Creating a 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.

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.