CHAPTER 12

MARKETING LOGISTICS:
PHYSICAL DISTRIBUTION
AND CUSTOMER SERVICE
 LOGISTIC DEFINITION
 Inventory:
◦ Management of materials in motion and at rest

 Customer:
◦ Getting the right product, to the right customer, in
the right quantity, in the right condition, at the right
place, at the right time, and at the right cost (called
the dictionary “seven Rs of logistics”)

 International Society of Logistics:

◦ The branch of military science having to do with
procuring, maintaining, utility/ value and
transporting material, personnel, and facilities
 Council of Supply Chain Management
◦ The art and science of management, engineering,
and technical activities concerned with requirements,
design, and supplying and maintaining resources to
support objectives, plans, and operations
 LOGISTIC DEFINITION
 Component support:
◦ Providing time and place utility/value of
materials and products in support of Functional
management organization objectives
 Common culture:
◦ That part of the supply chain process that plans,
implements, and controls the efficient, effective
flow and storage of goods, services, and related
information from point of origin to point of
consumption in order to meet customer
requirements

◦ Supply management for the plant (inbound

logistics) and distribution
◦ Management for the firm’s customers materials
requirements, purchasing, transportation,
inventory management, warehousing, materials
handling, industrial packaging, facility location
analysis, distribution, return goods handling,
information management, customer service, and
all other activities concerned with supporting
the internal customer (manufacturing) with
materials and the external customer (retail
stores) with product
RELATIONSHIP OF LOGISTICS AND
PHYSICAL DISTRIBUTION
 Logistics refer to the interrelation and management
of all the activities. Involved in making products
and raw materials available for manufacturing and
in providing finished products to customers
when,where,and how they are desired.
 This requires the management of two primary
product flows:
physical supply
physical distribution
 Physicalsupply(material management):-
It involves all those activities necessary to
make production inputs(raw materials,
component parts, and supplies)available to
the manufacturing process.

 physical
distribution:-
physical distribution encompasses those
tasks necessary to deliver the completed
product to customers or channel
intermediaries.
Logistics Activities
 Transportation
 Warehousing and storage
 Industrial packaging
 Materials handling
 Inventory control
 Order fulfillment
 Demand forecasting
 Production planning/scheduling
 Procurement
 Customer service
 Facility location
 Return goods handling
 Parts and service support
 Salvage and scrap disposal
Typical logistical activities
KEY ELEMENTS
 TRANSPORTATION
(a).mode and carrier selection
(b).carrier routing
(c) .vehicle scheduling
 INVENTORY MANAGEMENT
(a).stock-level policies
(b). Short-term sales foresting
(c).product mix by location
(d).stocking locations
 CUSTOMER SERVICE
(a)determine customer needs
(b)analyze customer response
to service
(c)set customer service level
SUPPORTING ACTIVITIES
 WAREHOUSING (a).space
determination (b)warehousing
configuration
(c)stock layout and placement
 MATERIAL HANDILING
(a)equipment and personnel
(b)order picking procedures
(c)stock storage and retrieval
 PROTECTIVE PACKAGING
(a)design for handling
(b)design for storage
(c)design for protection
Typical logistical activities
KEY ELEMENT SUPPORTING ACTIVITIES

 ORDER PROCESSING  PRODUCTION SCHEDULING

(a)sales order-invetory interface (a)aggregate volume forecasting
(b)order information transmittal (b)sequence and timing of
production
(c)ordering rules  INFORMATION MAINTENANCE

(a)collection and storage

(b)data analysis
THE TOTAL-COST APPROACH
 The objective of an efficient physical distribution
system is to minimize the costs involved in storing
product and moving them from the point of
purchase within a specified level of customer
service.
 Management of logistical activities, focuses on two
essential variables:
(1)total distribution costs and
(2)the level of service provider to customers
 INTRACTIVE COST:-
the total cost approach to logistical managements
based on the premises that a firm should consider
as a lump sum the cost of all the activities involved
in physically moving and storing materials and
products when it attempts to establish specific
customer service levels.
the costs of logistical activities interact often in
an inverse manner
for instance, policy of maintaining low inventory
levels reduce holding costs can result in stockouts
and backorders, special production runs, costly
air-fright shipment, or even lost customers.
when logistical activities are evaluated
individually on ability to achieve a given
management objective,suboptimzation often
occurs

 EVALUATING COST TRADE-OFF

Cost trade off are not limited to any specific

activitiy.they occur among all logistical activities.
 CUSTOMER SERVICE
 Customer service is presumed to be a means by
which companies attempts to differentiate there
product, keep customers loyal, increase sales, and
increase profits. Thus customer service is not just,
an outcome of business activities; it can be a
managed element of that business.
 Determining customer service levels
Determining the level of customer service requires
consideration of all those activities involved in
filling orders and keeping customers happy.
Distributors play a vital role in providing ultimate
customer service levels.
 Customers perceive the service provided by this
indirect channel as being more consistent and
effective than what they would obtain directly from
the manufacturer.
 Customer service element actually occurs in three
stages:
(1)before the transaction
(2)as part of the transaction
(3)after the transaction has been completed
 The Competitive environment:
The competitive environment relates to industry
service standards. Customers from expectations
based on what they view as “normal "with in their
industry.
 PROFITABILITY
The major criterion for evaluating the appropriate
customer service level is profitability. The higher
the level of service, greater the costs evolved.

 THE IMPACT OF LOGISTICAL SERVICE ON CHANNEL

MEMBERS
Logistical service level effect the relationship
between the manufacturer and customer as well as
the operations of channel members.
 IDENTIFYING COST CENTERS
 Logistical management includes the integration
of relevant cost centers so that the level of
logistical service desired by customer and
middleman can be provided at the lowest possible
cost.

 TRANSPORTATION
Air fright
Truck
Rail
Pipeline
Intermodal transportation
 STATE AND FEDERAL REGULATION OF CARRIERS
Common carrier
Contact carrier
Private carrier
Exempt carrier

 CRETERIA FOR SELECTING THE MODE OF

TRANSPORTATION
Speed and availability of service
Dependability of service
Carrier capability
Frequency of service
 WAREHOUSING
Private or public facilities
Warehouse site location
Market-positioned warehouse
Production-positioned warehouses
Intermediately positioned warehouses

 OPTIMIZING INVENTORIES
Abc analysis
Determining inventory level
The EOQ model
Fixed-order-quantity model
Thank you…