Some say we are in the digital age and others term it the knowledge economy. Either way, it’s clear that businesses that ignore the rapidly changing marketplace risk being replaced by a competitor with a disruptive technology or by an upstream supplier. So when you consider your business among the suppliers in your value chain, how do you retain the most value?
This summer, I read an article by Michael Jacobides and John Paul MacDuffie in Harvard Business Review, July-August 2013 issue: How to Drive Value Your Way. If you missed it, grab a reprint, because I think the authors hit on a key focus for many corporations—competitive value. My favorite line in the article,“New corporate giants do not compete in a sector, they shape it.” underscores the important thing successful companies do well—actively influence the entire value chain. They analyze four factors that can trip up established players (like Blockbuster) and make way for newcomers (Netflix). The factors are: irreplaceability, quality, customer needs, and managing growth.
Carmakers and other industry leaders like Apple and Google gain and hold on to strategic control and value in their industries in four key ways:
- Controlling the assets least likely to be commoditized (and blocking others’ efforts to do the same)
- Serving as “guarantor of quality” to the end customer (including assuming responsibility for the entire product, even components made by suppliers)
- Staying in close touch with changing customer needs (changes in the end consumer are often accompanied by shifts in who captures the most value in an industry)
- Balancing the imperatives of growth and strategic control of the value chain.
Because I am immersed in supply chain, it occurs to me that a 3PL is uniquely positioned to help companies stay relevant to their customers, maintain quality standards, and grow. For simplicity, I’ll use a retail example, but I think it is easy to see how a 3PL can help companies in all industry segments retain value. Here are three main ways a logistics service provider can help your company evolve and gain a competitive edge.
- Match consumers’ order and delivery demand, especially in omni –channel retailing. Not so long ago, the customer order cycle was linear and purchases were made in a brick and mortar store or through a catalog. Today, shoppers research products and purchase through any number of channels—from smartphone to laptop to retail store and more. And with more consumers looking for free shipping, same day shipping, or ship to store, corporations need a finely tuned inventory management and fulfillment system. That’s where a 3PL can add significant value without adding headcount. Supply chain management is the key to staying on top of customer needs.
- Leverage advanced and specialized supply chain functions to maintain quality. Companies large and small care about delivering high quality products to their customers. Your reputation depends on goods that arrive in excellent condition and it makes clear business sense to minimize exceptions. 3PL services like special handling and reverse logistics help companies with flawless delivery—even for high value or specialized products—and ensure the returns process operates according to plan.
- Plan and execute a smart growth strategy based on network optimization. Every company wants to grow. You might be opening a new office or location, starting up a new product line, or wanting to reevaluate distribution center locations to position your company for optimum growth. A competitive supply chain can fuel your growth story and a 3PL can add value in any number of ways. For example, a 3PL with global office locations can be the feet on the street when you enter a new market. Supply chain experts can help you with connections to carriers, customs brokerage expertise, and technology integration to keep everyone on the same page and give you the visibility you need. Logistics experts are often the first to involve with a new product launch to ensure the new line is distributed effectively. And sometimes you might need extra supply chain consulting resources to optimize your network. For example, some companies increase their efficiency and reduce costs when they locate distribution centers near key ports or suppliers.
In a competitive market when similar products strive to capture the most market share, a highly effective supply chain can provide a significant competitive advantage. Innovation is key to prolonged success, and logistics advances are almost always a worthy investment. When it costs you less to distribute your goods, when your customers look to you as the model of quality, and when you can find new ways to make your inventory and distribution systems more efficient—you succeed.
 Jacobides, Michael G., MacDuffie, John Paul. How to Drive Value Your Way. Harvard Business Review, July-August 2013, p 93-100. HBR Reprint R1307H.