The main goal of effective logistics and supply chain management is providing of sustainable competitive advantage. The source of sustainable competitive advantage is contained in the ability of the company to differentiate itself from competition, in the eyes of the customer. Another way of differentiating is by operating at a lower cost and subsequently obtaining at greater profit.

It is no longer enough to assume that good products will sell themselves effortlessly. Also, it is not likely that success of today will carry forward into tomorrow, without providing necessary actions that will protect sustainable competitive advantage.

Cost advantage is one of components of sustainable competitive advantage. In many industries there will typically be one competitor who will be the low-cost producer and often that competitor will have the biggest sales volume in the sector. There is substantial evidence to suggest that \”size matters\” when it comes to cost advantage as part of sustainable competitive advantage. This is partly due to economies of scale, which enable fixed costs to be spread over a greater volume. On the other hand, the impact of experience curve is contributing as well.

Value advantage is another component of that contributes to sustainable competitive advantage. For a long time it has understood that customers don\’t buy products, they buy \”benefits\”. In other words, the product is purchased not for itself but for the expectation of what it will \”deliver\” to the shopper. Unless the product or service we offer can be distinguished in some way from its competitors there is a strong possibility that the marketplace will view it as just as \”commodity\” and so the sale will tend to go to the cheapest supplier. Therefore it is important to look for additional functionalities of a product that will bring sustainable competitive advantage.

What are the means by which such value differentiation and sustainable competitive advantage may be gained? Basically the development of a strategy based upon added values will normally require a more segmented approach to the market.

Another strong factor that strengthens the position of the company in the market is the availability of the product. The product that is frequently out of stock does not have much chance to succeed in the market. This refers to the shopper response, but also retailers do not like to deal with products that have unreliable chain of supply.

One of the answers for avoiding of stock out is the proper inventory management. Every order should secure the cycle stock, with safety stock in case of demand fluctuation.

From the logistical side the stress is on timely and completely delivery. The OTIF is the key performance indicator that helps proper availability of the product in the market. OTIF – is the Supply Chain term that describes the logistic service level. The OTIF is fulfilled if the product is delivered to the customer according the OTIF principles:

OT – On Time ( delivery according the agreed delivery window )

IF – In Full ( delivery was in full, no ordered products missing )

If the delivery is not full, the missing products can contribute to the stock out. Also, if the delivery was late, the availability is in jeopardy again. Only full compliance of the OTIF principle can provide full logistical service. OTIF is one of the most important factors that influence performance management of the logistic.

The underlying sustainable competitive advantage philosophy behind the logistics and supply chain concept is that of planning and coordinating the materials flow from source to user as an integrated system rather than, as was so often the case in the past, managing the goods flow as a series of independent activities. Thus under this approach the goal is to link the marketplace, the distribution network, the manufacturing process and the procurement activity in such a way that customers are serviced at higher levels and yet at lower cost. In other words the goal is to achieve sustainable competitive advantage through cost reduction, service enhancement and effect of the experience curve.

Sustainable Competitive Advantage and Performance Management are important aspects uf successful Supply Chain Management. Check more on Biz-Development.com

Check http://www.biz-development.com/SupplyChain/6.2.Sustainable-Competitive-Advantage.htm for more information about competitive advantage. Also, check http://www.biz-development.com/PerformanceManagement/2.16.Performance-Management.htm for info about Performance Management

Author Bio: Sustainable Competitive Advantage and Performance Management are important aspects uf successful Supply Chain Management. Check more on Biz-Development.com

Category: Business
Keywords: competitive advantage, cost advantage, value advantage, otif, performance management