Why Logistics are Essential to Business Strategy?

Why Logistics are Essential to Business Strategy?

Logistical aspects have always played a key and strategic role in business. Irrespective of whether it is about wholesalers, retailers, logistical considerations span beyond simple inventory management and transportation to address one of the most crucial factors in business success: location. Location in relation to markets and different sources of supplies. Logistics concern are in fact very common amongst manufacturers, especially those regarding matters as simple as facility location, the origin of raw materials and quality of customer service (paying special attention to the standards.) Entrepreneurs, for instance, tend to disregard the importance of the aforementioned aspects.

Not so long ago, it was quite weird to see these changes in the business environment affect companies in regard to these issues; however, in recent years, these alterations in today’s business juncture have forced firms and companies of all sizes to pay close attention to how these functions—and these aspects—relate to others. Governmental regulations, the transportation system, energy constraints and limits and technological developments constitute several—important—considerations in the implementation of every business strategy.

Many companies have tried to respond to these tough challenges by focusing on developing competitive strategies based partly on concepts such as postponement and, of course, speculation, standardization, differentiation and, lastly, consolidation. These are firms in which the managerial approach has conducted both formal and informal logistics audits; it has redesigned previously established systems to provide more efficient and productive support for corporate strategies and has taken huge steps towards ensuring continued appraisal of opportunities in the long run.

Logistics can certainly embody the difference between success and failure in business as David Kiger has previously asserted in other articles. In fact, part of the reason is that logistics operates within a somewhat broad spectrum, therefore, it demands not only perfectly tailored strategies but also leadership capabilities, for leaders must be capable of properly addressing executives and pretty much everyone involved in the supply chain. Thus, it is also necessary to possess a solid knowledge of the entire chain: the intricacies of its functions and the business itself.

Supply chain management experts are the ones responsible for determining the importance of coming up with a very organized logistics strategy: they must understand that under today’s circumstances it is practically mandatory to seamlessly implement all types of strategies and key elements in both the corporate strategy and the logistic approach in order to satisfy customer’s needs and outperform the competition. Irrespective of the size of the business, it is clear that having a well-based logistic strategy is what helps businesses thrive and expand—locally, regionally, internationally, etc.—. Whatever a company’s location, logistics serve as the perfect tool for cutting costs and time when it comes to moving goods across the chain.

Supply chains are complex, of course, and sensitive since they heavily depend on demand. Thus, a supply chain cannot ensure a high ROI if it is not effectively organized. Today, many companies have reinvented themselves and have developed unorthodox yet effective creative-based strategies to cope with today’s struggling pace:

An example in which logistics played a major and vital role was depicted by a milk company that came up with an innovative, low-cost way to distribute high volumes of milk and other liquid products by building a retail store that consisted of a convenience-oriented, self-service and a large truck dock near the production area. The intricacies do not matter much, but in short, these people discovered how to put milk in other recipients without spending a lot of money in transportation and harnessing the advantages of their location and, of course, technology.

Image courtesy of energepic.com at Pexels.com

Technology-oriented and creativity-based strategies are also key in larger firms. Another example is one of the world’s biggest and largest chemical manufacturers. They recently had to replace its vessels and ships. These would carry materials in bulks from plants in the caribbean to east coast ports for subsequent transportation through barges and rail cars. Instead of simply getting new ships, the company invested money on modernizing its entire distribution approach to one using cans and containers. Of course, these changes also suppose a disruption in the business model: procurement, order processing, packaging, transportation, etc. are aspects subject of change.

It is quite evident that the impact of changing the logistics strategy also represents a major change in today’s business models, especially taking into account the pace at which technology is evolving. Firms are always looking for ways to generate new competitive advantages, which ultimately forces firms within the same industry and across the supply chain to either cope with it or develop new ways to harness such juncture. Be that as it may, logistics has never been more important for driving value: disregarding its importance could result in a way beyond detrimental for a company and its goals over the long run.

* Featured Image courtesy of Pixabay at Pexels.com

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