Maximizing Competitive Advantage Through Logistics Management

Summary of Chapter 3

Competitive Advantage
A good logistics management can provide significant competitive advantages. You can achieve:
- Undifferentiated status in the eyes of customers and competitors, taking advantage of value.
- Operating at a lower cost, leading to greater benefits in productivity or cost.
Eventually, the company has the tools to succeed in its business.

Advantage in Productivity
In any industry, a company that produces at lower costs normally has the highest turnover since:
- It achieves the best economies of scale (fixed costs are spread over a large volume).
- It benefits from the impact of the experience curve, which improves the performance of workers.

Historically, it is known that reducing costs through achieving greater sales volume is effective, but logistics can contribute in many ways to improve efficiency and productivity, thus reducing unit costs.

Advantage in Value
According to marketing, clients do not buy products; they buy benefits, which may be tangible or intangible.
- Tangibles are related to some functional aspect.
- Intangibles relate to image and reputation.
After that, the product should be distinguished from some form of competition; otherwise, the market will see it as a commodity and will prefer the cheaper option. This is achieved through a more segmented market approach.
Customer groups within a given market set different significance for different benefits. This allows for the identification of attractive opportunities to create differentiation for specific segments.

Another way to add value is through service. For example, it is increasingly difficult to compete on brand or company image. There is a growing convergence of technology within various categories of products, making it challenging to compete based on product differences. Here arises the need for differentiation by means other than technology, such as service.
In practice, companies are looking for a position based on both the productivity advantage and the advantage based on value.

Production Chain
It is the network of organizations that are actively involved through a series of links, upstream and downstream, in the different processes and activities that produce value in the form of products and services for end customers.

This concept becomes more effective as organizations increasingly focus on their core businesses, i.e., the things they do really well or where they have a distinct advantage. Everything else is outsourced.

The main idea of this concept is that transferring costs upstream or downstream makes an organization more competitive, because ultimately, all end up paying the costs to the end user.
This clarifies that the real competition is not company against company, but supply chain against supply chain.