The role of logistics in the formulation and deployment of strategy: an empirical analysis of australian packaged consumer products manufacturers

For a number of organisations the practice of logistics management has changed from an operational concern with the elemental activities to a strategic interest in how effective logistics management can help achieve corporate objectives. A detailed investigation of six Australian packaged consumer goods manufacturers was carried out to test this link. First a framework was used to determine the level of sophistication of the logistics operations of these companies. This framework examines six process capabilities and five support capabilities. Sophisticated logistics operations employ advanced technology in the physical and communication activities, focus on effective interrelationships along the supply chain and use leading edge logistics management practices

The characteristics of the logistics operations of these companies were then linked to logistics of strategy to external business environmental drivers and of change projects, that these companies hadnderway, to logistics strategy and to corporate strategy, was examined. It was found that these companies had relatively unsophisticated logistics operations which did relate to the basic nature of their logistics environment—few customers, large shipments, a small number of Stock-Keeping Units (SKUs) and few suppliers. However, over the next two years all six companies had plans to increase substantially the sophistication levels of their logistics operations. All had substantial change projects underway, but none had a logistics strategy to guide and prioritise these projects. And all had vague or difficult-to-operationalise corporate strategies. For these companies logistics was not being employed strategically. As a result of using our framework these companies would be advised to: more clearly specih their corporate strategies in operational terms; develop a logistics strategy and ensure that it links with the corporate strategy; avoid investing resources to increase the sophistication of their logistics operalions; and work on improving the processes and management of their existing relatively unsophisticated logistics systems.This is a signij2antly different course of action to that actually planned.

The next phases of the overall research study-looking at other industry groups in Australia and comparing thcm with similar groupings in Japan, South Korea, Taiwan and Singapore-will detennine whether this situation is widespread or just applicable to one AustraIian indust y group.