Case 16:Physical Distribution

and Logistics
SERVICING DELIVERIES2
TheGodrej Lock Manufacturing and McDonald's have put faith on third
party logistics and favoured courier companies to deliver
network of dealers/agents and consumers. The core products to the wide
rier companies like Elbee Services Ltd., Blue Dart
competencies of the cou-
Express Ltd., and Air
freight limited, have been sought to be explored by the índian industries.

12. Adapted from: Shailesh Dobhal, "Delivering a Complete Package", The Economic Times,
Feb. 12, 1997.
8.26 MARKETING MANAGEMENT

The marketers, with advice from the manufacturers and pressure from
competition, have sought to cut down the costs by cutting the size of interme
diaries, for reaching the retailers and the ultimate users.
The companies are trying to bypass the hassles involved in distribution
logistics due to dealing with multiple vendors, transporters, C&F agents,
freight forwarders, Octroi and customers agents that the traditional distribu-
tion system carries.
Third party logistics have become the new buzz word with courier com-
panies. The new imperative is to prune and control the inherent fixed over-
heads in the supply or distribution chain management.
This has opened up new opportunities for the courier companies. The
service requires distribution network/infrastructure that have multi-model
transportation fleets/arrangements, warehouses, hubs, investments in tech-
nology and manpower. The offering of third party logistics service is a logical
extension of express service and cargo companies. The current growth of the
trend-setting third party logisties is around 30%, which has been favoured
because of increasing popularity of the fax, e-mail and internet. The
pure
outsourced logistics market size is estimated to be between Rs. 80 crore to
Rs. 100 crore. The express industry, in comparison, is around Rs. 800 crore.

Questions
1. Why the companies like McDonald's and Godrej have favoured third party
logistics to satisfy customer need ?
2. Will it pay to cut costs on a number of intermediaries and the benefit to be
passed on to customer ?
3. Will thearrangement make the manufacturers and marketers more efficient in
handling their day-to-day operation?