Many in the academic field of logistics management started to write on the topic in depth in the 1960s. However, the use of logistics strategies have been employed for thousands of years. This describes the need to move an asset or commodity from one location to another, at the right time, at the least cost. Assets were moved across the sea in amphoras, which were perfectly suited for sea travel, to items carried on a person’s back or on the back of a pack dog or camel. Merchant ancestors had the same issues as businesses do today. What to sell, and how to get it to where they can make a profit.
Changing Logistic Strategies
What has changed drastically in the past 40 years is the technology and means to track and transport assets and commodities. Newer and better computers, containerization for ship and rail, shortened delivery times from almost any place in the world, have all changed how a business looks at logistics. What once was an impossible dream for a manufacturer may now be a simple matter of logistics.
Look to the simple pencil for example: The wood comes from California or Oregon. The eraser is made from soy bean oil and latex from South America. The metal band is mined in 13 states and 9 Canadian Provinces. The graphite may come from Montana or Mexico. In all, the parts used to make a simple pencil can come from any one of 15 states, three countries and 9 Canadian Provinces. dakota bandung
Supply strategies for pencil manufacturers must deal with transportation of raw assets from across the U.S. and the world. It is obviously a cost effective logistics strategy to bring in the assets to make pencils. This reduces manufacturing cost, storage and warehouse costs and makes for an inexpensive product that they can sell and make a profit.
Failures in Logistic Strategies
A company that limits its possibilities regarding a logistics strategy may make a fatal mistake by not considering what is available to them. They fail to see changes in technology, new markets and even perhaps the impending demise of their product line. If they are not open to possibilities they may very well work themselves right out of business.
A good example would be the photo and film industry. They failed to see the change in technology to digital media in time to lose a market share of the business. Their market strategy was to provide film, developer, paper and cameras to the world. Their supply strategy was outstanding. They were able to send each of the assets and commodities to every corner of the world. There were literally millions of places to have a film developed into prints. The photo companies set up worldwide distribution to make their product user friendly and inexpensive. Where they failed, was to consider changing technology.
Another company developed digital photos. The customer clicked a camera (like they were used to), and were now able to print the photos at home on their own printers. No need for developers, toners, toxic chemicals, a dark room and most of all, time. They could take a photo, dock it to their computer or put a chip in their printer and print an instant photo.
A loss of insight into a logistics strategy can bring down major corporations. For those companies that can look to possibilities they can make faster changes to meet customer demands. Polaroid and Kodak come to mind as two major suppliers. Polaroid stopped its production of instant photo cameras and film. Kodak lost a market share of its developer and film technology to digital printing.
Changes in Technology, Force Changes in Strategy
A company’s logistics strategy needs to look at their marketing. What do they make or provide that a customer wants. How can they best meet the needs of obtaining assets or commodities to make or sell assets to a customer? How can they reduce cost of warehousing, manufacturing, shipping and administrative overhead to make a profit? After all, without profit a company may be the best at making a product. But if the product becomes unprofitable they will suffer a loss.
A small business with five employees would have a different strategy from one with a thousand or more employees. One thing is universal among them all, however. They need to consider what they provide. How best to provide it, and how to do so quickly and in a way that is cost effective. If their logistics strategies do not take that into account, they will not be in business for long.