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Logist. Res. (2010) 2:97–108 DOI 10.1007/s12159-010-0029-2 O R I G IN AL ARTI CL E Logistics learning mechanisms and capabilities: towards an understanding of sustainable competitive advantage Erik Sandberg Per Aman Received: 1 October 2009 / Accepted: 15 May 2010 / Published online: 4 June 2010 Springer-Verlag 2010 Abstract This study explores the relationship between 1 Introduction logistics capabilities and sustainable competitive advantage by using the notion of learning mechanisms. It is argued The strategic importance of operations has been recognised that a set of processes of learning mechanisms may serve as for some time in logistics literature [1, 13, 15, 18]. Logistics- a source of dynamic capabilities that create, develop and related operational capabilities have been argued to be maintain logistics capabilities in their role as source of a intrinsically involved in the formation of competitive company’s sustainable competitive advantage. The learn- advantage, where operational excellence in logistics is ing mechanisms, in the form of experience accumulation, measured on a corporate strategy performance scale in terms knowledge articulation and codiﬁcation, are identiﬁed in of proﬁtability and growth [1, 25]. It has been argued that two best-practice companies within logistics. Results imply logistics can be seen as a distinctive capability that may be that the origin of the sustainability of a logistics-based valuable, rare and imperfectly imitable, and hence a source company’s competitive advantage may be found in the of sustainable competitive advantage . In fact, a con- dynamics of organisational learning, ultimately based on siderable amount of research has been devoted to identify trial and error and experience accumulation. As such, the such operational logistics capabilities as customer-focused research elaborates on the connection between logistics capabilities, supply management capabilities, integration capabilities and strategic competitive advantage, with capabilities, measurement capabilities and information learning as mediating dynamic capability. exchange capabilities . In recent years, enhanced by the development of a Keywords Operational capabilities dynamic capabilities view in strategic management theory Dynamic capabilities Learning Knowledge management [4, 10, 23, 24], a discussion on organisational learning has started to appear in logistics literature [6, 13, 18]. This body of literature is focused on how knowledge is recog- nised, interpreted, expressed, formalised and transformed into business strategy. For logistics research and practice, concerned with the long-term sustainability of logistics- based competitive advantage, it is important to better E. Sandberg (&) Logistics Management, understand by what processes logistics experience can be Department of Management and Engineering, gained at an operational level and how this can be trans- Linko ¨ ping Institute of Technology, formed into sustained strategic competitive advantage. Linko ¨ ping University, Linko ¨ ping, Sweden This study explores the relationship between operational e-mail: email@example.com capabilities and sustainable competitive advantage by using P. Aman the notion of learning mechanisms. We adopt a resource- Business Administration, based perspective on these issues, where learning feeds into Department of Management and Engineering, the dynamic capabilities of the ﬁrm that recreate, upgrade, Linkoping Institute of Technology, ¨ ¨ change and thus sustains the capabilities that are the basis Linkoping University, Linkoping, Sweden 123 98 Logist. Res. (2010) 2:97–108 and Winter’s  work, illustrates our main set of concepts Learning mechanisms used and structure of our research. � Experience accumulation � Knowledge articulation 2.1 A resource-based perspective � Knowledge codification Employing a resource-based theory language, a ﬁrm con- Dynamic capabilities sists of bundles of resources  from which different � Capacity to create, extend or kinds of capabilities can be constructed. These capabilities modify operational capabilties should be controlled and managed in such a way so that over time competitive advantages can be achieved. Competitive advantage is deﬁned in terms of economic net value gained, where either greater beneﬁts are enhanced with the Operational capabilities same costs (in comparison with rivals) or the same beneﬁts � Valuable as rivals are produced to lower costs . � Rare � Imperfectly imitable A capability that is the foundation for a competitive � Organisational processes advantage must be valuable, rare and, in order to avoid competitive parity, difﬁcult to imitate . In addition, for the achievement of a sustainable competitive advantage, it Sustainable competitive advantage is also necessary to have proper organisational processes � Economic net value gained – profitable growth that can exploit the valuable, rare and imperfectly imitable capabilities . Value is here, in accordance with having a Fig. 1 The structure and major constructs of the article sustainable competitive advantage, discussed in terms of for competitive advantage (see Fig. 1). The learning process economic or monopolistic rents. Whereas economic rents is modelled in the form of Zollo and Winter’s  three are deﬁned as the excess return caused by more efﬁcient learning mechanisms of experience accumulation, knowl- usage of resources, monopolistic rents are created when a edge articulation and knowledge codiﬁcation. company can earn money due to scarce competition rather Our ﬁndings are grounded in ﬁeld studies of the supply than more efﬁcient usage of resources . Thus, value chain management practice and strategic behaviour in two creation requires that the capability at hand is exploiting Swedish retail companies; Dustin and Clas Ohlson. While opportunities and/or threats . The criterion of being predominately operating in a local Swedish context, Dustin rare gives that only relatively few existent and potential is the market leader in computer peripherals distribution and competitors must possess the capability. Finally, an Clas Ohlson is one of the top distributors of DIY products in imperfectly imitable capability means that it must either the Nordic countries. As distributors, logistics is a key (1) have unique historical conditions, or (2) be causal operational capability for both ﬁrms. While argued neither ambiguous or (3) be a socially complex resource . to be perfect representatives of a class of ﬁrms, nor perfectly In the VRIO (valuable, rare, imperfectly imitable, comparable case studies, the experiences of two ‘best- organisation) framework, a structural stance is taken, practice’ ﬁrms have anchored the issues empirically, and underplaying dynamism. Operational capabilities have ﬁeld observations have inspired conceptual development. been seen as momentary, static capabilities [11, 28] that In this paper, we will ﬁrst develop a conceptual starting explain ‘‘how we earn a living now’’ . However, point, successively focusing our interest from capabilities to operational excellence without a dynamic capability is a the speciﬁc organisational learning mechanisms. Second, temporary gain, of possibly short-lived competitive value. we will discuss the methodology for the case studies and ‘Temporary’ may be more or less stretched out, but a discuss some caveats with the resource-based starting point. competitive advantage, however, valuable, rare or difﬁcult Third, we will present and analyse the case studies with the to imitate, is always bound in time. A capability to con- background in the conceptual structure. Finally, conclu- tinuously be ahead in the striving for operational excel- sions are drawn and implications for practice discussed. lence may, on the other hand, have the potential to constitute a sustainable competitive advantage . Dynamic capabilities may perhaps be best approached 2 Conceptual departure points on a somewhat metaphorical level as the many, and often relatively open-ended deﬁnitions indicate. For instance, In this section, we will construct our conceptual starting Helfat et al.  deﬁne it ‘‘the capacity of an organisation to point, by using contributions from the strategic manage- purposefully create, extend, or modify its resource base’’ ment ﬁeld. Figure 1, inspired by Zollo and Winter’s  (p. 4). Operational capabilities are created, developed and 123 Logist. Res. (2010) 2:97–108 99 maintained over time by dynamic capabilities [4, 23, 24] through ‘codiﬁcation’ , which carries signiﬁcant that are concerned with change [10, 11, 28]. The dynamic advantages, especially in larger organisations. capabilities are indirectly contributing to a company’s Organisational learning may, hence, be seen as a set of competitive advantage and hence do not replace the tradi- linked processes bringing the day-to-day practical experi- tional operational capabilities that at any one moment ence from tacit to explicit . As a set of processes, constitutes the competitive advantage of the ﬁrm [4, 11, 28]. organisational learning is a foundation of a dynamic capa- A changing and perhaps volatile environment [4, 6] bility; reﬂecting upon, and upgrading, the knowledge as potentials a situation where the productivity frontier is resource of the ﬁrm. A model with this orientation is Zollo constantly moving, and a sustainable competitive advantage and Winter’s  model of ‘deliberate learning’, connecting could be to continuously operate at this frontier . For this practical operational experience with upgraded competitive discussion, we take learning mechanisms as a starting point. advantage. The set of learning processes are experience accumulation, experience articulation and experience codi- 2.2 Learning mechanisms ﬁcation . ‘Experience accumulation’ is the tacit and trial- and-error based form of learning as it evolves over time. The In a dynamic global business environment characterised second step, of ‘knowledge articulation’, introduces a pro- by intense competition, the need to upgrade and improve cess of deliberation concerning what works and what does logistics excellence requires knowledge and expertise, and not work. Third, the articulated knowledge may, through a thus, organisational learning has become an increasingly process of ‘knowledge codiﬁcation’, be made explicit and recognised avenue in logistics research. Results have accessible for a collective in manuals, instructions, etc. This indicated organisational elements conducive to efﬁcient set of learning processes is argued to be sequential in nature organisational logistics learning . Logistics learning . Through such a sequence of learning mechanisms, the capability is suggested as a function of four elements: a experiential knowledge gained may be transformed into new cultural component, characterised by open-mindedness, or upgraded capabilities [14, 26], providing a link between shared vision and commitment to learn in the organisa- individual action and reﬂection on an operational level, and tion; a structural component, i.e. an organisational design strategic competitive advantage. that facilitates learning, with features such as ﬂexibility In all, the perspective developed herein sees logistics and decentralisation. Another important issue here is to learning not as a structural optimisation of factors, but as a have a structured educational practices within the orga- set of processes that dynamically links practical experience nisation; a relational component, meaning the importance to higher-level managerial assets, and eventually to com- of having relationships with other supply chain members petitive strength. where involved companies can learn from each other. Collaboration based on trust is here discussed as on effective way to learn from each other; and, a temporal 3 A note on methodology component, i.e. the speed of the learning. Following the logic that capabilities need to be renewed in order to Well-publicised companies such as Wal-Mart and Dell be sustainable, the learning speed of the organisation , and Inditex , all utilise their supply chains to gain becomes critical . competitive advantages. For these companies, logistics and With a broader perspective, organisational learning is a supply chain practices is their major strategic weapon, and ﬁeld that links individual action and experience to knowl- therefore logistics issues are on the agenda for top man- edge as asset of the organisation and as resource for agement. Two Swedish examples of best-practice compa- competitive advantage. Operational level action and nies within logistics, Dustin and Clas Ohlson, provide the experience, often individual, tacit and difﬁcult to access foundation for our ﬁndings here. The two companies have from a managerial viewpoint, need to be transformed from grown extensively over a more than a decade, with above- an individual to a collective level . Actions give rise to normal proﬁt in comparison with industry competitors. The experience, which may conﬁrm the existing mind-set or companies have also in common a strong logistics proﬁle suggest a deviance . All daily action on an operational in their business strategies, as well as committed top level carries the potential for experiential learning . management teams where logistics and SCM issues con- A key issue is how best to transfer the experiential stantly are on the agenda. As such, they provide fruitful knowledge gained. One way to transfer tacit, experience- ground for exploring the relationship between learning based knowledge is through personal and social processes mechanisms, capabilities and competitive advantage. , such as apprenticeships, informal groups or ‘collec- The companies have been chosen with theoretical tivities of practice’. The alternative way, which is focused sampling  in mind, meaning that they are not to be in this study, is to transform the tacit knowledge to explicit, considered as representative for companies in general. 123 100 Logist. Res. (2010) 2:97–108 Instead they have been chosen, since they are expected to The three steps in the learning process modelled above replicate or extend the emergent theory . As Eisenhardt present different methodological challenges, due to the and Graebner  argue, they are particularly suitable for different forms of knowledge we are attempting to monitor. the illumination and extension of relationships and logic Indicators for the explicit knowledge that is the codiﬁed among constructs. In a similar way, Flyvbjerg  argues material of the ﬁrm is relatively easy to access using that a random case selection within a given sample may not conventional interview techniques. Likewise, the formal be the most appropriate strategy. Instead cases with rich aspects of the articulation process are something that information, content should be selected and these cases interviewees can accurately and with conﬁdence comment often represent some kind of extreme. These cases better upon. However, part of the articulation process is tacit and facilitate a deeper understanding of causes behind a given so is virtually all of the accumulation process. For the problem, and since this is desired more than the description identiﬁcation of indicators of the accumulation process, of the symptoms, extreme cases are often preferable. As different learning techniques and how operations are stated earlier, the two selected case companies are to be developed has been discussed with the interviewees. considered as best practice when it comes to logistics Important input to these discussions has been personal performance and can, hence, be considered to be what visits at the warehouse in order to better understand the Flyvbjerg  labels as extremes. details in the operations. The case studies were conducted, in a ﬁrst round, during November and December 2006 with several visits at the headquarters and the central warehouses. In total, 9 inter- 4 Case study views at various management levels including the CEOs, were made. In August and September 2008, the companies 4.1 Dustin were revisited for a second round of interviews. In between, secondary material such as annual reports and Dustin is a retailer of IT-related products and home elec- newsletters have been collected and studied on a continu- tronics operating on the Swedish and Danish markets. The ous basis. The ﬁrst contacts were made with the CEOs at company was founded in 1984 and was run as a family each company, and the COOs. Thereafter, a ‘‘snowballing’’ business until 2005, when 80% of the shares were sold to a approach was used to identify other interviewees until the private equity company. Dustin has had an impressive empirical data was to be considered to have enough theo- proﬁtable growth recent years, with a proﬁt margin retical saturation , i.e. no further, new, substantial between 3 and 7% last years, while their two main com- information of interest for the research was provided by the petitors have had between 0 and 3%. In terms of growth, Dustin has grown in average 15% annually in recent years, interviewees. The interviews can be described as semi- structured, where the companies’ strategy, learning and in 2007 the turnover was EURO 350 million. behaviour and facilities and management style, were From being a traditional mail-order company, the focused. Even though all interviews have been grounded in Internet sales has increased last decade and today repre- an interview guide (the same for all interviews), the sents 75% of the turnover. Approximately 65,000 articles questions have been open-ended and no speciﬁc order of are provided in 22 different product groups and the com- the questions has controlled the interview. All interviews pany has about 350 employees. Dustin is present on the were typed and later transcribed. Citations have been business to business market, mainly focusing on small- extracted from the transcriptions in order to illustrate and sized companies and medium-sized companies, as well as strengthen the analysis. on the private consumer market. On the two markets, Critique has been voiced against some research within targeted by Dustin AB and Dustin Home AB, respectively, the resource-based ﬁeld for measuring on dependent vari- a complete palette of IT-related products are offered, ables and thus for being tautological in nature . There is including hardware and software as well as installation, reason to pay adherence to this critique, and we have con- conﬁguration and ﬁnancial solutions. All products are cerned ourselves to avoid this pitfall. A VRIO framework purchased via multinational distributors and delivered to has been used , for its comprehensiveness and clarity, to Dustin’s central warehouse in Stockholm. From here, the evaluate the nature and existence of competitive advantage, products are delivered to the end customers 1–2 days after while such a framework has not been employed for the study the order is placed if available in the central warehouse. of the learning mechanisms. We had an ambition to operate At the outbound side, Dustin has a close collaboration with with a multi-level approach, locating boxes within boxes the Swedish mail company, Posten, and goods leave the and also with what Teece  labelled micro-foundations in warehouse 6–8 times every day. that we seek speciﬁc examples of processes of translating Dustin operates in a rapidly changing market charac- experiential knowledge to explicit business strategy. terised by low margins and short product lifecycles, where 123 Logist. Res. (2010) 2:97–108 101 more than 100 new products/versions are introduced on a 1918 as a mail-order company based in Insjo ¨ n, Sweden, but daily basis (about the same amount are deleted). The two most of the sales has now transformed into regular stores, main components of Dustin’s business model are high representing 97% of the turnover. Clas Ohlson has had a availability and speed, i.e. short customer order lead times. proﬁt margin of in average 13.5% last 5 years, while the Competitively, price is less important than speed and two largest competitors have had a proﬁt margin of about availability. By linking the four largest distributors to 10 and 3%, respectively. During the same period, Clas Dustin’s in-house administrative software, Dacsa, and Ohlson has managed to grow in average 17% annually. having standardised processes in the central warehouse, The expansion outside of Insjo ¨ n started in 1989, and in Dustin’s supply chain is cost- and service-efﬁcient with an May 2009, Clas Ohlson had 106 stores in Sweden, Norway inventory turnover of as much as 40 times per year. This and Finland with total of approximately 3,000 employees set-up also supports Dustin’s business model components and a turnover of EURO 460 million in 2008. In December of high speed and availability, which means that Dustin 2008, the expansion continued to the UK market, where 5 competes with service, large assortment, availability of stores were operating in the end of 2009. The base remains products and speed of delivery rather than on arguments of in Insjo ¨ n, where the headquarters and central warehouse having the lowest prices. are located. All goods from suppliers are brought here and To manage this ﬂow of goods in the supply chain and then further distributed to the stores. keep the high availability and speed, efﬁcient and stand- Clas Ohlson operates, similarly to Dustin, on a market ardised processes are required. The warehouse operates with ﬁerce competition. Although costs always are a con- more or less in the same, highly standardised way inde- cern for this kind of retailer where the underlying products pendent from the type of customer served. In addition, the are relatively uncomplex and standardised, the strategic IT system Dacsa has one common platform for the dif- orientation of the ﬁrm does not rest squarely with a low ferent companies in which employees as well as customers cost orientation. Rather, ready availability for an urban operate—but is linked to different websites that are population sets the ﬁrm’s offering apart. It operates its adjusted to the targeted market segments. outlets not in shopping centres on the rims of cities but on Recent years, Dustin has been transformed from a rather locations in city centres, providing access and availability unknown, small family-owned business to a professionally coupled with low prices. The customers are offered ‘‘good managed corporation. New ownership with new require- value for money’’. ments on performance and strategic objectives, major To improve supply chain operations is a prioritised area organisational changes where the organisation has been for top management and includes challenges such as cost ‘‘stretched’’ with several hierarchical levels, an entrance efﬁcient management of increased purchasing volumes from Asia (31% of products are purchased in Asia), to ﬁnd into the Danish market through the acquisition of Com- puter store A/S with the ambition for further expansion to new and more environmentally friendly packaging designs, the other Nordic countries, and a new central warehouse keep high inventory turn over rates in the supply chain with 20,000 square metres instead of the former 4,500. The (inventory turnover is 6.8 times in central warehouse, and timeline in Fig. 2 summarises this development. in the stores between 8 and 10 times annually), and manage deliveries to new stores. Crucial for these challenges is the 4.2 Clas Ohlson central warehouse—the main hub in the supply chain—in which Clas Ohlson has repeatedly made investments in Clas Ohlson Group AB is a Swedish retailer of do-it- enlargements and new technology such as an automatic yourself products for house and homes, technology and sorting facility and a new mini-load facility. The contem- hobbies, targeting private consumers. It was founded in porary central warehouse, which was opened in 1995, has 2004 2005 2006 2007 2008 1984-2003 � Private equity company � A complete review of the � Danish market is entered 1984: Dustin is founded � The former sales � Dustin gets a Altor buys 80% of Dustin company is performed by through acquisition of manager becomes CEO president and country 1995: The sales over the hired consultants and new Computerstore A/S. instead of founder Bo � A COO is installed as a managers for Sweden Internet begins growth strategies are Lundevall link between CEO and top � Team leaders are installed and Denmark. formulated 1995: Dacsa is launched management team between top management � Dustin Home is founded � A new central team and employees to better serve private warehouse is opened consumers Fig. 2 The development of Dustin 123 102 Logist. Res. (2010) 2:97–108 been enlarged and rebuilt in three phases, with two more in-house made IT systems can be identiﬁed as the com- planned before the end of 2010, see Table 1. In total, the panies’ distinctive capability considered as valuable, rare investments in the ﬁve phases are estimated to EURO 110 and imperfectly imitable . Starting with value, the million. combination of the logistics processes and the IT systems The central warehouse has remained in operation forms the basis for an efﬁcient ﬂow of goods in terms of through the opening of 10–15 new stores on an annual economies of scale and control and is therefore obviously basis. In the central warehouse, the opening of a new store bringing value to the companies’ customers, where high is managed in a standardised way, where the only obvious efﬁciency in operations means excess returns [18, 21] and news is that it generates an extra delivery address at the above-normal proﬁt margins. outbound area. In fact, the entire replenishment process to The question of what can be considered as rare may be the stores is managed in a highly standardised manner with a difﬁcult question. Overall, a capability should be con- few differences between e.g. size of stores or destination sidered rare as long as the number of owners of the country. The process is based on a simple pull-based order capability is lower than the number needed for perfect system with order batches and reorder points individually competition dynamics in an industry . It is important to deﬁned for each product and store. note that the individual elements of the logistics opera- tions, as well as of the IT systems, are not necessarily unique and rare. What fulﬁls the rareness criterion is the 5 Analysis complexity in the combination of them. The complexity in the relationship between the warehouse operations and 5.1 Identiﬁed operational capability replenishment process on the one hand, and the IT system on the other, also means that they are to be considered as Dustin and Clas Ohlson are two companies heavily imperfectly imitable . The IT systems have been dependent of logistics for their business success, and developed in symbiosis with the operational logistics logistics operations are in both companies considered as processes over the years and can therefore be viewed as major competitive strength vis-a-vis competitors. Logistics being path dependent and historically unique . In operations, characterised as simple, standardised but order to function, the distinctive capability discussed here thought-through routines, gain a strong support from top requires a bundle of resources to be combined in a unique management that emphasise the importance of speed and way. The exact relationship between the resources is cost efﬁciency in the warehouse operations as well as difﬁcult to clarify, and therefore they can also be con- transportation. As an important supportive function for this sidered as causally ambiguous , i.e. to imitate this system would be difﬁcult for a competitor. logistics system, both companies have elaborate IT systems linking sales orders to purchasing as well as the operations of the warehouse. The close integration between logistics 5.2 Identiﬁed dynamic capability operations and the IT system are further enhanced by the fact that the IT systems have been developed in-house for From a structural standpoint, the operational capabilities many years, which means many advantages: may be deemed a valuable, rare and difﬁcult-to-copy capability. This form of non-imitability stems from struc- ‘‘Many of our advantages are due to the fact that we tural characteristics, such as the complexity of the system. have not considered what an IT-system can do for us Both ﬁrms also display an ability to continuously improve and adapted us, but what we want to do and make the on that structural capability. The ﬁrms seem to have IT-system adapt to how we work’’ developed dynamic capabilities capable of sustaining (Marketing manager at Dustin) competitive strength over time. We earlier argued that a The combination of simple, standardised logistics company’s dynamic capability may consist of the ability to operating routines such as picking and packing in the over time develop and change their operational capability, warehouse, and the development over time of adjustable, so that they constantly are positioned at the productivity Table 1 The ﬁve phases of enlargement of Clas Ohlson’s central warehouse 1995: Phase 1 New central warehouse is opened. Capacity for mail-order business and 8 stores 1999: Phase 2 The central warehouse is enlarged for a capacity of 25 stores 2004: Phase 3 High bay warehouse and automatic sorting facility is installed. Capacity increased to 90 stores 2009: Phase 4 Sweden’s largest mini-load inventory. Enables deliveries to 150 stores 2010: Phase 5 Another high bay warehouse for storing capacity to 150 stores 123 Logist. Res. (2010) 2:97–108 103 frontier . This is well mirrored in the case companies’ ‘‘The processes and how we work are in our heads. view on their market and environment: We have until now not picked them out but we are on our way now. That work has begun. Because we ‘‘-We are not a static company, we live in a changing know that if there would be a walk-out there are a world to which we constantly adapt ourselves. As a number of people who leaves with a lot of consequence, even if you have plans, these are knowledge.’’ changed during the journey. Both concerning what (COO at Dustin) we sell, in what way we sell, and the way we reach the market.’’ Clas Ohlson has also a considerable amount of experi- (CEO at Dustin) ence accumulation in the company. Similar to Dustin, a strong culture, expressed in what is labelled ‘‘the Clas The understanding of this change process may be Ohlson spirit’’, has preserved much of the company’s grounded in three different learning mechanisms; expe- entrepreneurial thoughts. Inspired by this, parallel working rience accumulation, knowledge articulation and knowl- routines are in place at the central warehouse, where the edge codiﬁcation , which have been explored in the best, most efﬁcient ones, outperforms the others in the long cases. run without much interference from management. Knowl- edge is thus accumulated in the company routines without 5.3 The learning mechanisms any explicit articulation or codiﬁcation. Several indicators, through which the learning mecha- ‘‘I believe the best way to ﬁnd out how to work is not nisms have been explored, have been identiﬁed in the to manage it too much in detail. Imagine we get a companies (see ‘‘Appendix’’). Even if it can be argued new working task here at the DC. We then let the that all three mechanisms are equally important, the workers test by themselves how to work and perhaps degree of utilisation of them varies between Dustin and 5-6 different alternatives come up. After a while Clas Ohlson. perhaps two main alternatives for how to work have been developed. In general, learning by doing is what On a company level, the 25 years of history of Dustin may be seen in two distinct phases coinciding with shifts in it is about. This is I believe the fastest way to ﬁnd out the most efﬁcient way of working.’’ learning mechanisms. Over the ﬁrst, entrepreneurial phase of development, from the foundation to 2004, the family (COO at central warehouse at Clas Ohlson) controlled ﬁrm was largely dependent on tacit experience In contrast to Dustin, Clas Ohlson exhibited a more accumulation among a tightly knit management team, led developed knowledge articulation and codiﬁcation in how by the founder and CEO. Still, many of these practices are logistics operations were handled. An indicator for articu- present in the company and indicators for this experience lation is the speciﬁc reference groups used for the accumulation found in this study are a strong personal enlargement of the warehouse where experiences from involvement of top management, where not always fully employees are articulated. Other, even more deﬁned thought-through solutions are launched, called 90% solu- standardised project forms, the formal education centre, the tions, and Dacsa as an engine for development and learning ‘Clas Ohlson Academy’, to which all staff are sent for in the company. training, and the formalised information ﬂows between the Following a new CEO appointment, new management central warehouse and the IT department, are examples of structures and a new central warehouse, a major overhaul knowledge codiﬁcation at Clas Ohlson. was made of both strategy and organisational structures Both companies show that all three learning mecha- and processes. According to company management, a nisms are in place simultaneously, which means that the major thrust of that work was articulating experience made, three learning processes long term should be considered as and subsequently using that articulation as a major input parallel ongoing processes. Although the companies utilise into the formal strategy formulation process. Indicators for all three learning mechanisms simultaneously at an overall knowledge articulation found are increased professionalism level, individual indicators reveals a translation process in management, formalisation of the organisation and the moving from experience accumulation, through articula- launch of user groups. tion to codiﬁcation. For speciﬁc issues, the three learning In terms of knowledge codiﬁcation, Dustin has also mechanisms are hence coupled in sequence, starting with started to document their work and deliberately launched a tacit experience accumulation, ending up in structured, test and learn culture in the organisation that goes in line codiﬁed clear working routines. One example for this is the with the founder’s philosophy. Overall, the trust to expe- formalised information lines between Clas Ohlson’s central rience accumulation is, however, still dominating the warehouse and the IT department, where all development company development. As argued by the COO: 123 104 Logist. Res. (2010) 2:97–108 of the IT system Raindance is conducted. From initially measure of the competitive strength of the two companies having an ad hoc approach to development of new func- cannot be identiﬁed in the logistics function alone, but in tionalities in the system, based on informal wishes of the the interrelationship between logistics and IT. employees at the warehouse, the development process was We evaluated this combination based on a set of struc- structured, including formal IT groups for development at tural criteria, the VRIO framework. This combination can the warehouse and priority lists of improvements. be identiﬁed as valuable, because of their fundamental importance to the business, rare, because of the in-house ‘‘We have now formalised the contact between the developed systems and imperfectly imitable, because of its DC and the IT-department. We had to do that rather path dependency, social complexity and to some extent recently. Our IT-department consists of 40 people causal ambiguity . now and it did not work any longer that 10 different people from the DC called ten different people at the 6.2 Dynamic capabilities IT-department talking about the same things. So we had to formalise it… We did that about a year ago. The recognition of dynamic capabilities, we argue, is cru- Now we have a speciﬁc IT-group here at DC with cial in order to understand why operational excellence in people from the different areas and backgrounds. The the form of a bundle of logistics routines and IT system group has monthly held meetings and works with a may be intrinsically involved in shaping business strategy. wish-list where different changes are given different The interrelationship between logistics and IT suggests a priorities. This list is then of course changed contin- co-evolutionary quality over time, where the two functions, uously. The list is communicated by one person here albeit distinct, follow parallel trajectories. With this per- to one person at the IT-department.’’ spective, the substantial and risky investments in in-house (COO at central warehouse at Clas Ohlson) IT systems development of both ﬁrms also gain a rationale. It is a highly adaptive mode of proprietary knowledge development, tuned to the business model and very difﬁcult 6 Discussion and conclusions to imitate. Earlier discussion lead us to conclude that the interwoven and co-evolving capabilities in logistics and IT The purpose of this study has been to explore the rela- of the two companies here studied constitutes a set of tionship between logistics capabilities and sustainable advantages, where the productivity frontier  is contin- competitive advantage by using the notion of learning uously pushed. mechanisms. Applying the theoretical concepts of opera- tional and dynamic capabilities, as well as learning 6.3 Organisational learning mechanisms to a logistics context, we have sought to contribute to the emergent debate on organisational learn- The discussion above permits identiﬁcation and classiﬁ- ing in logistics literature. cation of how logistics forms the basis for a sustainable competitive advantage. However, it lacks an explanation as 6.1 Operational capabilities to why these logistics-related capabilities are at work. Pushing the productivity frontier as argued above requires Operational capabilities are here seen as the momentary adapting the present level of knowledge to new require- competitive advantage that at any one point in time pro- ments; reactively or, perhaps preferably, proactively. The vides an advantage in quest for performance, i.e. allowing logic for this is straightforward; to be able to develop and the ﬁrm to capture above-average return and achieve improve capabilities over time the company needs to be a growth. Our ﬁndings support previous research that argues learning organisation. To address that issue, we applied a logistics to be such an operational capability [6, 18]. The knowledge based perspective in this research by using case companies’ competitive strength depends greatly on Zollo and Winter’s  conceptualisation of the learning working process efﬁciency and costs handling. They both process into experience accumulation, knowledge articu- display a remarkable speed of throughput, coupled with a lation and codiﬁcation. very broad array of product range. Customers expect ready The identiﬁed indicators of the learning mechanisms all availability and accurate delivery in a very complex retail represent important cornerstones for development and operation, and the ﬁrms are therefore highly dependent on improvements of logistics operations, and, as such, they are logistics skills. At the core of the competitive strength of the foundation for the companies’ dynamic capabilities. both companies lies a complex combination of efﬁcient, For instance, experience accumulation in the form of par- standardised logistics processes and well functioning, tai- allel working routines, where the most efﬁcient routines lored and in-house developed IT systems. Thus, the full outperforms the others, means that Clas Ohlson has been 123 Logist. Res. (2010) 2:97–108 105 able to continuously improve efﬁciency in warehouse codiﬁed in and through the IT systems in the form of e.g. operations. Knowledge articulation in the form of an new applications. increased formalisation of the organisation at Dustin has From a theoretical perspective, logistics has in strategic enabled new installed middle managers to better cope with management literature been considered to be operational information from staff and bring use of this. Knowledge and a tool for strategy implementation rather than important codiﬁcation in the form of documentation at Dustin has for the strategy making process . A capabilities-based enabled the organisation to improve the roles of the dif- and dynamic view of logistics changes that perspective, in ferent employees and the interfaces between different the sense that logistics now may play a crucial role for a functions and is an important tool for the spread of tacit proper understanding of how competitive advantages may ‘‘know-how’’. be achieved and upgraded. In this article, we have outlined a structure that combines sustainable competitive advantage 6.4 Implications and further research with organisational learning via operational and dynamic capabilities. In summary, this means that logistics opera- From a managerial perspective, our research conﬁrms tions cannot generically be detached from the strategy of the existing logistics research ﬁndings [1, 6] that operational ﬁrm, and the explicit strategy making of the ﬁrm not logistics skills and performance can be of strategic impor- detached from its operational base, but reinforces the tance for top management. A natural continuation of previ- logistics orientation. In fact, one may even suggest that ous research is a call for an agenda of how logistics leaders sustained logistics excellence is a driver of competitive can manage and exploit the learning concept . This advantage, where learning is a critical process. The ﬁndings research answers this call in the sense that the three learning emphasises the role of micro-processes of learning in sus- mechanisms explored here can help to understand logistics taining competitive advantage and identiﬁes interfunctional, learning in a more systematic way. As such, the three co-evolutionary processes of experiential learning as a mechanisms described and exempliﬁed in this research may challenging avenue for further research. help logistics managers to structure their work towards Zollo and Winter’s  model applied in this research improved logistics learning. Thus, although it is not at ﬁrst highlights knowledge transfer through explicit, coded hand a management tool for practitioners, Zollo & Winter’s forms of knowledge and the generation of coded knowl-  three learning mechanisms utilised here may function as edge from tacit and experiential on an operative level. Not the foundation for improved logistics learning in the com- discussed in this research is the role of learning speed, i.e. pany. The fact that the three learning mechanisms in the case how fast companies transform experiences gained to cod- companies are applied simultaneously over time and that iﬁed knowledge. The speed of the transformation process may be vital for a company’s competitiveness, in particular there is a transformation of individual learning indicators from tacit experience accumulation to explicit knowledge to for companies operating in highly volatile markets [4, 6]. codiﬁcation indicates the necessity for top management to The issue of learning speed hence remains to be an inter- strengthen and reinforce all three mechanisms and to balance esting future research topic. managerial attention given to each of them. For further research, it is also prudent to raise issues Another managerial learning from the case companies concerning an alternative dissemination of organisational highlighted in this research is the close relationship learning where tacit knowledge is transferred through between logistics operations and the in-house developed IT informal and personalised learning rather than with the pro- systems at the case companies. From a learning viewpoint, cess of codiﬁcation. This would be connected to cultural this interplay has been of crucial importance for the com- issues, and there are indeed observations pointing to the panies, and it indicates the importance of having in-house importance of cultural characteristics and support from ear- control of the IT development. In fact, one conclusion may lier research in logistics . Examples from this study that are be that the IT systems have been a driver for the translation in a similar vein include open door policies at the IT of logistics experiences to codiﬁed management routines. department, informal and spontaneous communication pat- The nature of information technology systems is such that terns, tightly knit and vision driven management teams, and they require formal codes of operations, and throughout the the efforts to preserve an entrepreneurial culture at both ﬁrms. years of perfecting their respective logistics practice, the IT Another interesting research area related to this research systems have required attention to articulation and formal is the extension of learning mechanisms towards relations codiﬁcation. Since the practice of logistics and IT has co- with other supply chain members. Whereas this study is evolved in the two ﬁrms, the learning cycle of accumula- based on one member of the supply chain, it could be tion, articulation and codiﬁcation may be interpreted as the argued, in line with supply chain management literature mechanism for that co-evolution. Thus, any initiative from [6, 15], that well-developed relationships in the supply the experience of logistics practice has been articulated and chain could enable learning not only for the individual 123 106 Logist. Res. (2010) 2:97–108 company but also for other supply chain members. Appendix Organisational learning would here be extended to ‘supply chain learning’. See Tables 2, 3, 4. Table 2 Indicators for experience accumulation Company Indicator Description Dustin Personal involvement—entrepreneurial Informal, fast decision-making by the founder, described as a great founder and young, energetic functional entrepreneur with many ideas, and a team of young energetic managers functional managers has played a decisive role for the development of operational routines at Dustin. Top management themselves has been involved in the operations, which has enabled them to identify problems and rapidly ﬁnd solutions The IT system Dacsa as a tool and driver Development of Dacsa, which has been initiated by a need from the for change logistics operations, has led to, for example, new tools and KPIs. These have in turn developed the logistics processes and, in the long run, meant that new people and functions have been employed in the company. As such, Dacsa has been an important tool and platform for experience accumulation 90% solutions The functional managers have in-depth technical and operational knowledge about the company, and trial and error and ‘‘hands-on’’ have been the main development approach. Typically, not everything has been planned in detail before launching a project or a change in the warehouse routines. The working style consists of ‘‘90% -solutions’’ where the last 10% have been optimised later on when the project already has been launched Clas Ohlson Entrepreneurial culture Despite a long history, Clas Ohlson has preserved an entrepreneurial culture in the company, the so-called ‘‘Clas Ohlson spirit’’, in which the personnel’s own initiatives and willingness to come up with ideas for improvements are encouraged. Improvements are expected to be accomplished without any speciﬁc, outspoken arrangements from management. In fact, suggestion box and other similar tools for general improvements are considered as counterproductive, since these hampers the speed of the changes Parallel working routines The development of operational working routines in the central warehouse might be compared to Darwin’s theories of development, where the best (most efﬁcient) routines ﬁnally outperforms alternative ways. This can, for instance, include new routines for how to pick items or where to place forklifts in the warehouse Table 3 Indicators for knowledge articulation Company Indicator Description Dustin Professionalism in management Recent years development in Dustin has necessitated more professionalism in the management of the company, which affects also the logistics activities. This professionalism above all means clearer, more distinct responsibility areas are given to different functions. For logistics, clearer interfaces towards other functions in the company and more pronounced demands in terms of, for example, delivery times and capacity have been established. These interfaces means that knowledge about how logistics activities are performed in the company, and what they require in terms of, for example, time and capacity, to a higher extent has to be formalised in order to be communicated to other parts of the company 123 Logist. Res. (2010) 2:97–108 107 Table 3 continued Company Indicator Description Formalisation of organisation Dustin’s organisation has been stretched out in terms of hierarchical levels as a means to cope with information and management of the staff. About 28 team leaders have been installed in all important departments in the company, including the central warehouse. The team leader, organisationally placed between employees and department managers, is thought to better integrate different functions in the company and care for inﬂuences and ideas from employees. Through the new team leaders, initiatives and experiences from the personnel are expected to become formal inputs into the decision-making process User groups Dustin has in recent years formalised the communication lines in the company in terms of formal meetings. One example of this is that speciﬁc cross-functional user groups have been established in order to better integrate people and Dustin’s technology, i.e. Dacsa, the web and a new CRM system. The user groups function as a platform for further changes and improvements of the systems. In short, different suggestions from employees are gone through and discussed if possible to implement. As a result of cross-functional presence of people, a good overview of systems implications will immediately be gained Clas Ohlson Speciﬁc reference groups Parallel to the entrepreneurial spirit and low reliance on, for example, organised suggestion schemes, Clas Ohlson has developed and formalised the organisation, for example with speciﬁc reference groups of employees for intended changes. These groups are set up in order to comment and give input to different aspects of above all the enlargement of the central warehouse. In connection to the different enlargement phases, a number of groups have been set up each time. The mission for the groups has been to gather knowledge from employees and organise it into useful knowledge for the enlargement, e.g. how the outbound area in terms of gates should be designed Table 4 Indicators for knowledge codiﬁcation Company Indicator Description Dustin Documentation The work of documenting working processes, working descriptions, etc. has started. Knowledge about how things work, and ‘‘know-how’’ that previously have been tacit in the company, is now to a higher extent than previously codiﬁed The launch of an explicit Another part of Dustin’s professionalism and increased awareness of the importance test and learn culture for organisational issues is the increased interest in the personnel and the need for taking care of initiatives and ideas. Dustin has therefore launched a so-called ‘test and learn’ culture as a means to encourage personnel to take own initiatives. Except for an external consultancy ﬁrm, which has been hired, the team leader roles are seen as extremely important communication tool between employees and the top management team Clas Ohlson Standardisation of work Standardisation is seen as a key element in order to cope with Clas Ohlson’s future in project form growth. Larger change projects are organisationally managed in a standardised way where different and hierarchical levels are normally present. For example, the opening of a store is one example where a project team form is used. The project team is set up 10 weeks before the store is planned to open for customers and consists of around 8 people that are internally recruited from their normal jobs within Clas Ohlson. The people have different positions in the company and the logistics function is always represented in order to at an early stage develop routines and design suitable for Clas Ohlson’s logistics processes. Here, typically knowledge about order size, purchasing batches from suppliers are matched against shelve-spaces for each product. All projects are thus in forehand very well described with timelines, suggested number of participants, budget in some occasions, etc. The projects are also always followed up and evaluated in a standardised way 123 108 Logist. Res. (2010) 2:97–108 Table 4 continued Company Indicator Description Education centre In recent years, accelerated by the geographical expansion into new countries with different business cultures, the education centre, the Clas Ohlson Academy, has become increasingly important. The purpose of this centre is to educate all new employees in the company’s working routines, policies, products, and above all, the Clas Ohlson spirit. 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Logistics Research – Springer Journals
Published: Jun 4, 2010
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