Gaining a Competitive Advantage through New Developments in International Logistics Management

Abstract

International logistics is refers to all activities that monitor the movement of raw materials through the production process to its final destination, and in which all transactions involve firms and/or individuals from more than one nation. International logistics management has become a popular subject in most firms because studies have shown that it can provide firms with a competitive advantage. In this paper, it is argued that a very well organized and integrated logistics system can improve a firm's competitive advantage and, possibly, improve the comparative advantage of a country. Logistics is traditionally viewed as a process of supply and a link between the firm and the marketplace. Management developments such as Just-In-Time logistics, Third Party logistics, and the newest development of Supply Chain Management can provide a firm with a link to other companies, which can provide firms with a competitive advantage. There are three types of competitive advantages: lower costs, differentiation and quality. Lower cost refers to lowering costs such that a firm gains higher real returns. Differentiation is the ability to furnish unique goods and services comparably better than ones competitors. The essence of quality is providing customer satisfaction in goods and services. Logistics can improve competitive advantage through factors such as flexibility, lower costs, better customer service, building relationship, and is a tool for innovation. If the entire industry sector within a particular country gain a competitive advantage relative to other countries, it is possible for the country to gain a comparative advantage in the industry, which also yields better a trading position. Theoretically, a competitive advantage within an industry is predicated on the firm's innovation skills. Innovation leads to better technology and countries gain from firms' innovation. To accomplish both tasks of increasing competitive advantage and creating a link between the market and activities of the firm, integration is key. Logistics must create a fully integrated system, which monitors the flow of raw materials to the final destination in a way that provides firms with a competitive edge. Logistics is able to assist in gaining a competitive advantage by adapting and restructuring systems. In order for logistics to provide firms with a competitive advantage, changes in information systems, downsizing, establishing relationships, and shift in business paradigms may occur. The applications of using logistics as a source of competitive advantage can be seen in a case study of Sankyu Incorporate, a Japanese logistics firm. In general, Japanese institutions are unique in their business behavior and overall business system. Japanese firms hold that building relationships is key to gaining a competitive advantage. Relationships can provide a method for Japanese firms to have a stable market share and a means of working together for the good of the community. Though there are risks involved in this system, Japanese firms believe that this is one of few practices that yield the highest social benefit. To gain a cost advantage, the Sankyu logistics department builds relationships with other companies so that operations within the entire supply chain is of high quality and performance. In the past three decades, logistics has evolved tremendously. Logistics is no longer a collection of discrete operations but, rather, a fully integrated system. With major developments such as supply chain management, firms are redefining logistics and reshaping the roles and managerial systems of international logistics.