Topic 10 – Strategic Logistics Planning

Outline

1.1 What is Strategic Planning?

1.2 The Importance of Planning

1.3 The Corporate Planning Process

1.1 What is Strategic Planning?

Definition of strategic planning:

“The process of identifying the long-term goals of the entity (where we want to be) and the broad steps necessary to achieve these goals over a long-term horizon (how to get there), incorporating the concerns and future expectations of the major stakeholders.”

Source:

Cooper, M.C., Innis, D.E. and Dickson, P., (1992), Strategic Planning for Logistics, Oak Brook, Illinois : Council of Logistics Management : p. 3.

1.1 What is Strategic Planning?

Definition of logistics strategic planning:

“A unified, comprehensive, and integrated planning process to achieve competitive advantage through increased value and customer service, which results in superior customer satisfaction (where we want to be), by anticipating future demand for logistics services and managing the resources of the entire supply chain (how to get there). This planning is done within the context of the overall corporate goals and plan”

Source:

Cooper, M.C., Innis, D.E. and Dickson, P., (1992), Strategic Planning for Logistics, Oak Brook, Illinois : Council of Logistics Management : p. 4-5.

1.1 What is Strategic Planning?

Definition covers three major elements:

a. long-term goals – customer satisfaction, competitive advantage, supply chain management

b. the means to achieving these goals – value, customer service

c. the process for achieving these goals – anticipate, manage, relate to company goals

The strategic plan covers a period of five or more years.

1.2 The Importance of Planning

Minimizes risk in a Changing Environment

a. anticipating change and developing strategies to deal with it

Basically two types of plans:

a. Operating Plan – covers a period of one or two years

b. Strategic Plan – covers a period of five or more years

1.2 The Importance of Planning (con’t)

Strategic plan “can be thought of as a set of guideposts which keeps the operating plan on the path to meeting objectives. It is the operating plan which must be programmed in fine detail to demonstrate how the objectives will be reached and to justify the expenditures of the … budget.”

Source:

Stern, M.E., (1966), Marketing Planning : A Systems Approach, New York : McGraw-Hill : p.4.

1.3 The Corporate Planning Process

Planning must take place within the following constraints:

a. Political & legal environment

b. Social & economic environment

c. Technological environment

d. Competitive environment

1.3 The Corporate Planning Process

Evaluation of the Consumer & Identification of Potential Target Markets

a. Who, when, what, why, how analysis

b. Competitive analysis by market segment is more meaningful than an overall competitive analysis.

1.3 The Corporate Planning Process

Evaluation & Selection of Target Markets

a. Requires a preliminary profitability analysis

b. Only those costs that would change by adding or dropping a segment should be included in the profitability analysis.

1.3 The Corporate Planning Process

Formulation of Supply Chain Objectives & Strategies

a. Supply chain objectives flow from a firm’s marketing objectives, e.g market coverage and customer service levels.

b. Supply chain strategy is the specific plan to achieve these objectives, e.g. push versus pull inventory strategy.

1.3 The Corporate Planning Process

Identification & Evaluation of Supply Chain Structure Alternatives

a. Supply chain structure affects:

Speed and consistency of delivery & communication

Control of performance

Cost of operations

b. Evaluate alternatives available for in-house versus outsourcing

1.3 The Corporate Planning Process

Selection of Supply Chain Structure

a. Potential profitability is important when selecting structure

b. Program various components of marketing mix – time, place and possession utility

1.3 The Corporate Planning Process

Formulation of the Strategic Logistics Plan

a. Marketing Input

Proposed product

Pricing

Promotional strategies

Sales forecasts by geographic area, by account type, by customer

Customer service policies by account type and geographic area

1.3 The Corporate Planning Process

Formulation of the Strategic Logistics Plan

b. Manufacturing Input

Location of production facilities

Manufacturing capabilities at each facility

Planned production for each product

1.3 The Corporate Planning Process

Formulation of the Strategic Logistics Plan

c. Purchasing Input

Supplier network

New technologies

Potential new materials or services

New sources of supply for existing materials & services

1.3 The Corporate Planning Process

Formulation of the Strategic Logistics Plan

d. Finance/Accounting Input

Cost data required to perform segmental analysis

Cost data required to perform logistics trade-off analysis

Availability of capital to finance logistics assets

Corporate hurdle rates

1.3 The Corporate Planning Process

Formulation of the Strategic Logistics Plan

e. Logistics Input

Existing product storage locations

Current transportation links

Operating characteristics of distribution centers : size, volume, product mix

Fixed & variable costs associated with materials flow & storage

1.3 The Corporate Planning Process

Formulation of the Strategic Logistics Plan

f. Requirements of a strategic logistics plan:

Alignment with corporate strategies & marketing plans

Competitive customer service study

Total cost analysis

1.3 The Corporate Planning Process

Formulation of the Strategic Logistics Plan

Components of the strategic logistics plan:

Management overview

Statement of logistics objectives

Description of individual customer service, inventory, warehousing, order processing & transportation strategies to support the overall plan

Outline of major logistics program or operational plans

Forecast of workforce & capital requirements

1.3 The Corporate Planning Process

Formulation of the Strategic Logistics Plan

(Components of the strategic logistics plan)

Logistics financial statement

Description of business impact of the logistics strategy

1.3 The Corporate Planning Process

Evaluation & Selection of Supply Chain Members

a. Selection criteria must support operational objectives and procedures.

1.3 The Corporate Planning Process

Performance Evaluation & Supply Chain Modification

a. Measure by customer segments using profitability analysis

b. Modification can involve:

Changing existing processes

Changing supply chain members

Changing supply chain structure

c. A logistics audit program should be conducted on a routine basis.

Topic 10

Summary

and

Conclusion

1. Logisticians must be become involved in the corporate strategic planning process in order to meet and overcome the challenges placed on logistics to facilitate the achievement of corporate objectives.

2. Generally, a strategic logistics plan flows from and support an organization’s marketing objectives.

3. Strategic logistics planning must seek and consider inputs from marketing, manufacturing, purchasing, finance/accounting and the various logistics functional areas.

4. The planning process is a dynamic one and requires logisticians to continuously audit and measure performance against efficiency and profitability goals.

5. Changes may be made to existing processes, supply chain members or the logistics structure itself to correct gaps in performance.