manufacturing plant.
- Functional: Any strategy should review how each separate function in the logistics organization is to achieve functional excellence.
- Implementation: The key to developing a successful logistics strategy is how it is to be implemented across the organization. The plan for implementation will include development or configuration of an information system, introduction of new policies, and procedures and the development of a change management plan.
Components to Examine When Developing a Logistics Strategy
When examining the four levels of logistics organization, all components of the operation should be examined to ascertain whether any potential cost benefits can be achieved. There are different component areas for each company but the list should at least include the following:
- Transportation: Does the current transportation strategies help service levels?
- Outsourcing: What outsourcing is used in the logistics function? Would a partnership with a third party logistics company improve service levels?
- Logistics Systems: Do the current logistics systems provide the level of data that is required to successfully implement a logistics strategy or are new systems required?
- Competitors: Review what the competitors offer. Can changes to the company’s customer service improve service levels?
- Information: Is the information that drives the logistics organization real-time and accurate? If the data is inaccurate then the decisions that are made will be in error.
- Strategy Review: Are the objectives of the logistics organization in line with company objectives and strategies.
A successfully implemented logistics strategy is important for companies who are dedicated to keeping service levels at the highest levels possible despite changes that occur in the supply chain.
The goal of any formal logistics or supply chain strategy is to make sure you and your company are delivering to your customers what they want. And delivering to them when they want it. And accomplish all of that by spending as little money as possible.
By following these guidelines, you can ensure that your logistics are aligned with your customers' needs, your inventory targets, and your company's cost reduction goals.
Remember, your company may need to review its logistics strategy from time to time, as supply chains and supply chain priorities change. If your supplier base had been primarily located in the United States and Mexico - and now, because of a change in your supply chain, your suppliers are now primarily located in Asia - you'll need to review your existing logistics strategy.
The same transportation and freight forwarding providers you were using may not be the right strategic partners for that kind of supply chain realignment.
Define your service level goals and map your current logistics landscape. Are you meeting your service level goals? If not, it's time to take a close look at your logistics strategy.
This article has been updated by Gary Marion, Logistics and Supply Chain Expert.