Logistics management as competitive advantage in retail and e-commerce

Transportation and Logistics Management

1. Logistics management plays a significant role in economic activities. Retailing is a good place to start, because many retailers derive competitive advantage from their logistics programs. Once a company understands that it can measure the value of logistics to its bottom line (Lambert & Burduroglu, 2000), then it can start to figure out the best ways to extract that value. The reality is that for much of the 20th century, logistics was more or less taken for granted. It was simply viewed as something that must be done, rather than something at which a company can excel and from that excellence extract competitive advantage (Ballou, 2007). Firms like Wal-Mart see logistics as a critical component of their value chain. They compete on the basis of being a low cost provider (Bhatnagar & Teo, 2009). To support this, they seek to get goods from factory to store in the most efficient way possible, lowering the per unit cost of logistics. By lowering this per unit cost, the company may end up with the ability to undercut their competitors, if they can get the same good to the store at a lower price. The opposite is also true. Some companies use logistics as a means of getting goods to consumers faster – not cheaper – and leverage this for competitive advantage. Amazon has numerous warehouses, but then they also work with a number of providers to get goods to consumers quickly, which reduces one of the differences between online shopping and in-store shopping. Luxury brands use companies like FedEx to ship one-of-a-kind goods around the world – you can literally walk into a Hermes store in North America, order something that\\\'s only available at a store in Dubai, and it will be in your hands in two days. So logistics is used to differentiate by way of premium service that other companies simply cannot match. How a company uses logistics management to competitive advantage will differ by business model, but more companies are finding that logistics is a critical part of the value chain, and therefore seeking to differentiate with logistics approaches that provide them with competitive advantage.

2. There are a few different security issues that arise in logistics, so it is worth examining them separately. The first is physical security. We know, for example, that there are many different countries goods pass through, or the high seas, and that security levels can vary significantly between them (Cowen, 2010). There are different programs, such as C-TPAT, that cover various different elements of logistics security, in that case terrorism. By setting out best practices, and understanding where the biggest physical vulnerabilities are in a given supply chain, security practices can be made more effective (Sheu, Lee & Niehoff, 2006). Vulnerabilities are of course greater in areas of the world with weaker governance, higher crime rates, and greater rates of corruption, and in many cases companies seek to avoid such places, which is why the most secure areas are often also the ones with the greatest flow of goods and services. Increasingly, digital security is critical in supply chains. Obviously cybersecurity matters for any business whose logistics are basically online – software-as-a-service companies, for example. But companies are increasingly leveraging technology to improve the efficiency of their supply chains, and that creates digital vulnerabilities, not just online but even within closed systems between them and their suppliers. Supply chain partners often move sensitive data between their servers, RFID is common, but easily hackable, and then there are the basic cybersecurity vulnerabilities such as poor password hygiene. Williams, Lueg and LeMay (2008) rightly point out that supply chain security has become a comprehensive task for most organizations, and a mission critical one at that, given the value that their sensitive supply chain information has.