It is no longer acceptable to assume that good products or services are going to sell themselves, nor it is advisable to imagine that today’s success will continue into tomorrow. In this context, the concern of every business is to seek a sustainable and defensible competitive advantage. The source of competitive advantage lies, firstly, in the organization’s ability to distinguish itself from its competition in the eyes of the customer and, secondly, in its ability to operate at a lower cost and hence at a higher profit. Considering the basis of success in any sense, either a cost advantage or a value advantage, or preferably both, define the commercial success of a business.

Traditionally, cost reduction was achieved through increased sales volume but in this globalized economy, the cost of production is impacted by various elements in the wider supply chain. On the other hand, customers have become more sensitive to service, and if they do not find value in them, they may see a product or service as merely a ‘commodity’. As businesses grow and expand across the borders, they become more reliant on effectively organized supply chains which includes sophisticated logistics. This element of supply chains is as crucial in terms of improving efficiency, productivity, customer services and as a result achieving cost reduction and increased service quality.

By designing its logistics strategy to support its core business activities such as designing, manufacturing, marketing, delivering and supporting its product, a firm can gain competitive advantage. To understand cost behavior and existing and potential sources of differentiation, the value chain model disaggregates a company into its strategically relevant activities. On the other hand, logistics management aims to ensure that logistical systems, including partners and consumers over the supply chain, are perfectly integrated in order to gain a competitive advantage.

In the fast-moving business and consumer environments, Companies must be able to meet and exceed high consumer expectations, which require a high degree of logistical competence in the fields of order processing, inventory, transportation, the combination of warehousing, materials handling and packaging, all integrated in an interacting facility design. The processing of orders is a key task that provides reliable and accurate information throughout the logistics systems, especially for forecasting and the communication of customer requirements. Additionally, inventory is another key functional area and its strategy includes a successful combination of core customer segmentation, product profitability, transportation integration, time-based performance and competitive performance that helps to gain customer service advantage than to lower logistics costs. Responsible for the geographical movement and positioning of inventory is the transportation function. The most indispensable determinants of transportation is the cost, speed and consistency of transportation. The logistic framework must be focused on the balance between cost of transport and quality of service, as can be seen in other functional areas.

Contrary to the aforementioned areas, warehousing, material handling and packaging may be considered as one combined unit. Together, they promote speed and overall ease of product flow in the logistic system by helping to store the product efficiently, keep handling times as short as possible and reduce of risk damages for the product. The last functional area is the facility network design. In this context, the number, size and geographical relationship of facilities have an enormous impact on customer service objectives and logistic costs. Besides focusing on these functional areas, company’s efforts to achieve logistical integration, operational responsiveness, variance reduction, inventory reduction, shipment consolidation, quality and life cycle support are the biggest contributors to achieving a competitive advantage.

It has been proven that considering logistics as a strategic function and managing it efficiently can help the organizations of all sizes to achieve cost as well as value advantage in their business. All in all, it should be emphasized that planning, executing and controlling logistics activities as a unified, comprehensive, and integrated process will help an organizations to achieve competitive advantage by increasing value and customer service, resulting in greater customer satisfaction. Ultimately, it is important, as a key differentiator, to develop logistics strategies with a unique set of operational and dynamic capabilities in the light of overall corporate goals and plans.