Dominant strategy in supply chain and logistics

Logistics can be tricky. How to add value through logistics is unclear to many companies, which can be reason enough for manufacturers and retailers to outsource the activities to logistics service providers. But the question remains: is that a wise decision? To take an intelligent look at logistics outsourcing once and for all, I brought together the consultancy firm Districon, logistics service provider DSV Solutions and Nyenrode Business University. Our project, which we hope will become the global standard for assessing the potential of logistics outsourcing, is now at an advanced stage. The assessment method is based on four types of shippers (manufacturing and retail companies), categorised according to their logistics situation. Shippers are represented on a matrix featuring, along one axis, the extent to which their supply chain is unique and, along the other axis, the strategic added value of outsourcing. After the initial test results using information from real shippers, I’m already convinced that his will become a groundbreaking online tool.

While working on this assessment recently, I’ve noticed that many supply chain managers are unfamiliar with the three strategies for business success by thought-leaders Michael Treacy and Fred Wiersema: product leadership (best product, e.g. Apple), operational excellence (lowest overall costs, e.g. Walmart) and customer intimacy (best total solution, e.g. Cisco).

Logistics Service Providers

Not only manufacturers, wholesalers and retailers but also logistics service providers should know what their dominant strategy is, whether for the whole company or for a division. Product leadership is most likely only possible for pure 4PL players with a logistics cross chain control centre (4C). The other logistics service providers have to choose between customer intimacy and operational excellence. A logistics service provider that strives to set itself apart through a strategy of customer intimacy listens closely to the requirements of its (potential) clients and takes a proactive approach to advising its existing customers. Furthermore, this type of company knows the average lifespan of a customer relationship (which is generally longer than the length of one contract) and uses that as a basis for its investment decisions. The remaining logistics service providers are forced to adopt a strategy of operational excellence – hopefully clearly specialised in a sector in which they know the tricky logistics processes inside out and hence can handle them more efficiently than their competitors.

Martijn Lofvers, Publishing Director & Editor-in-Chief of Supply Chain Movement

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