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Distribution Customer Service and LogisticsDistribution Customer Service and Logistics

For use only withPerreault/Cannon/McCarthy or Perreault/McCarthy texts.© 2008 McGraw-Hill Companies, Inc.McGraw-Hill/Irwin

CHAPTER ELEVEN

CH 12: Retailers, CH 12: Retailers, Wholesalers & Their Wholesalers & Their Strategy Planning Strategy Planning

Logistics customer Logistics customer serviceservice

• What it is• Level to offer• Cost • JIT and EDI

TransportingTransporting• Transport modes• Benefits and

limitations

StoringStoring• Inventory costs• Storing facilities

and distribution centers

CH 11: Distribution Customer Service & Logistics

CH 10: Place and CH 10: Place and Development of Development of Channel SystemsChannel Systems

Marketing Strategy Planning for Place (Exhibit 11-1)

Physical Distribution Gets It to Customers

Logisticsor

PhysicalDistribution

Physical Distribution Customer Service

Trade-Offs of Costs, Service and Sales (Exhibit 11-2)

Physical Distribution Concept Focuses on the Whole Distribution System

Info on Product Availability

Info on Product Availability

Order Processing Time

Order Processing Time

Backorder ProceduresBackorder

Procedures

Inventory Storage

Inventory Storage

Order AccuracyOrder Accuracy

Damage in Transit

Damage in Transit

Online Status Information

Online Status Information

Advance Info on Delays

Advance Info on Delays

Delivery TimeDelivery Time

Compliance with Customers

Compliance with Customers

Defect – Free Deliveries

Defect – Free Deliveries

FactorsAffecting PD

ServiceLevels

FactorsAffecting PD

ServiceLevels

Handling Adjustments/

Returns

The Total Cost Approach

A Cost Comparison of Alternative Systems (Exhibit 11-4)

Shifting and SharingShifting and SharingShifting and SharingShifting and Sharing

JITJITJITJIT

Conflict HandlingConflict HandlingConflict HandlingConflict Handling

Supply ChainSupply Chain

Coordinating Logistics Activities

Better Information Helps Coordinate PD

Electronic Data

Interchange

Electronic Data

Interchange

Electronic Data

Interchange

Electronic Data

Interchange

Continuously Updated

Information Systems

Continuously Updated

Information Systems

Continuously Updated

Information Systems

Continuously Updated

Information Systems Key

Areas WhereComputers

Help PDService

KeyAreas WhereComputers

Help PDService

ProductAvailability

ProductAvailability

• False expectations about delivery speed

• Selling products that are not available

• Running out of popular products

Coordinationof PD

Coordinationof PD

• Intentional delays in order confirmation

• Shifting the burden of holding inventory

Ethical Issues May Arise

The Transporting Function Adds Value to a Marketing Strategy (Exhibit 11-5)

Which Transporting Alternative Is Best? (Exhibit 11-6)

Water Transportation

Airfreight Is Expensive but Fast and Growing

© 2008 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Interactive Exercise: Transport Modes

The best transportation alternative for shipping chickens from farms in West Virginia to processing plants in Maryland would be:

A. air.B. truck.C. rail.D. water.E. none of the above.

Checking your knowledge

Achieves Production Economies of Scale

Achieves Production Economies of ScaleAchieves Production Economies of Scale

Achieves Production Economies of Scale

Keeps Prices SteadyKeeps Prices SteadyKeeps Prices SteadyKeeps Prices Steady

Needed When Production Doesn’t Match Consumption

Needed When Production Doesn’t Match Consumption

Needed When Production Doesn’t Match Consumption

Needed When Production Doesn’t Match Consumption

Builds Channel Flexibility

Builds Channel Flexibility

The Storing Function and Marketing Strategy

Handling costsHandling costsHandling costs

Cost of inventory becoming obsolete

Cost of inventory becoming obsolete

Cost of risksCost of risksCost of risks

Cost of damage while in

inventory

Cost of damage while in

inventory

Cost of damage while in

inventory

Cost of storage facilities

Cost of storage facilities

Cost of storage facilities

Interest expense &

opportunity cost

Interest expense &

opportunity cost

Interest expense &

opportunity cost

Interest expense &

opportunity cost

Total Inventory Cost (Exhibit 11-7)

TotalInventory

Cost

TotalInventory

Cost

Specialized Storing Facilities May Be Required (Exhibit 11-8)

Which of the following statements indicates a reasonable approach to the management of inventory and storage?

A. “Inventory that sits in a warehouse doesn’t do any harm; besides, it might be needed someday.”

B. “Inventory and storage costs should be minimized, regardless of the impact on customer service.”

C. “The cost of stockouts always exceeds the cost of carrying inventory.”

D. “Always have a large safety stock of inventory to eliminate the possibility of stockouts.”

E. Have enough inventory on hand to meet the expected level of customer service required, but don’t carry too much.”

Checking your knowledge

• Logistics

• Physical distribution

• Customer service level

• Physical distribution concept

• Total cost approach

• Supply chain

• Electronic data interchange (EDI)

• Transporting

• Containerization

• Piggyback service

• Storing

• Inventory

• Private warehouses

• Public warehouses

• Distribution center

Key Terms