Value-Added Services in Logistics Operations - Coursework Example

Running head:  Value-added services in logistics operations [Name] [Professor Name] [Course] [Date] Executive Summary In the context of logistics operations, value-added services can be described as the unique services and produces that shipping or warehousing companies can develop reciprocally, to improve their effectiveness or relevance in their specific markets of operations. In this case, when a firm commits itself to value-added services for its customers, it becomes caught up in customized logistics. Value-added services in logistics operations Warehouse and shipping companies must adopt customer-focused approaches into aspects of their operations if they have to achieve their objectives of consolidating and increasing their customer bases. Within the logistical context, the businesses can supply exclusive product packages, offer unique information services, offer special shipping arrangements, create customized services or even place prices on their products (Peck 2006). Logistics operations involve the planning and organization of movements and storage of products from one point to the other. This means it is not limited to products alone but it comprises a combination of time, space and form. This means the definition of value-adding services in the context of logistics operations takes a rather wide scope, meaning value-added services in logistics business are varied, and may include customer information service, distribution, demand forecasting, order processing, repackaging, security, product disposal, location analysis as well as warehousing and storage (Shapiro & Heskett 1985). Overall, a number of the value added services that businesses choose to engage integrated service providers that are well positioned to offer the services. In this case, a few examples on how some Australian companies work within the supply chain to offer value added services is critical (Christopher 2006). The field of logistics has been broadened beyond its conventional coverage of warehousing and transportation, to now include assembly, distribution, packaging, labeling, finance, customer service and even insurance. These activities, which are often referred as high end or low end value added logistics services are key source of revenue generation for warehousing and shipping industry. It is also important to note that although these value-added services always take place at the warehouses or distribution centers, the factors that influence their location are not similar to determinants that guide the allocation of value added logistics services (Ryan 1996). Examples in Australia Generally, warehouses or transportation carriers can actively get involved in the supply chain in a way that brings value-adding service a reality. Warehouses can be appropriately engaged in performing a specific customized service. For example, a retail customer may want a customized palletization alternative for its cross-dock activities as well as ensure the distinctive product requirements of its store units are met. In this case, each store would need varying amount of specific product so as to uphold in-stock performance with little inventory. For example, Geodis Wilson, an Australia-based logistics services provider, involved itself in assembling volumes from different origins and consolidating them into a single final delivery package to its retail customers. On critical analysis, this ensures reduction of storage and transport cost as the configured products are consolidated into once single shipment. This also reduces inventory costs as it rationalizes the flow from the supplier to the consignee. In many business organizations, the conventional practice is to stock inventory while anticipating customer orders. Normally, inventory stocking’s basis lies on anticipated demand of products. In addition, some products may be assembled within the warehouse even as orders are received to fulfill customers unique configuration of the products. A good example is the first-aid kits where Seton Australia, a leader in safety products supplies in Australia, has to place order at the warehouse in time so that the first aid kits can be assembled to meet the each specific configuration requested for by the retail customers. On analysis of this value-added service by the warehouse, it means that Seton Australia is saved the burden of having to look for the packaging materials requirement that conforms to the configurations stipulated by Australian department of environment. It can thus be able to meet local packing legislations as well as cut labor costs. The product assembly offered by DHL that helps assemble finished products, including modules and components, helps the customers to cut labor costs. In addition, this kind of value added service ensues that the products are assembled in a standard way and that they are customized for the local market. This way, stockholding is cut down and redundancy of inventory reduced (Ryan 1996). Further, it is quite ordinary for warehouses to offer repacking services enabling manufacturers to repackage the products in a way that meets the unique configurations specified by different retailers. IN Australia, DHL provided contract packing that usually comprised integrating outsourced packing services into the distribution centers. The services include a repackaging of finished products particularly to support product promotion or launch, as well as to customized them to customer preference. On analysis, this value-added service reduces costs while at the same time improved the control and the visibility of a product. Some businesses in the context of logistics and supply chain have taken their value-added services a notch higher by insuring the products to hedge financial risks. For instance, Australia’s Geodis Wilson insure the goods on transit or during warehousing, such that the customer is compensated when the products are damaged are lost. This beats the logic that is dictated by standard convention that freight companies should have limited liability in case the products are damaged, vandalized or lost. On analysis, the value added service of insuring the products can save the customer the risk of losing his products due to negligence of the freight handler. On the other hand, the logistics company knowing it has no limited liability, will handle the products more cautiously as in case of loss of the product it will take full responsibility. In a different scenario, some transport companies have resorted to bolstering their securities to add value to their services. This is because transit business, and particularly, truck driving has become an increasingly risky business as each stop on the course-way increases the chances of hijacking that can lead to loss of cargo. Some transport companies have safe-guarded their operations by installing anti-theft gadgets such as tracking devices. For example, an Australian supply and logistics firm called Value Logistics has installed security devices called Ctrack that can manage the information on the behavior of routes the company’s vehicles use. It also has a panic button that can be used to alert authorities in case of hijacking. In addition, Australian firms have been involved in a special kind of value-adding services that comprises re-sorting and re-sequencing of products to fulfill unique customer configurations. For instance, a number of Australian automobile assembly plants have been known to specify that car components be received in time so that they can be sorted and sequenced to fulfill the requirements of certain autos within the assembly line (Christopher 1996). To improve the value of a customer’s supply chain Global logistics company DHL, which has operations in Australia, offers assembly and sequencing services of products that require fixing of components through line-feeding, which is concerned with the delivery of assembled components to auto assembly plants or other production lines on a just-in-sequence, or just-in-time basis. On analysis of this value-added service, it can be said to be instrumental in reducing the hassle of inspection of the incoming components. However, to meet such intricate configurations before delivery is beyond the basic services provided by a typical component supplier. This means third party specialists would be outsourced, specifically when the components from various suppliers have to be sorted before sequencing. Businesses can also perform value-added services directly as an alternative to outsourcing a third party specialist. In recent years, the trend to hire specialists has become commonplace as they tend to be more flexible and able to focus on the required configurations. Nonetheless, despite how the unique aspects that satisfy customer needs are met, it is apparent that value added services within the context of logistics is a critical aspect of customer loyalty strategy. Analysis Value-added services in the context of logistics are essentially focused on aligning the varied aspects of supply chain to meet the dynamic demands of the customers. Overall, following the examples of Australia-based firms noted above, it can be deduced that the reasons why value-added services are crucial in logistics is to reduce cost, maximize profits and satisfy customers On further analysis, a good profit margin should be easy to achieve when business, and particularly in the logistics sector, offer value-added services whose objectives are targeted at consolidating strong customer base. This is because customer is always prime (Christopher 2006). More so, a conventional marketing model emphasizes that business risk losing their sales pitch once they stop paying attention to the needs and requirements of the customers, a concept few successful businesses would contest (Fisher 1997). In this case, as practiced by the logistics firms discussed above, the focus should be on creating conditions that favor transactions between the customers and the businesses. It can as well be observed that since these valued-added services are focused on transferring the right supplies at the right place and the right time, the businesses should as well improve their competitive edge and customer satisfaction if they have to sustain profitability. In any case, with regard to the supply chain management, there has been a shift in the marketing philosophy where firms begin to focus on value-added services in creating bonds that ensure long-term relationships or loyalty with customers and suppliers. While some firms may offer to adopt value-added services to target individual customers, others pursue a more large scale basis to attract many customers (Green 1981). Even so, the best way to ensure value-added services sustain long-term relationships is through intense research and making efforts to accommodate those requirements favored by the customers. Accordingly, the issue of consistency is significant in logistics operations, as studies have showed that customers prefer to specify the terms even if informally, such as delivery date or delivery appointment. This means the businesses have to be consistent in the quality of value-added services they offer. The supplier consistency that are often of concern are whether the supplier made the deliveries at the stipulated time and date. Value-added strategy in logistics, since it has time horizon, has to be consistent over time while focusing on selected capabilities. It can also be deduced that added-value marketing comprised turning a commodity-based service or product into one that is unique from the competitors’. The concept of value-added services in logistics operations goes an extra mile to meet the needs of customers. The first step in identifying the customer needs first involves interacting with the customer to know which values to add. Unique selling proposition, which involves adding value in the mind of the customer to boost company reputation, can also be applied. Aside for value adding, the companies should also take advantage of the value it has added and promote it through advertising as customers may not be aware the unique service exists. As a way of ensuring the service meets it target, the company should adopt an effective customer value program. This will enable establishing the customer perception of the unique service or product. If the customer fails to realize the benefits from the added value, it may imply the service has failed to achieve its objective. In addition, assessment of the customer’s knowledge of the value added as well as surveying them to secure feedback can later lead to improvement of value added. Companies can as well use focus groups to get the feedbacks from customers. Conclusion In conclusion, this paper attempted to define and explain how value-added services work within the context of logistics management. It further offered specific examples of how Australian service operations provide value-added services. Finally, it critically evaluated the value-added services with regard to their contribution to the customer’s organization strategy. Over the last one and a half decades, the route to competitive advantage that lies in incorporating value-added services in logistics operations has emerged. It has also been suggested that the idea of value-added services that characterize the inter-link of supplies from manufacturers to customers enables the attainment of competitive advantage through reduced costs or greater differentiations (Harrington 1996). Generally, the increasing need for shipping and warehousing companies to provide value-added services is triggered by globalization and the increasingly changing demands from customers. From the analysis above it can also be deduced that valued-added service in logistics operations offer advantage to both the customer and the business as customers are given the opportunity to benefit from something that is above and beyond their needs (Fisher 1997). On the other hand, businesses benefit from increased customer loyalty, and sometime event longer customer retention which basically translates to more profitability. In addition, even though the additional services may cost the company an extra operation cost, they have long-term benefits as they can improve the reputation of the business. Bibliography Bowersox, D, Closs, D & Cooper, M 2007, Supply chain logistics management, 2nd ed, McGraw-Hill, New York. Bowersox, D.J. et al.1992, Logistical excellence, Digital Press, Burlington, VT. Christopher, M 1986,The strategy of distribution management, Heinemann, Oxford. 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