Logistics and SCM Competitive Advantage December 26, 2021

What is Competitive Advantage?

Competitive advantage refers to factors that allow a company to produce goods or services
better or more cheaply than its rivals. These factors allow the productive entity to generate more
sales or superior margins compared to its market rivals.

Competitive advantages are attributed to a variety of factors including cost structure,

branding, the quality of product offerings, the distribution network, intellectual property, and
customer service.

3C’s of Competitive Advantage

The 3C Model by Ohmae was developed by the Japanese organizational theorist Kenichi
Ohmae, by the successful and optimum integration of these 3 factors (Customers, Competitors,
and Corporation), the aim of sustained competitive advantage can be accomplished.

It offers a strategic look at the factors needed for success. These are the customer, the
competitors, and the corporation. The primary goal of the 3C model should be the interest of the
customer and not those of the shareholders because a company that is genuinely interested in its
customers will automatically take care of shareholder interests.

Figure: 3C’s Model of Competitive Advantage

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Customers – The customers have needs and want and the company understands the requirements
of the customers. The company should be able to understand, meet, and cater to the needs and
demands of the customers rather than of the shareholders of the company.

Competitors – The business needs to conduct a thorough competitive analysis in the market
figuring out that who are the direct competitors and who are the indirect competitors. Finding out
their core strengths, business strategies, values, objectives, sales strategies, marketing strategies,
and other such crucial facets is important to work out the plan to beat the competition and gain the
advantage.

Corporation / Company – The company should be genuinely interested in the customers as doing
the same will automatically take care of the shareholders, profits, sales, and other crucial objectives
of the business. The customer should always be at the focal point of every business aspect.

The 3C’s provide a great framework within which you can think about your business. This
isn’t the most complex model for making strategic business decisions, but that is exactly the point
– it doesn’t have to be. By boiling business down to these three basic C’s – the customer,
competitors, and corporation – you should be able to think clearly and make sound, logical
strategic decisions consistently.

Understanding the 3C Model Competitive Analysis

Competitors’ Advantage – this area is where the competitors’ products offer features that
cause the customer to prefer these other products over yours and where they are willing to pay for
this differentiation. You cannot be good at everything and sometimes you may have to accept that
your competitor having some success in the market which is what is lack of.

Price war – there is little differentiation between products and where the customer is still
willing to pay the price demanded. Your customers have trouble seeing your value versus your
competitor’s and the results are a price war.
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Competitive Advantage – this area is where a company’s products offer features or other
qualities that cause the customer to prefer your product over a competitor’s AND where they are
willing to pay for this differentiation.

Gaining Competitive Advantage through Logistics

Logistics aims to meet the increasing demands of customers at the lowest possible cost, managing
the flow of materials and information in every activity that makes up the logistics system, from
the supplier to the end consumer.

As a result of its purpose, the logistics can put the company ahead of its competitors in two ways:

• Advantage of providing value by offering services such as delivering faster or scheduled,

product assembly, etc …, creating customer value.
• Productivity advantage, making goods cheaper costs, partnering with suppliers and
business customers, making activities and processes more efficient, by compensating for
the reduction of total logistics costs, etc. …, putting on the market with lower prices than
the competition.

Competitive performance and Supply Chain

According to the market research firm, Gartner, “Supply chain planning (SCP) is the
forward-looking process of coordinating assets to optimize the delivery of goods, services and
information from supplier to customer, balancing supply and demand.” SCP considers every
stakeholder, from raw materials suppliers to end customers, to build a cohesive plan to optimize a
company’s production, sales and operations and develop key performance metrics to ensure
efficient and cost-effective operations.

Efficient supply chain planning achieves three goals: lowering production costs, increasing
sales and bolstering supplier relationships. Supply chains can improve their performance by
developing competitive priorities in a specified sequence: quality, reliability, flexibility, agility,
and finally, cost efficiency.
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Changing Logistics Environment

A Growing Customer Base: The world’s population is rising and expected to reach 9 billion in
2050. Augmentation of internet access and growing e-commerce demand will require logistics
providers to deliver to remote locations in emerging economies. At the mean time, the logistics
industry will be affected by demographic shifts as well.

The Rise of The Digital Consumer: The number of Smartphone subscriptions is predicted to
approximately double to 4 billion by 2025. With the increased use of digital services, people will
begin to expect similar service quality in other industries. As such, logistics companies will strive
to serve their retail and corporate customers through multiple platforms.

Political and Economic Developments: Similar to any industry, the logistics industry is affected
by geopolitical and economic developments. Oil prices, trade harmonization, and growing concern
in relation to the environment top the list. Accordingly, logistics companies will seek out methods
to utilize greener methods of transportation.

The Internet of Things (The Third Age of The Internet): Described as a smart network in which
devices connect and exchange information with each other through various communication
protocols, the IoT trend will positively impact the logistics industry. By 2020, IoT is expected to
grow to almost 50 billion objects. This trend provides potential for improved efficiency in the
logistics industry. The big data collected by this technology will offer instant analysis and supply
chain information to logistics providers and customers.

Rise of The Platforms: Giant internet platforms such as eBay, Amazon and Alibaba are among
the most major latest trends. These platforms enable startups and small firms to operate in a global
market and customers – businesses or consumers – benefit from having a broad range of alternative
suppliers to select from.

Planning

Planning is the process of thinking regarding the activities required to achieve a desired
goal. Planning is based on foresight, the fundamental capacity for mental time travel. The evolution
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of forethought, the capacity to think ahead, is considered to have been a prime mover in human
evolution.

Levels of Planning

There are three main types of plans that a manager will use in his or her pursuit of company goals,
which include operational, tactical and strategic.

Strategic Plans

To best understand the relationship between the different types of plans, let's start at the top.
Strategic plans are designed with the entire organization in mind and begin with an organization's
mission. Top-level managers, such as CEOs or presidents, will design and execute strategic plans
to paint a picture of the desired future and long-term goals of the organization. Essentially, strategic
plans look ahead to where the organization wants to be in three, five, even ten years. Strategic
plans, provided by top-level managers, serve as the framework for lower-level planning.

Tactical Plans

Now that you have a general idea for how organizational planning evolves, let's look at the
next level of planning, known as tactical planning. Tactical plans support strategic plans by
translating them into specific plans relevant to a distinct area of the organization. Tactical plans
are concerned with the responsibility and functionality of lower-level departments to fulfill their
parts of the strategic plan.

Operational Plans

Operational plans sit at the bottom of the totem pole; they are the plans that are made by
frontline, or low-level, managers. All operational plans are focused on the specific procedures and
processes that occur within the lowest levels of the organization. Managers must plan the routine
tasks of the department using a high level of detail.

Problems in Logistics Planning and Management

Customer Service: Logistics management is all about providing the right product in the right
quantity to the right place at the right time. One of the major challenges in the logistics industry is
that customers want full transparency into where their delivery is at all times. In this day and age,
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the location of a customer’s shipment is as interconnected as your social network. In fact, as

customer expectations have increased, their willingness to pay for fast shipping has decreased,
with just about 64 percent of consumers unwilling to pay anything extra for less than two-day
shipping.

Transportation Cost Control: Another major logistics challenge for logistics managers is
controlling costs in your transportation budge. One of the highest costs contributing to the ‘cutting
transportation cost’ concern is fuel prices. Higher fuel prices are likely to increase transportation
costs for shippers this year by pushing up fuel surcharges. Additionally, rising fuel prices are
escalating surcharges added to freight rates, which is reversing a two-year trend that cut into the
revenue and earnings of truckers as fuel prices plummeted.

Supplier/Partner Relationships: It is important to create, understand and follow mutually agreed

upon standards to better understand not only current performance but also opportunities for
improvement. Thus, having two different methods for measuring and communicating performance
and results in time and effort wasted. Changing geopolitical scenarios has made difficult to predict
the sustainable suppliers.

Government and Environmental Regulations: Carriers face significant compliance regulations

imposed by federal, state, and local authorities. As well as federal regulations, environmental
issues such as the anti-idling and other emission reduction regulations brought about by state and
local governments have created concern that the compliance costs could exceed their benefits.
Frequent changes in regulations makes planning logistics difficult for the managers to do.

Guidelines for strategy formulation

1. Write a Vision Statement: A vision statement (crisp and to the point) is a must for
developing a strategy. Exploring and deciding on the vision of the company gives you
clarity on the main objectives of the company.
2. Mission Statement: Decide a Mission statement for the company. This mission statement
would actually determine the methodology of the company in reaching its vision, its
purposes and its philosophy behind its goals.
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3. Define the company profile: The company profile needs to be comprehensive which
further clears the goals of the organization. What would be the strengths of the company,
capabilities, management. In essence mention everything you can about the company. This
helps in transparency while deciding the strategy.

4. Study the External environment: No strategy can be complete without taking into
consideration the effect that external environment has on businesses. Thus an in depth
study on external environment is necessary and the same should be mentioned in the
strategy report.

5. The 5th step involves matching all three – Mission statement, Company profile and the
external environment such that they are in sync to achieve the vision of the company.

From here on, Step 6 to 10 involve decision making based on the research as well as the
decisions taken for the company in the previous steps. The last steps are more inclined
towards implementation.

6. Deciding the actions for accomplishing the mission of the organization

7. Selecting long term strategies which will be most effective
8. Deciding on short term strategies arising from the long-term ones such that these short-
term strategies too are in sync with the mission and vision statement
9. Deciding the budget and resource allocation according to the short-term strategy
10. Implementation of the strategies along with pre decided review system along with
measures to maintain control and a fallback short-term plan.

Channel Strategy

A channel strategy refers to a vendor's plan to move a product or service through a chain
of commerce to the end customer. Channels serve two primary functions. The first is to sell a
product or service to a customer, and the second is to deliver a customer experience. Companies
can distribute their goods and services through direct or indirect channels. Here is how each of
these types of channels operates:
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Direct channel: In a direct channel, consumers buy a product or service directly from a company.
For example, a consumer might purchase a product from a physical storefront or an e-commerce
website.

Indirect channel: In an indirect channel, consumers purchase a product or service from an

intermediary instead of directly from the company that produced it. For example, a consumer
might buy a product from another large retailer that the company distributes their products to.

A complete channel strategy includes all the steps a vendor takes to connect with their target
customers through various platforms or channels. The goal of each channel strategy can vary,
depending on a company's overarching marketing and sales objectives.

Types of Channels

• Retails
• Wholesale
• Direct to consumer
• Business 2 Business (B2B)
• Franchising
• Dealer Network
• Value added resellers

Ideas of selection of proper channel strategy

Identify your target audience

Start by identifying who your ideal consumers are by building a target audience. A target
audience is the segment of the population that is the most likely to purchase your product. Analyze
your current audience to help you identify what key demographics, interests, beliefs and goals your
consumers have in common.

Determine what channels your consumers use

Determine what channels your ideal consumers use by identifying how they purchase
products. For example, a company that sells shoes might recognize that their consumers purchase
their apparel items through retail outlets and e-commerce platforms, while a company that sells
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accounting software may find that the B2B distribution channel is the best way to reach their target
audience.

Analyze your in-house capabilities

Take the time to analyze your in-house capabilities by determining the size and skill sets
of your workforce, your budget, your inventory storage space and your overall capabilities. This
can help you identify what channel distribution strategy may offer you the most benefits.

Define your business goals

Define your business goals to determine which channel strategy can help you reach them.
You might consider whether you're looking to gain more sales, acquire lifelong customers,
generate brand awareness or increase your profit margins.

Develop a customer journey map

Companies develop customer journey maps to understand the process customers go

through before purchasing a product from them. A customer journey map typically begins with
the first interaction a customer has with a brand and ends when they make a purchase. To develop
a customer journey map, consider what stages your customers go through based on your current
distribution channels.

Measure your progress

Develop a set of key performance indicators (KPIs) you can use to measure the success of
each distribution channel. This can help you identify which channels perform the best. Some of
these KPI’s include:

• Return on Investment
• Revenue Growth
• Sales growth etc…
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References

1. https://www.indeed.com/career-advice/career-development/channel-strategy
2. https://www.marketing91.com/10-steps-in-strategy-formulation/
3. https://www.plslogistics.com/blog/5-challenges-that-logistics-managers-face-every-day
4. https://www.ekol.com/en/7-trends-driving-change-in-logistics/
5. https://6river.com/competitive-advantage-through-supply-chain-planning/
6. http://www.scmconcept.com.br/site/en/a-logistica-empresarial-como-vantagem-
competitiva/
7. https://online.visual-paradigm.com/knowledge/strategic-analysis/what-is-ohmaes-3c-
model/
8. https://www.investopedia.com/terms/c/competitive_advantage.asp