The Strategic benefits of logistic alliances

Donald J Bowersox

Harvard Business Review

July-August 1990, p. 36-45

 

1)      Logistics Alliances

  1. a) Goals
  2. i) Opportunities to improve quality of customer service
  3. ii) Cooperation replaces adversarial stance separating buyers and sellers
  4. b) Types
  5. i) Alliances between a logistics services provider and a producer of goods

(1)   Jointly developed system

(2)   Emphasis on improved speed

  1. ii) Alliances between two service providers

iii)     Alliances between two product marketers

  1. c) Level of involvement
  2. i) Routine services
  3. ii) Some additional activities

(1)   Contains les risk

(2)   Partners share cost savings

iii)     Complete responsibility for logistics requirements

(1)   Service provider assumes more risk

(2)   Includes rewards

(3)   Risk may include capital investment

2)      Forces of impetus

  1. a) Political/legal terrain
  2. i) Deregulation of transport
  3. ii) Deregulation of communications

iii)     Relaxed anti-trust enforcement

  1. b) Explosion of IT
  2. i) Computerization more accessible/inexpensive
  3. ii) Information holds alliances together
  4. c) Emphasis on leaner organizations
  5. i) Trend to hire external specialists/ consultants rather than complete activities in-house
  6. d) Escalating competitive forces
  7. i) Low cost emphasis

3)      Strategic Vision

  1. a) Willingness to offer value-added services
  2. i) Serving the customer better
  3. ii) Strive to maintain customer loyalty through continuous improvement
  4. b) Benefits of alliances
  5. i) Specialization realizes economies of scale
  6. ii) Spread of risk
  7. c) What they must contribute
  8. i) Economic / managerial strength
  9. ii) Appropriate IT and information sharing capabilities

iii)     Ability to operate on two levels

(1)   Performing specified role in specialist operating domain

(2)   Able to mesh the tasks and work together

(a)    Understand each others value systems

(b)   Grasp entire distribution system

  1. iv) Willingness to cooperate

(1)   Establish ground rules

(2)   Willingness to change and evolve relationship

(3)   Provision for exit

  1. d) Why Alliances fail
  2. i) Failure to develop rules and provisions at entry
  3. ii) Clashes of culture and style

iii)     Failure to develop trust at onset

  1. iv) Uneven commitment

4)      Conclusion

  1. a) Alliances are making industry more competitive and more efficient
  2. b) Main rationale is increased competitive advantage

 

Key points:
-Partners should view arrangement as part of a strategic plan

-Partners should seek arrangements that spread risk and achieve scale economies

-Benefits are gained through long-term relationships where parties are interdependent

-Building trust and setting goals, roles and rules at onset is essential to build a long-term relationship