THE IMPORTANCE OF LOGISTICS ALLIANCES AS A COMPETITIVE STRATEGY

The main objective of this paper is to explore the differences between logistics alliances (win-win relationship) and traditional business practices (win-loose relationship) within two or more organizations of the same value added channel. Also, a brief framework for a best practice implementation, check and control for such partnership is detailed, as well as we describe the most important organizational changes for the success of a logistic alliance.

Traditional business practices between two or more companies, usually of the win-lose type, have been progressively replaced by the development of sophisticated interorganizational alliances, often known as logistical alliances. Currently, there is little doubt that logistics alliances have become an important means of conducting many businesses in environments permeated by constant change. However, experience tells us that this type of interorganizational partnership relationship is as difficult to establish as it is to maintain. While numerous examples of alliances between different companies have been exhaustively discussed in the media and in specialized journals, so far little has been done in the sense of bringing academics or interested companies the procedures and basic problems for the implementation, maintenance and reassessment of these logistical alliances. This is the focus of this article.

2. WHAT ARE LOGISTICS ALLIANCES? HOW DO THEY AFFECT THE INTERFACE BETWEEN TWO OR MORE ORGANIZATIONS?

However, before proceeding we must consider the definition of logistic alliances. According to Donald J. Bowersox, “an alliance reflects an existing desire between two or more participants to modify their current business practices, in the sense of eliminating duplication of activities at the interfaces of the added value chain, as well as reducing possible waste of resources. production, transport and distribution resources”. There are three basic characteristics that distinguish logistics alliances from other integration and/or cooperation strategies between two or more companies.

1. The desire translates into a closer bond between two or more companies, encompassing their objectives, values, rules, behaviors and procedures. If in a traditional purchase and sale transaction, for example, prices are the main decision and choice criteria, in the logistical relationship possibilities of mutual gains and benefits are explored, arising from the synergy of working together. This is something non-trivial given the need to overcome behavioral barriers and mutual mistrust between two companies.
2. The change in current business practices is a direct consequence of the fact that one-off purchase and sale transactions are no longer practiced, but rather an ongoing relationship focused on loyalty/reliability between channel companies and customer satisfaction. A common example in this case is the vertical alignment between producers and retailers, usually marked by the transfer/consignment of stocks. It is the well-known distribution link between Procter&Gamble and Wal-Mart
3. The reduction of possible waste stems from the optimization of production, storage and distribution resources, where for this it may be necessary to make investments in specialized assets to meet the needs of the partner company. However, the exploitation of earning opportunities will directly depend on the stage of development of the two previous items.

3. IMPLEMENTATION AND MAINTENANCE PROCESS

The process of implementing and maintaining logistical alliances necessarily involves creating a common mechanism for managing its objectives and establishing channels for feedback. This is achieved through four main definitions:

1. Roles and responsibilities of each partner
2. Performance measures used to audit strategic goals and adherence to operational standards
3. Type of information to be shared
4. Frequency and form of communication.

Once the strategic expectations and common standards of operation of various logistics activities have been determined among the partners (customer service measurement, order processing, inventory control, demand forecasting, transport and distribution, warehousing and storage, location of warehouses/ warehouses, etc), the alliance was implemented. We must not forget that all these steps basically involve managing the fear of change and the incompatibility of existing systems between two organizations.

The maintenance process, on the other hand, consists of several visits to the partner company's facilities, in order to develop a better understanding of both operations. This is the key point for a successful logistics alliance: continuous visits facilitate the identification of opportunities for gains, as well as helping to create an informal and extra-organizational communication channel between the two companies, making possible flexibility and speeding up possible corrections of course resulting from changes in the competitive environment. These course corrections can also involve the dissolution of the alliance, in case it has been unfeasible to reach the pre-established operational standards.

4. CONCLUSION

In short, we saw that the emergence of logistics alliances basically stems from the exploration of the buying and selling relationship between two companies from other angles, due to the intensification of competitive pressures, transport deregulation, the need to improve customer service levels, etc. The number of logistic alliances grows each year in the United States and Europe, due to the companies' recognition of the mutual benefits that can be shared. Everything indicates the growth of this trend in the short and medium terms.

BIBLIOGRAPHY

* Bowersox, Donald J., “The Strategic Benefits of Logistics Alliances”, Harvard Business Review, July-August 1990, pp.36-45

* Michigan State University Global Logistics Research in Donald J. Bowersox, David J. Closs, M. Bixby Cooper, Lioy M. Rinehart & David J. Frayer, “Adapting to the Global Environment”, Proceedings of the Council of Logistics Management, 1990 , p.361

* ECR Alliances