Logistics strategy-revisited

Journal of Business Logistics, 2002 by McGinnis, Michael A, Kohn, Jonathan W

This research addresses the roles of three logistics strategies in achieving logistics effectiveness, explores the interaction among these three strategies, and discusses the role of logistics strategy in managing conflicting challenges inherent in logistics. This article is organized into five sections. The following section reviews the literature and develops hypotheses. Next, the methodology section describes the data collection process. Third, the data analysis and results are described. The fourth section discusses the findings and relates them to the literature. Finally, the conclusions section provides additional insights into logistics strategy and discusses the implications of the research for logistics practitioners, teachers, and researchers.

SELECTED RESEARCH RELEVANT TO LOGISTICS STRATEGY

Issues of logistics strategy and organization have been discussed in the literature for at least 40 years. Brewer and Rosenzweig (1961) identified the interdependencies of the material flow process, the problem of optimizing individual functions at the expense of the overall system, and the lack of organizational coordination among logistics functions. They recommended that overall logistics optimization could be accomplished by assigning the various logistics functions to one executive. The unification of logistics activities under one organization was discussed by Bowersox (1974) as a process where logistics organizations evolve through three stages. Additional responsibilities are added to the logistics organization at each stage. While the stages paradigm received some support in the literature, subsequent research concluded that it did not offer an adequate explanation of how advanced logistics organizations develop and operate (Bowersox and Daugherty 1987), that it was independent of logistics strategy (McGinnis and Kohn 1990), and there is substantial doubt that it explains the development of advanced logistics organizations (McGinnis and Kohn 1990).

A second concept for examining logistics strategy is the value chain (Porter 1985). The value chain provides a framework for examining interdependencies within logistics; between logistics and other areas of the firm; and between the firm, its suppliers, and customers. Sources of competitive advantage (cost advantage, differentiation, or a combination of both) are identified by examination of the company's five primary activities (inbound logistics, operations, outbound logistics, marketing and sales, and service) and four support activities (procurement, technology development, human resource management, and firm infrastructure). Two studies demonstrate that the value chain offers potential for the discussion and research of logistics strategy (McGinnis and Kohn 1988, 1990).

Earlier work in organizational theory provides a framework for the conflicting challenges that logistics strategies face. Thompson (1967) recognizes that most organizations seek to reduce uncertainty in the short-run in order to perform well on technological measures of performance. Simultaneously, most organizations strive for freedom from commitment to increase the organization's flexibility in an uncertain environment. These conflicting goals result in a "paradox of administration" where administration must constantly mediate between short-run and long-run imperatives, seeking to simultaneously reduce uncertainty and search for flexibility in order to satisfy an array of conflicting goals. An implication of Thompson's work is that logistics managers must constantly balance a need to perform well on hard measures of performance, while responding to a constantly changing environment. For example, logistics managers may strive to simultaneously meet quantitative cost and service goals; respond to changing needs of suppliers, internal customers, and channel members; and insure that logistics helps the organization achieve its long-run strategic objectives.

Shapiro and Heskett (1985) offer two insights that address the "paradox of administration" as it applies to logistics strategy. The first identifies four perspectives that must be constantly managed and balanced in logistics strategy. They are internal (focused on efficiency), interfunctional (focused on intraorganizational interactions), channel (maximizing the benefit of suppliers and channel partners), and strategic (maximizing competitive advantage). The second recognizes four sets of inherent conflicts in logistics strategy, called "The Two Faces of Logistics." They are: tactical versus strategic, short-term versus long-term, quantitative versus qualitative, and detailed versus broad.

Bowersox and Daugherty identified three strategic orientations and their effect on logistics strategy. They are summarized as follows:

1. Process Strategy: Traditional logistics activities are managed as a value-added system. Emphasis is on achieving maximum efficiency, the primary goal is to control costs, and the focus is on rationalizing complex activities into an efficient value-added system.