Logistics and supply chain management
Martin Christopher
Chapter 1: Logistics, the supply chain and competitive strategy
Supply Chain management is a wider concept than logistics
Logistics: a planning orientation and framework that seeks to create a single plan for the flow of
products and information through a business.
Supply chain management: builds upon this framework and seeks to achieve linkage and co-
ordination between the processes of other entities in the pipeline, for example suppliers, consumers
or the organisation itself.
- The focus of supply chain management is upon the management of relationships in order to achieve
a more profitable outcome for all parties in the chain.
- Demand chain management could be more appropriate, to reflect the fact that the chain should be
driven by the market, not by suppliers.
- Chain could be replaces by ‘network’, as there will be multiple suppliers and, indeed, suppliers to
suppliers as well as multiple customers and customers’ customers to be included in the total system.
- Supply chain management could also be described as: a network of connected and interdependent
organisations mutually and co-operatively working together to control, manage and improve the
flow of materials and information from suppliers to end users.
A goal of supply chain management could be to reduce or eliminate the buffers of inventory that
exist between organisations in a chain through the sharing of information regarding demand and
current stock levels.
Competitive advantage
Effective logistics and supply chain management can provide a major source of competitive
advantage: a position of enduring superiority over competitors in terms of customer preference may
be achieved through better management of logistics and the supply chain.
Three C’s: triangular linkage of the company, its consumers and its competitors.
Source of competitive advantage
1: ability of the organisation to differentiate itself positively, in the eyes of the customers, from its
competition.
2: operating at lower cost hence at greater profit
Successful companies either have a cost advantage or a value advantage, or – even better – a
combination of the two. Cost advantage gives a lower cost profile and value advantage gives the
product a ‘plus’ over competitive offerings.
Cost advantage
The experience curve is a phenomenon with its roots in the earlier notion of the ‘learning curve’, in
world war II, researchers discovered the possibility to identify and predict improvements in the rate
of output of workers as they became more skilled in the processes and tasks on which they were
working. The relationship that the experience curve describes is between real unit cots and
cumulative volume. Today, much of the product cost lies outside the business in the wider supply
chain.
1
Martin Christopher
Chapter 1: Logistics, the supply chain and competitive strategy
Supply Chain management is a wider concept than logistics
Logistics: a planning orientation and framework that seeks to create a single plan for the flow of
products and information through a business.
Supply chain management: builds upon this framework and seeks to achieve linkage and co-
ordination between the processes of other entities in the pipeline, for example suppliers, consumers
or the organisation itself.
- The focus of supply chain management is upon the management of relationships in order to achieve
a more profitable outcome for all parties in the chain.
- Demand chain management could be more appropriate, to reflect the fact that the chain should be
driven by the market, not by suppliers.
- Chain could be replaces by ‘network’, as there will be multiple suppliers and, indeed, suppliers to
suppliers as well as multiple customers and customers’ customers to be included in the total system.
- Supply chain management could also be described as: a network of connected and interdependent
organisations mutually and co-operatively working together to control, manage and improve the
flow of materials and information from suppliers to end users.
A goal of supply chain management could be to reduce or eliminate the buffers of inventory that
exist between organisations in a chain through the sharing of information regarding demand and
current stock levels.
Competitive advantage
Effective logistics and supply chain management can provide a major source of competitive
advantage: a position of enduring superiority over competitors in terms of customer preference may
be achieved through better management of logistics and the supply chain.
Three C’s: triangular linkage of the company, its consumers and its competitors.
Source of competitive advantage
1: ability of the organisation to differentiate itself positively, in the eyes of the customers, from its
competition.
2: operating at lower cost hence at greater profit
Successful companies either have a cost advantage or a value advantage, or – even better – a
combination of the two. Cost advantage gives a lower cost profile and value advantage gives the
product a ‘plus’ over competitive offerings.
Cost advantage
The experience curve is a phenomenon with its roots in the earlier notion of the ‘learning curve’, in
world war II, researchers discovered the possibility to identify and predict improvements in the rate
of output of workers as they became more skilled in the processes and tasks on which they were
working. The relationship that the experience curve describes is between real unit cots and
cumulative volume. Today, much of the product cost lies outside the business in the wider supply
chain.
1
