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David Matwa Nyabwari, Kenya
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How Can Logistics Help to Achieve a Competitive Advantage?
How can logistics (transport, warehousing, customer service, inventory control) contribute to a Competitive Advantage (CA) of an company? Thanks for your ideas...
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Piero Mella
Teacher, Italy
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Competitive Advantage and Time Competition This article might help you to find some answer. “Time Competition. The New Strategic Frontier”
Chiara Demartini, Piero Mella, iBusiness, 2011, pp. 136-146.
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Hessel Visser
Partner, Netherlands
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The Added Value of Logistics Logistics can contribute to a competitive advantage by supporting the improvement of the flow of goods and information in the organisation so that the turnaround of money is increased while also offering a good customer service.
Return on Investment = profit margin * inventory turn over.
Logistics can support both the profit margin by lowering costs and inventory turns by reducing lead times.
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Utkarsh
Student (MBA)
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Question for Hessel Viser, Partner, Netherlands @Hessel Visser, please explain how Return On Investment in your view depends on inventory turnover
Because I think Return On Investment is dependent on:
- The gains from the investment, and
- The cost of the investment.
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Javier Elenes
Business Consultant, Mexico
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Value / Price Index to Approximate Competitive Advantage Built on Better Logistics If our VALUE / PRICE INDEX (VPI) delivered to the customer is higher than the strongest competitor we have a "competitive advantage".
In this formula VALUE = (QUALITY x SERVICE).
If your Quality x Service and your Price are the same as your competitor's, you don't have a CA.
For example, suppose:
- Your quality as perceived by the customer is 80 and the quality of the Competitor is the same 80. The Q index = 100.
- Your service (for example as measured by % of deliveries on time promised is 70% and the competitor has the same 70%. The S index is also 100.
- If you and your competitor also both have the same price of 100 dollar, your VPI will be 1.00, calculated as VPI = (80/80 x 70/70) / (100 / 100) = 1.
- Your sales people are going to ask you to reduce your price "to be more competitive".
- Should you decide and be able to improve your perceived service from 70 to 90, and you and your strongest competitor will still offer the same price, your VPI is 1.28. That means that you offer 28% more value for the same price and THIS IS YOUR CA built on better logistics, warehousing, inventory control.
Last Note: I´m realize that of course this is a pseudo-scientific competitive formula, but I have seen it working. Let me know your results...
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Bahman Norouzpour, Iran
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Sustainable Competitive Advantage of Logistics First, make sure you appreciate the difference between a CA and a Sustained CA.
Logistics can be considered to offer a CA for a company if that 'edge' is not simultaneously implemented by any current competitor.
But to make that CA into a SUSTAINABLE one, it is additionally required that these other firms are unable to duplicate it.
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Andrew Blaine
Business Consultant, South Africa
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Inventory Turnover and ROI @Utkarsh: In business, working capital is tied up in stock. This stock is, hopefully, sold profitably, which increases the cash flowing into the business.
This cash coming into the business is, eventually, distributed to investors as dividends, generating a return from the original investment. The greater this dividend, the greater the return on investment.
I hope that clarifies the position, in simplistic terms.
Editor: indeed, see also Days Inventory Outstanding and Cash Conversion Cycle, which are efficiency measures based on this same idea.
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J. W. Mphande
Manager, Malawi
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What is Logistics --> Competitive Advantage of Logistics First of all, define what LOGISTICS is. Wikipedia defines logistics as "the management of the flow of resources between the point of origin and the point of destination in order to meet some requirements, for example, of customers or corporations. The resources managed in logistics can include physical items, such as food, materials, equipment, liquids, and staff, as well as abstract items, such as information, particles, and energy. The logistics of physical items usually involves the integration of information flow, material handling, production, packaging, inventory, transportation, warehousing, and often security". Or see this discussion on the definition of logistics.
From understanding this definition you can then move on to find the links between logistics and CA of an organization.
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Dr Mohammed Farid Abdulghany Ahmed
Consultant, Saudi Arabia
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Sustainable CA can Only be Achieved at Supply Chain Level CA can simply be defined as the unique offered added value that other parties (rivals, competitors) cannot provide. Competitive strategies are adopted by organizations to maintain and sustain their competitiveness.
The only way to achieve a CA is that you and all your partners in the supply chain adopt the same competitve strategy as you have (starting from the customer order cycle and ending with the manaufacturing cycle).
Moreover, the rapid changes in the corporate environment (whether internal or external) have made the (sustainable) CA process more dynamic and raised the importance of efficient and flexible decision making techniques, supported by appropriate decision making dashboards / MIS.
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Bernhard Keim
Business Consultant, Germany
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Logistic as Competitive Advantage Good logistics make it easier for suppliers and customers to reach, access your company. Delivery quality and delivery time are hurdles for your company, your suppliers and your customers. Less hurdles = better access. Logistics is an integral part of a company's value proposition. If it matters to your customers it should matter to you. If you don't take care of it, someone else will.
To establish good logistics always causes costs. But one has to take the opportunity cost of revenues lost by mediocre logistics into account as well. Ask your customers and suppliers whether they are willing to pay for better logistic services. Try to find the possible customers that don't make business with you because delivery times are too long or unreliable.
Also never forget companies aren't selling products, they are selling solutions. Especially in B2B, your company is an integral part of the supply and value chain of your customer. If it does not fit into that seamlessly, you are causing problems for your customer.
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Sifiso Ndhlukula
Manager, Democratic Republic of the Congo
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How Logistics can Offer a CA Properly managed logistics definitely can offer a competitive advantage.
Picture this scenario whereby you are in the retail industry and you rely on your supplier's delivery vehicles. If the supplie...
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vascogorjao
Student (University), Portugal
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CA via Logistics A key competitive advantage can be to negotiate long-term partnerships of trust with suppliers. The mutual adoption of integrated Information systems will allow that the information of the point of sa...
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Barry Martin
Business Consultant, United Kingdom
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Competitive Advantage is Only True When in the Mind of your Customers Logistics, i.e. getting goods on the shelf does NOT give a competitive advantage, but not having it right is a competitive disadvantage.
Manage the top 20% of sellers and the link and associate produ...
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Francilio Dourado Filho
Business Consultant, Brazil
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No CA without Considering Cost There can be no CA without considering the costs. Having real CA requires that, in comparison with the competition, the competitor can operate with a lower relative cost and / or charge a higher relat...
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Gary Bernier
Consultant, United States
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2 Ways in Which Logistics can be a Competitive Advantage There are two primary ways that logistics can be a CA:
1. Lowering the overall cost of delivery to a customer. Better logistics can also mean lower inventory requirements, faster delivery, lower frei...
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Yuriy
Analyst, Russian Federation
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How Can Logistics Help to Achieve a CA Good coordination and planning of logistics operations can make good savings on internal costs.
These funds can be sent to marketing, adding efficiency to the process of promoting and selling.
Contr...
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jaime cortabarria
Consultant, Colombia
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Consider also (International) Comparative Advantages My intention is to globalize the context. It is also necessary to take into account the comparative advantages of his company, which can make the logistics of your business efficient and competitive.
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Simon Lum, Australia
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Measuring Service in the Value / Price Index Formula Above @Javier Elenes: In your above formula, just delivering on time may not be a good enough measure of service. It is delivering on time and in full that measures a good service....
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Javier Elenes
Business Consultant, Mexico
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On Time, % First Field, Time to Solve a Claim, Etc @Simon Lum: You are right, it should be delivery on time as promised and % perfect first time. And maybe the time (hrs?) to solve a claim or suggestion received from Customers....
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sudheer Kothamasu
HR Consultant, India
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Competitive Advantage with Logistics Logistics adds 'time' and 'place' utility for a product. It provides complete information about customers requirements. Logistics adds 'value' to your product.
To gain a CA, maintain good logistics. ...
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avinash, India
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Competitive Logistics through Supply Chain Planning A strategic supply chain planning solution provides clients with a process that enables organizations to effectively synchronize their supply chain strategies with their company’s strategic plan by:
...
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Juergen Kanz, Germany
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CA of Logictics You will get a CA when you are capable to solve the two major problems of each supply chain:
- Avoid abundant shortages and surpluses
- Don't carry high inventory on several places....
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Purna Chandra
Business Consultant, India
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Logistics Contributes Directly to CA According to Porter, an organisation's competitive advantage stems from:
1. Cost Leadership (same value at less cost)
2. Differentiation of Product or Service (more value at same cost)
Possibly com...
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jacinta wamwaki
Kenya
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Logistics CA @Bahman Norouzpour: I agree only a sustainable CA is lasting. A competitive advantage is there for a time till your competitors catch up with you.
A CA through Logistics is very real and can be ach...
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Peter Andrea, South Sudan
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How Logictics can Contribute to a CA Logistics is a major part of of supply chain. Proper logistics can contribute in a reduction of the total transaction cost, which will pave the way for a CA of the products in supply chain....
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Simon Lum, Australia
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SCA with Logistics through Supplier-Customer Cooperation @Jacinta wamwaki: Sustainability of the CA can be achieved through supplier-customer cooperation and collaboration as @Dr Mohammed Farid Abdulghany Ahm already said. The customers can help the supplie...
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Istvan Szeman
Consultant, Hungary
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Why Logistics is a Factor in SUSTAINABLE Competitive Advantage I have no doubt that logistics can contribute to SCA and when it does contribute, because improving logistics efficiency takes a lot of time and effort, given the difficulty that it has to deal with t...
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Helen Strong
Business Consultant, South Africa
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An Example of Logistics Offering Competitive Advantage Innovation in logistics can add substantially to the competitive advantage.
For example in RSA, one company that specialised in fast food deliveries has extended their services to deliver credit card...
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Scott McKay
Consultant, Australia
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How Logistics Contributes to Competitive Advantage for All Supply Chain Parties As a customer I consider that for my suppliers Delivery In Full On Time In Specification (DIFOTIS) is the greatest source of CA. This enables me to sell more effectively, deliver with greater reliabil...
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Kyrian Agbodike, Netherlands
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Achieve Competive Advantage in Logistics by Outsourcing it The competitive advange is that all of these logistic activities can be outsourced using best practices. Proper management of these logistics will bring down the total cost of ownership and improves t...
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Uduakobong Sunday
Management Consultant, Nigeria
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How Logistics Can Enhance CA No seriously-minded business operator who has options would want to maintain a continuous relationship with a supplier who does not provide timely delivery of goods/services. Where all the chains of s...
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Dr. Uwe Schindler, MBA
Manager, Germany
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Competitive Advantage - Intangible Assets Please let me highlight 3 stages which might help you to answer the question:
1. According to Barney (1991) 4 empirical indicators of the potential of a firm's resources to generate SCA are: Valuable...
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Andrew Blaine
Business Consultant, South Africa
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Intangible Assets as a Competitive Advantage @Uwe Schindler: The most obvious example of an intangible asset offering sustainable competitive advantage is the formula for Coca Cola. Knowing this formula and producing a competitive soft drink fro...
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Ahmad Sultan Abdulla
Consultant, Malaysia
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Strong Logistics only is not enough for a Competitive Advantage In simplistic terms, if you have strong logistic arrangements - i.e. B2B systems (order, invoicing etc), transportation, warehousing, JIT delivery that is better and faster than your competitors and ...
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Simon Lum, Australia
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Logistics and Competitive Advantage No statements of mission, goals or strategies will sustain CA until they are understood, accepted, implemented and practised by everyone in the organisation. The challenge lies in the firm's ability t...
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John Ebinum, Nigeria
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How Efficient Utilization of Warehouse and Inventory Management Lead to Competitive Advantage Just-in-time delivery means cost savings on warehousing space and inventory holding cost. Sustained application of this situation means lower operations cost and improved net margins.
Efficient utili...
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Javier Elenes
Business Consultant, Mexico
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JIT Provide BETTER Service WITH LESS Cost, Create Market Value and Economical Value @John Ebinum: Delivering JIT have a double positive effect on CA, Deliverering MORE VALUE (Higher Service to the Customer) and - as you stated - REDUCING COST Warehousing and inventory Cost).
A perf...
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Festus Kurgat
Student (University), Kenya
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Competitive Advantage through Logistics Hoe can logistics management be used as a tool for competitive advantage in a manufucturing industry?...
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