The need to compete has led many organisations to assess their core business and reduce costs. This is often seen in value chain analysis. Once this analysis is complete organisations can look at what forms part of the core activities and what could be contracted out: outsourcing. In this way in an effort to identify best methods and economies, companies may make the decision to shift the logistic responsibilities to specialist providers.
A good way of expressing this is by thinking while on the road how many Lorries display the word logistics in their logo. How many used to? Here we see a very simple example of the growth of specialist logistic companies which now form essential parts of value adding services being formed to integrate the supply chain.
The Cost of Distribution
The largest retailers’ competitive edge is cost but is this out of choice or necessity? Another issue is that the manufacturers were forced to focus on distribution costs creating a synergy on focusing on cost reductions to the detriment of other strategies such as order fulfilment.
This change in strategic thinking led to the consolidation of retailers, i.e. Walmart with Asda and Morrison’s merger with Safeway. Creating, or adding more pressure on manufacturers and suppliers. As a result, these manufacturers had to change their supply chain strategies by producing ‘tailor-made’ packaging, creating scheduled deliveries and continuous replenishment systems.