On Logistics in the Strategy of the Firm

The purpose of this thesis is to describe and analyse the role of logistics in the strategy of the firm. Leading to this purpose are empirical observations of firms that manage to grow under sustained profitability, by the means of logistics. The clothing retailers H&M and Inditex manage to pursue strategies of growth under sustained profitability. Both H&M and Inditex acknowledge that logistics is used in achieving these strategic goals. The competitive environments are similar for the two retailers. However, the strategy content, i.e. the what of strategy, differs greatly between H&M and its Spanish competitor. H&M focuses on economies of scale in their operations to allow for low logistics costs and a cost-efficient geographical expansion. Inditex focuses on flexibility and speed, being able to quickly respond to changes in demand, which calls for a more agile logistics platform. From this background, two cases are studied as regards the role of logistics in the strategy. The case companies Ahlsell and Bergman & Beving, two wholesalers of industrial goods, display growth under sustained profitability and have an outspoken focus on logistics in their strategies. The cases are described in terms of the content and the context of logistics in the strategy of the firm. The content is the what of strategy whereas the context is the where of strategy. The context is further divided into inner and outer context, where inner context is the firm and outer context is its environment. The theoretical basis of this research is found in logistics and in strategy: Logistics research on the relation between logistics and strategy from a logistics perspective, and strategy theory ranging from the resource-based view of the firm, or the inside-out perspective, to positioning theory, or the outside-in perspective. A pattern-matching methodology is used to establish an appropriate description of the logistics content and context in the strategy of the firm. In the content-dimension, the opposing views of the resource-based view and positioning theory are tested on the cases. In the context-dimension, the cases and their environment are described with a stance taken in the contingency approach to the organisation of logistics. The research shows that the role of logistics in the strategy of the firms in the scope of this study is most appropriately described using a resource-based view of the firm. Further, the two firms under study serve as examples of two different ways to use logistics in the strategy: - Bergman & Beving manages to integrate a decentralised group of product companies in one logistics platform. - Ahlsell achieves synergies in acquisitions by moving logistics and administration of the acquired firms into their centralised logistics platform. The cases also serve as examples of that the logistics solutions need not be optimal in terms of the lowest cost and the highest service level to be used successfully in the strategy of the firm to reach growth under sustained profitability. The firms in the scope of this research act in similar outer contexts but interpret these contexts in different ways depending on their manner to use logistics in the strategy. The research shows that similar outer contexts can be approached successfully with strategies with different logistics content. The logistics organisations in the firms in the scope of this thesis display robustness towards changes in the outer context of the firm, i.e. the logistics organisations can encounter considerable changes in the environment without altering their position in the firm. It is concluded that in order to make the role of logistics in the strategy more comprehensible, a bridge between the abstract strategy theory and the role of logistics needs to be established. A possibility to attain this can be found in the application of a business model framework to the relation between logistics and strategy, which is suggested as an area for further research.ISRN/Report code: LiU-Tek-Lic 2005:34