How businesses can achieve competitive advantage? Through Supply Chain.
How businesses can achieve competitive advantage?
What is the contribution of logistics and supply chain to create a competitive advantage?
What logistics and supply chain can leverage to contribute to the business competitive advantage?
Competitive advantage
Logistics and supply chain can have a high contribution to creating a competitive advantage for any business, actually, businesses can achieve competitive advantage by leverage customer preferences through logistics and supply chain by utilizing the processes and activities through the whole supply network.
Business Competitive advantage can be achieved through two routes:
- By adding higher value to the customer, that can be differentiated from other competitors.
- By managing its activities at the least possible cost, which leads to higher profits.
So business needs to identify the customer needs and how much the customer willing to pay to obtain that need, and utilizing the assets used to deliver that needs.
It means business success will be derived from either
- Cost advantage. Or
- Value advantage. Or ideally from
- Both.
Many studies have concluded that the most profitable business in any industry tends to be the lowest-cost producer, or the supplier providing a product with a differentiated value.
As customers become more aware of their needs and they have big access to compare products, features and prices, and value, it becomes more and more critical to businesses to invest heavily in having cost and value advantage.
Cost advantage
Usually, not all suppliers can be cost leadership in any industry, indeed the cost leadership in any industry might be one or two suppliers. However, cost leadership advantage leads to higher sales volume which gives the supplier the advantage to leverage the economies of scale. One of the valuable benefits of economies of scale is spreading the cost over a greater volume.
But increasing economies of scale may not lead to higher profit all the time, as there are significant costs of the product cost incurred from the wider supplies network. Supply chain management takes higher importance with managing costs outside the organization by leading efficiency and productivity within activities between the layers of the supply network.
Value advantage
It’s known in marketing that “customers don’t buy products, they buy benefits” so we usually buy what we get from the product. The benefits we receive might be intangible, tangible, or a combination of both.
Lacking differentiated value means the product will be viewed as a commodity, this means the design of purchase will be taken based on the lowest price.
Business can have the value advantage by segmenting the customer into multiple segment (benefit segmentation) base on their the benefits they are looking to obtain from the product.
A great example here is Apple computers/laptops, line models. Apple offering a range of computer/laptops model with different price tags, and each model targeting a segment of customers. At the high end of the rang we will find the highest performance in line for the processional user (Mac Pro base model starting $5,999), while at the lower end of the range we will find the lowest performance hence capable for entertainment and education tasks (Mac book Air base model starting $899).
However current market becoming more service-sensitive as a lot of customers moving away from being loyal to a specific brand, as most of the product becoming a commodity hence businesses no longer able to compete only on the brand name. And businesses need to have more effort to be differentiated through delivery services, after-sale services, and longer technical support.
