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Marketing logistics (physical distribution) involves planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit

Marketing logistics involves:

Outbound distribution: Moving products from the factory to resellers and consumers Inbound distribution: Moving products and materials from suppliers to the factory Reverse distribution: Moving broken, unwanted, or excess products returned by consumers or resellers

Marketing Logistics and Supply Chain Management

Supply chain management is the process of

managing upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers

Marketing Logistics and Supply Chain Management

Why Greater Emphasis is Being Placed on Logistics:
Offers firms a competitive advantage Can yield cost savings Greater product variety requires improved logistics Improvements in distribution efficiency are possible due to information technology

Importance of logistics

Competitive advantage by giving customers better service at lower prices Cost savings to the company and its customers Product variety requires improved logistics Information technology has created opportunities for distribution efficiency

Goals of the Logistics System

No system can both maximize customer service and

minimize costs.
Firms must first weigh the benefits of higher service

against the costs.

State goals in terms of a targeted level of customer

service at the least cost.

To provide a targeted level of customer service at the

least cost with the objective to maximize profit, not sales

Logistics objective
Getting the right goods at the right place at the

right time for the least cost

the last frontier for cost economies.

Major Logistics Functions


Order Processing

Transportatio n




The starting point of physical distribution activities is the processing of customers orders. In order to provide quicker customer service, the orders received from customers should be processed within the least possible time. Order processing includes receiving the order, recording the order, filling the order, and assembling all such orders for transportation, etc.

Requirements for system order processing

Responsiveness and speed and order Lowest possible cost of delivery

Minimum wastage in system

Accuracy in order Continuous improvement of the system Efficiency related to paper work

1. Order planning: designing and efficient order

handling system.
2. Order transmittal: a series of events that occur

between the customer order and firm receive the orders. 3. Order handling: recording of transaction then allocation of product at time specified.
4. Order picking and assembly: giving

instruction to a specific warehouse to assemble a given order for a customer.

5. Order delivery : the time from when a carrier picks

the shipment until it is delivered to the customers receiving dock.

6. Order inquiry : make a lists and check the record

of products
7. Shipping scheduling: determine the time when the order is to take place.
8. Order editing and modification: modify the order according to requirement of the customer

Order Processing and Information Systems


Steps in Order Processing

Use a Standardized Form When Taking Order 2. Recording the transactions 3. Confirm and filling the Order 4. Distribute the Order Form Internally

Order processing tasks

Meaning : it is the act of holding the goods until the customer is ready to buy them. it is a place where surplus goods can be kept for future use.

Storage warehouses are designed to store goods, not move them Distribution centers are designed to move goods, not store them Automated warehouse are designed to move and store the goods both.


Economic / financials benefits :

a. reduction of overall cost of transportation b. . reverse logistics ( of unsold/unwanted

materials) c. assortments of products d. postponement of deliver Break bulk Cost reduction and service improvement assembly stockpilling

3. 4. 5.

Classification of warehouse

Utility criteria

a.) product
- Explosive store house and magazine - FOL depots with storage tankers - secured warehouse

b.) speciality service warehouse


a.) govt warehouse b.) private warehouse c.) public warehouse d.) cooperative warehouse

Helps in financing the trade Removes the urgency of paying custom duty

Perform the various services

Helps in storage Maintain safety of stocks

Facilitates smooth supply of goods

Transportation is the main artery of logistics and supply chain management. It refers to movement

of goods from one location to others

means of conveyance or travel (of goods and services) from one place to another.

Rail Nations largest carrier, cost-effective for shipping bulk products, piggyback Truck Flexible in routing & time schedules, efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value, non-perishable goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Air High cost, ideal when speed is needed or distance markets have to be reached

Reduction in transit time for minimisation of

inventory cost. Less damages, en route handling and pilferages for minimum insurance charges. Curtailment of protective packaging costs. Availiability of point to point information regarding the status of the shipment.

It provides protective storage during transit. It ensures cost efficient better customer services. It creates core competency by preventing stock outs. It ensure speedier and timely physical movement of










Three factors are fundamental to transportation performance: (1) cost, (2) speed, (3) consistency.

the inventory decisions which hold the key to success of physical distribution especially where

the inventory costs may be as high

The cost inventory consists of holding cost (such as cost of warehousing, tied up capital and obsolescence) and replenishment cost (including the manufacturing cost).

Kinds of inventory

Raw materials,

In-process or semi-finished goods,

Finished goods.

Inventory management balances carrying too little and too much inventory Just-in-time logistics systems RFID Just-in-time logistics systems allow producers and retailers to carry small amounts of inventories of parts or merchandise

RFID (radio frequency identification devices) are small transmitter chips embedded in or placed on products or packages to provide greater inventory control

The objective of an inventory

strategy is to achive desired customer service with the minimum inventory commitment. Excessive inventories may compensate for deficiencies in basic design of a logistic system but will ultimately result in higher-than-necessary total logistics cost.

Stocking policies for raw materials, work in progress

and finished goods Replenishment policy (just in time, push or pull strategies) Inventory cost Product price at stocking price Number ,location and size of stocking policy Approach towards safety stock , reorder point and lot size

The reasons for inventory control are: Helps balance the stock as to value, size, color, style, and price line in proportion to demand or sales trends. Help plan the winners as well as move slow sellers Helps secure the best rate of stock turnover for each item. Helps reduce expenses and markdowns. Helps maintain a business reputation for always having new, fresh merchandise in wanted sizes and colors.

STEP 1: Inventory Planning STEP 2: Establish order cycles STEP 3: Balance Inventory Levels STEP 4: Review Stocks STEP 5: Follow-up and Control

Various activities are:

Purchase of material
Receiving of material Inspection

Issue of material

1. EOQ model: cost of placing and receiving an order

are the same for each other and independent of the no. of units ordered

total costs = (no of order*cost per order)+(average inventory * annual carrying cost per unit)

2. XYZ classification: it has the value of inventory

stored as the basis of differentiation. X items are high inventory value while Z items are low inventory value.

3. HML classification: In this unit value of the item is

considered. The cut off points will depend on the individual units.

For ex kerosene 4. VED classification: (vital,essential and desireable).it

is applicable on spare parts. Vital class of spare parts have to be stocked adequately.

5. ABC classification: the maintaining appropriate control according to the saving associated with proper level of control. This approach is a means of categorising inventory items into A,B and C acc. to potential amount of control 6. FSN classification: Items are classified according to their assumption pattern. It is fast moving, slow moving and non moving.


(1) core customer segmantation (2) product profitability (3) transportation integration (4) time-based performance (5) competitive performance

Inventory vs Service levels


Reorder point should balance the risks of stockouts against costs of overstocking Company needs to balance ordering costs vs inventory carrying costs