- Why Logistics: Aligning the logistics strategy with the corporate objectives of the organization is the first imperative of logistics management. The logistics and operations strategy is at the service of income generation via increased sales and the reduction of costs associated with service to the markets.
Profitability and shareholder value creation continue to be the pillars of the growth and permanence of companies in the markets, and logistics is a crucial activity for the improvement of these corporate future variables.
- Theory – What is logistics? In the world of the administration it seems that there are certain topics become fashionable. The magazines, seminars of corporate gurus, press articles and consulting firms contribute to create that sense of urgency to improve or incorporate some processes or critical functions in the company.
In recent years we have attended different organizational reigns. Until the 70s, the kings of the company were the managers of plant and production (with the mastery of technology and know-how). In the 1980s the reign was ceded to the financial managers (in the domain of the use of productive resources) and the 90s were the decade of the marketing managers (dominating over the creation of demand).
In what reign are we? In recent years, successful corporations such as Microsoft, Intel, Wal-Mart, Carrefour and magazines such as Forbes and Business Week agree that we are in the reign of logistics managers. What is the domain of that function? Figure 1. The Role of Logistics in the Corporate Strategy and the Creation of Competitive Advantages The domain of the realm of logistics is the fulfillment of the promise of customer service. In addition to all the theories about consumer satisfaction, contact management and so on, the basic promise of service (in terms of logistics as well) is reduced to two basic premises.
Customers want several things: a) When they ask for … (Processing of Orders, Inventory Management and Procurement Management) and b) That what they asked for, arrives on time (Transportation, Distribution and Storage).
Components of a Logistics Strategy The construction of a logistics strategy seeks the design of processes that guarantee the fulfillment of the promise of customer service, as a support to sales management and the optimization of the total costs of the operation.
The components of the logistics plan include: a) the performance indicators system of the operation.
- the optimal design of processes that improve management indicators.
- the definition of infrastructure support requirements for the operation.
- the design of the logistics management and operation organization.
This model applies to logistics in general and each of its processes in particular.
Figure 2. Elements of a Strategic Logistics Plan in the Corporation 3. Logistics and Creation of Value to the Shareholder Exercise 1.
The creation of shareholder value is known as the true indicator of corporate performance. Theorists of the financial topic (which is not me!) Define the creation of value as the result of the profits of the traditional financial year (income operating expenses) less the costs of the capital used in the generation of that income.
The logistics activity has a direct relationship with the creation of shareholder value as it directly affects the three variables that increase the added value: income, operating expenses and capital costs.
Logistics is also an intensive activity in the use of capital, such as investment in inventories, transportation equipment, storage infrastructure, material handling equipment and systems and communications infrastructure.