Logistics and Supply Chain Management, 4th Edition

LO G ISTICS, THE SUPPLY CHAIN A N D C O M P E TITIVE STRAT E GY

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The implication of Michael Porter’s thesis is that organisations should look at each

activity in their value chain and assess whether they have a real competitive advan-

tage in the activity. If they do not, the argument goes, then perhaps they should

consider outsourcing that activity to a partner who can provide that cost or value

advantage. This logic is now widely accepted and has led to the dramatic upsurge

in outsourcing activity that can be witnessed in almost every industry.

Whilst there is often a strong economic logic underpinning the decision to

outsource activities that may previously have been performed in-house, such

decisions may add to the complexity of the supply chain. Because there are by

definition more interfaces to be managed as a result of outsourcing, the need for a

much higher level of relationship management increases.

The effect of outsourcing is to extend the value chain beyond the boundaries

of the business. In other words, the supply chain becomes the value chain. Value

(and cost) is not just created by the focal firm in a network, but by all the entities

that connect to each other. This ‘extended enterprise’, as some have termed it,

becomes the vehicle through which competitive advantage is gained – or lost.

The mission of logistics management

It will be apparent from the previous comments that the mission of logistics

management is to plan and co-ordinate all those activities necessary to achieve

desired levels of delivered service and quality at lowest possible cost. Logistics

must therefore be seen as the link between the marketplace and the supply base.

The scope of logistics spans the organisation, from the management of raw mate-

rials through to the delivery of the final product. Figure 1.8 illustrates this total

systems concept.

The scope of logistics spans the organisation, from the management of raw

materials through to the delivery of the final product.

Suppliers

Materials flow

Procurement Operations

Distribution

Customers

Requirements information flow

Figure 1.8 Logistics management process