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Strategic Logistics Management
Introduction
Logistics is management of movement of goods from the place of production to the intended destination, for example, a customer. Logistics management is a complex issue for most companies regardless the company size and profitability level. However, the companies that accept complexity of strategic management of logistics are more successful than the others, because they are able to maximize their profits and come up with better ways of countering their competitors.
Background
Extensive studies of logistics are explained by the fact that numerous industries in the world utilize different ways of marketing their products. However, there are some general characteristics of strategic logistics management that can be viewed in most companies. Therefore, this essay views Michelin Company engaged in the tyre industry. This company has shown great success in the past beating its competitors in the UK and in the rest of the world. The reason behind such success lies in the company management of logistics and wise strategic planning. However, there are some areas in which the company has failed to perform to its best. These have also been covered by looking into ways in which the company can better its management of logistics and in the process, derive more profits.
Strategy Tools
Reverse Logistics
Michelin company was chosen for analysis due to its top strategies recognized all over the world. In 2009 the company came up with a strategy of using reverse logistics in order to make sure that they could maximize their profits. Michelin decided to recycle their used tyres and use them in the production of new ones. In the past, the company used to hire private contractors for recycling which meant additional costs. However, it was decided that Michelin could carry out this activity on their own. According to the company financial report this approach allowed to save considerable amount of funds.
Logistics management involves numerous aspects. Each of these aspects has importance for companies and researchers. However, it is clear that there is no single strategy that can be said to be the best since it only depends on the results obtained after the strategy has been implemented. The management of goods from the time of production to the time they reach the consumer is what most analysts consider. However, Michelin went the extra mile and noted that this process could be reversed. This is one of the most creative ways in which a company can manipulate logistics and come up with a better way of managing their products.
Reduction in cost can also be good news for the customers, because the costs can be adjusted in the best way possible, in a bid to reach the demands of the consumers. When this is done, the company is most likely to attract more customers. The wages and salaries that are paid to the workers can also be adjusted in their favor. In short, this strategy can have two important ramifications. First, it is important for a company to come up with ways in which it can reduce its costs, especially by considering their waste materials. Secondly, it is important for a company to exhibit creativity in their bid to come up with the best strategies that would secure they overcome their rivals. This calls for bright and young minds to be incorporated into the decision making process of every company.
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Networking
How the company products reach their consumers is an important factor to consider, since lack of sound strategy in which a company can satisfy its consumers is the beginning of a down fall. Therefore, Michelin has been able to come up with and support supply chains that are vital for ensuring that their consumers get the best products and that these products are delivered on time. In 2011, the company was awarded the two top awards from DLA. During this year, Michelin was one among 182 companies, compared to the 7,000 military parts suppliers, which were recognized as meeting the performance requirements of the military. It was recognized as the prime contractor for tyre-privatization initiative by the government. Apart from these merits it is vital to look at the comments made by the defense on success of this company in achievement of consumer satisfaction. First, it is vital to note that Michelin supplies its products all over the world. This means that it is a company that has a wide market share. It supplies its products to companies all over the world. This happens in large scale, in terms of quantities and quality of services
According to the Chairman of Michelin in North America, Dick Wilkerson, the global supply chain capabilities of the company have enabled it to achieve success that it has exhibited. The fact that they work with partners such as SAIC, Lockheed Martin and other suppliers has enabled them supply their quality products in time. Timely supply of its products to soldiers, airmen, sailors and marines enables the company to retain these customers for as long as they keep up with their good work and services. This strategy has ensured success of Michelin. Most companies in the world want to offer their customers full satisfaction in the products that they require. However, there is a stereotypic idea that the business world is hugely competitive. This means that most companies think that they are there to compete with all the rest. Therefore, they operate in the market as individuals.
Even the biggest of companies try their best to come up with ways in which they can cooperate with other companies so as to gain mutual benefits. Also, two companies joining their efforts can achieve more than one on its own. For this reason, the greatest companies in the world are built on lasting partnerships. When they are able to network with suppliers of different consumers, as well as establish a lasting relationship with them, reaching success becomes easy. Marketing and actual sales are another vital issue related to supply chains. When a company is able to collaborate with other companies, there is the probability of commanding a larger market since the market that belonged to the partner is now acquired by the company. It does not matter how small the companies are. A perfect example is Coca Cola Company. This company has numerous partners who act as distributors in many countries. This ensures that the company is able to reach the most remote consumers.
The two strategies reviewed above provide enough grounds to give a clear idea of the issue. However, there is a need to undertake these strategies with great care since miscalculation of the same could lead to counter result and downfall of the company. Teams, rich in terms of talent, experience and creativity should be used for the purpose of deciding on how these strategies are to be applied. For example, a company might rush into unprofitable partnership. This may be a company that expects much more than it provides. In such case, the company may be forced to pull out of the partnership much later. When this happens, it may become extremely hard for this company to get back to the position in which it was. This is due to the use of ideas that are not well synthesized and discussed. Therefore, it is important for these companies to critically analyze new ideas before applying them practically.
Approaches to Logistics that Could Be Used
Management of People
It is also vital to point out that the most important factor in logistics management is management of people. This is a fact that surpasses technology and the products themselves because people are the main contributors and movers of all the other factors of production. Although, it has not been discussed for Michelin, the labor force of an organization can be extremely instrumental in ensuring success of a company. As it has been witnessed with Michelin, they are more focused on delivery of the products and the parties that are going to be involved in delivery of this product. However, management of people can ensure that a company comes up with a long lasting money-making machine that can be used in achieving expected profits for a long period of time. This can go on for a longer period of time than anyone would ever expect.
As a matter of fact, enhancement of labor force basically means an increase in productivity of the company. Eventually, the suppliers get positive feedback from the consumers on the enhanced quality of the product. This, it its turn, ensures that the demand for the product increases. The government is also able to appreciate the role a company plays in setting an example of the products standards that could further be adopted by other companies. This shows that labor management is a logistics management strategy whose efficiency cannot be doubted. Also, it is important to consider the fact that Michelin is a multinational company. Therefore, the strategy that they may use to come up with a better work force can be applied for all their representatives all over the world. This ensure the process of acquiring stable profits as well as ensures that the consumers receive the quality product timely. In this regard company management should pay attention to such measures as training its workers, salary raise, appraisal programs and good working environment among other strategies.
Pricing
Pricing is another issue that comes into question when the point of view of the customers is considered. No matter how complex the logistics management strategies are, the end point is always the customer. Therefore, any strategy that directly deals with customers, or grabs their attention is worth looking at. The prices of any products are the major determinants of the fact whether the customers will be attracted to the product or not. Hence, when discussing the factor of affordability, it is important to note that all the other factors have been held constant. This means that factors such as quality of servicers are not considered by the customers. Therefore, the only company that will get attention of the customers is the one that offers the lowest prices. However, these reductions in prices should come with relevant advertisement. Failure of advertising new product might put, the company in a weird position where the prices have reduced, yet the sales are the same.
When a company reduces the price of its products, it attracts much buying. The equilibrium prices in the market are determined by the forces of supply and demand. For this reason, there is a set price in the market that a company is obliged to place its products at. However, the company must not put this price on its products. It does not have to go way below this equilibrium price. Instead, it can just set a price that is slightly lower than the set one. This ensures that the company is in a better position to be noticed by the consumers. When this happens, sales of this company tend to increase. Therefore, the profit margins also increase. In the long run, this company notices that it makes equal or slightly higher profits as other companies that operate at the market price. For this reason, the method is proven to be satisfactory. The other fact is that it finally gets attention of most of the customers. This means that the consumers begin to associate certain products with particular company; resulting to the company being able to acquire permanent customers. In case if raise in prices is required the company does that without much fear, since at this point it may only lose a few customers and keep the rest. There above are only a few among other strategies that can be applied to Michelin, as well as all other companies in the world to better their performance. However, it is clear that the manner in which the exercise is undertaken largely determines its success.
Outsourcing
Most of the businesses have a way in which they can stretch themselves to reach desired heights. This is because there are some goals that may seem too huge for an organization. The extent of this is measured from the hugeness of the goals, as well as the ability of the organization. For example, a business may be willing to expand its market. However, it may be limited by the fact that in the new markets, there are other existing organizations that provide the same products. These are companies that may have already established themselves in these areas. In such a case, the company may find the need to outsource, rather than stretch its wings beyond its abilities. Research shows that partnership with third parties always increases the efficiency of an organization. This is because the resources of both the companies are brought together. The talents that are in each company are brought to the table. Therefore, the two companies complement each other perfectly. This means that the abilities that are not contained in one company may be found in the other. As a result of this, the efficiency of their workforces is increased to a maximum level.
Michelin Company was seen to cooperate with other businesses as well. This was in ways in which each one of them was helping the other achieve set goals. However, there is a need to consider total partnership. This is where the company approaches another and merges with it into one. From the information obtained, it is clear that there are other tire companies in the world that offer great competition to Michelin. This is because of the size and market share factors. The success of Michelin can only be mentioned in comparison to other smaller companies. This is because it has other rivals which it dreads to meet with in the same market. Therefore, the success of this company does not prove that it can function independently and exist for a long time. There is a need to look for suitable companies with which to form partnerships. When this is achieved, there is a tremendous increase in the market that these two companies command. It also ensures that the two obtain their products at a larger scale. Therefore, they are largely favored by the economies of scale. Also, the two companies are able to supply customers with extremely high demand for products. These are clients that would demand quantities of commodities which none of the two would produce separately, in the given time span.
Management Issues Caused by Implementing New Logistics
Application of new logistics may seem simple on paper. However, there are numerous issues associated with practical application of the latter. The first major issue is the capital. Implementation of new ideas requires financial resources and relevant investments. Every company has activities that it has to run on a daily basis. Findings that may come from their strategists may be the least of their priorities, in terms of spending their money. For this reason, most companies tend to shy away from implementing new logistics. They insist on sticking with the old ones, since they go at a cheaper cost. When this happens, the bright minds that come up with the ideas for new logistics lack their relevance. This is because the company lacks the initiative, as well as the ability to implement the new logistics. This is one of the most prevalent and negative management issue caused by the implementation of new logistics in a company.
Human resources are another challenging factor. Most people are resistant to changes. Therefore, trying to change the ideas and way of operation can prove to be difficult. This presents a challenge to companies, in a bid to come up with a way in which they can incorporate new ideas into working schedules of their workers. Technical resources account fort the last important issue associated with the same. New logistics might come with the demand to acquire more technical equipment, as well as manpower for relevant technological changes to be implemented. Therefore, most companies opt to apply the ideas whose productivity is mostly guaranteed. This means that they opt to stick with the old ideas and strategies in their logistics. This hinders the application and execution of new ideas into the logistics process.
Significance of New Technology to Future Logistics Strategies
As time goes by, new technologies are introduced in all sectors of the economy. These are technologies that ensure the need for adaptability of companies all over the world. Trends in economies are equally effective on adaptability of companies. Some of the trends that could be mentioned are those in customer expectations, networked economies, cost minimization pressure, globalization, talent shortfalls, volatility, increased risk and sustainability pressure. Therefore, the above trends, as well as technologies that are expected in the future can affect performance of a company. The best thing for a company is to prevent factors which might force it to take steps that are completely unplanned for. In case the company fails to keep up with technological advancements it may end up losing market share, as well as the popularity that it once enjoyed among the customers. Therefore, it is forced to undertake rapid measures which put it under pressure. To eliminate this occurrence every company should have a research team which would be responsible for updating the decision makers with any information that may affect the company, with regards to changing technologies and trends.
Conclusion
The essay above discusses different ways in which a company can acquire and apply logistic management strategies. Along with it is a case study of Michelin Company which acts as a representation of all the companies in the world. The problems that may arise from these strategies, as well as the advantages have also been covered in this paper. Despite the shortcomings that have been reviewed, it can be concluded that it is only the companies that understand and appreciate complexity of strategic management of logistics may be able to achieve considerable success.
