Logistics and channel

management
Week 12

Instructor: Jungwan Lee

What is logistics?

 ..physical distribution
 ..supply chain management
 ..planning and implementing,
and controlling the physical
flows of materials and final
goods from points of origin to
points of use to meet customer’s
needs at a profit. (kotler)
Supply chain management

 In more recent years, with the

growing emphasis in marketing
channels of firms cooperating in
partnerships and strategic
alliances, SCM describe logical
systems that emphasize close
cooperation to integrate the
logistical operations of the
different firms in the channel.
Logistic systems

 Total cost approach

 -> Minimize firm costs
 -> Channel-wide cost
efficiencies
Logistics system six basic
components

 Transportation
 Materials handling;cross-
docking
 Order processing;order cycle
time
 Inventory control;
 economic order quantity
 Warehousing
 Packaging
Third party logistics providers

 This firm specialize in performing

most or all of the logistical tasks.
 As specialists in logistics, companies
such as Strategic Distribution, which
focuses on maintenance, repair, and
operating supplies (MRO), are able
to provide superior service at low
cost than the firms who hire them.
Efficient consumer response
(ECR)
 ..seeks to provide consumers with
better service and more value
through cooperation of all firms in the
supply chain.
 In an effort to address logistics
challenge, the grocery (food)
industry in recent years has
launched a massive effort to improve
the logistics of food distribution from
farm to consumer.
Role of logistics

 ..getting the right amount, of the

right products, to the right place,
at the right time, at the lowest
possible costs to the customer.
 ..plays a critical role in channel
management.
The output of the logistics system;
key element of customer service

 Product availability
 Percentage in stock
 Order cycle time
 Elapsed time from order placement to order
receipt
 Distribution system flexibility
 Response time to special request
 Distribution system information
 Speed, accuracy of response
 Post-sale product support
 Response time in providing product support
Economic order quantity
 Inventory control refers to the firm’s
attempt to hold the lowest level of inventory
that still enable it to meet customer
demand.
 Inventory carrying costs: financing,
insurance, storage, lost, damaged, stolen
goods---about 25%
 Trade-off: inventory carrying costs versus
ordering costs=total costs
 EOQ occurs at the point at which total
costs are lowest, by balancing inventory
carrying cost and ordering cost.
Four key areas of interface between logistics
and channel management

 Defining logistics service standards

 Evaluating the logistics program
 Selling the channel members on the
logistics program
 Minimizing out-of-stock occurrences
 Reducing channel member inventory
requirements
 Strengthening the manufacturer-channel
member relationship
 Monitoring the logistics system
Discussion1

 Does this situation represent an

interface between channel
management and logistics
management?

 Timberland company case-

retailers/scanning equipment
 LG25 company case
Discussion 2
 Cross-docking system
 …which eliminates storage in the
warehouse and the subsequent need to
pick stock to fill orders, can dramatically
reduce labor and inventory carrying costs.
 The concept is just move it across the
loading docks to other trucks and send the
merchandise on to its intended final
destination.
 What are some of the complicating factors
that make challenging to implement?
Discussion 3

 What are your suggestions to

solve the logistic challenges of
Korea?