1. Logistics & Channel Management
Chapter 13
Logistics & Channel Management

2. Logistics Definition:
Objective 1: 13
Logistics
Definition:
Consists of the planning, implementing, and controlling of the physical flows of materials and final goods/services from points of origin to points of use to meet customers’ needs/wants at a profit.

3. Supply-Chain Management
Objective 2: 13
Supply-Chain Management
Definition:
Logistical perspective* that emphasizes close cooperation and comprehensive interorganizational management to integrate the logistical operations of the different firms within the channel.
* substituted “perspective” for “systems”

4. The Role of Logistics In essence…
Objective 3: 13
The Role of Logistics
In essence…
Logistics is focused on the physical movement of product…
In the right amount,
Of the right product,
To the right place, and
At the right time.

5. 3rd Party Logistics Providers13
3rd Party Logistics Providers
Specialize in performing most, if not all, of the logistical tasks that manufacturers or other channel members would normally perform themselves.
Represent a growing industry because…
Provide services at lower costs than the firms could do themselves

6. & Its “Core” Components
Objective 4 & 5: 13
The “Systems” Concept
& Its “Core” Components
Transportation
Warehousing
Materials
Handling
The
Logistical
System
Inventory
Control
Order
Processing
Packaging

7. The “Total Cost” Approach13
The “Total Cost” Approach
Given customers’ desired service levels…
The optimum combination of basic logistical components is sought while focusing on all the costs of logistics together, rather than the separate costs of the individual components together.
Goal = minimize total costs rather than individual costs

8. Logistical Component:13
Logistical Component:
Transportation
The most fundamental & necessary component of logistics
Accounts for the highest percentage of the total costs of logistics
Key Issue(s):
Choose the optimum mode of transportation that will meet the customers’ service demands at the lowest price possible.

9. Logistical Component:13
Logistical Component:
Materials Handling
Consists of all the activities and equipment involved in the placement and movement of products within storage areas.
Key Issue(s):
Choosing the correct mechanical equipment
Making the best use of labor
Minimizing the distances products are moved within the warehouse during the course of receiving, storage, and shipping.

10. Logistical Component:13
Logistical Component:
Order Processing
The task of filling customer orders
Its importance lies in its relationship with order cycle time, which is the time between when an order is placed & when it’s received by the customer.
Key Issue(s):
Developing an efficient order processing center so that order cycle time (and possibly other logistical costs) is minimized

11. Logistical Component:13
Logistical Component:
Inventory Control
Seeks to hold the least inventory as possible while still meeting customer demand
Key Issue(s):
Keeping inventory at its lowest possible level while simultaneously placing orders in large quantities
Determining one’s economic order quantity, which lies at the point where ICC plus ordering costs (i.e., total costs) are at their minimum.

12. Logistical Component:13
Logistical Component:
Warehousing
Concerned with the holding of products until they’re ready to be sold.
Key Issue(s):
Locating warehouse facilities
Determining the number of warehouse units
Determining the size of each unit
Designing the units
Determining who should own the unit(s)
Often one of the more complex components of logistics because…

13. Logistical Component:13
Logistical Component:
Packaging
Packaging and its associated costs significantly affect the other components of the system.
Key Issue(s):
Designing packaging to enhance the efficiency and effectiveness of the logistical system beyond that of simply acting as a promotional or educational device for consumers.

14. The Output of a Logistics System
Objective 6: 13
The Output
of a Logistics System
Customer Service
The collection of activities performed in fulfilling orders and keeping customers happy or creating in the customer’s mind the perception of an organization that is easy to do business with.
Enumerated or defined in terms of
one’s “Service Standards”

15. Nine Common Categories of13
Nine Common Categories of
Service Standards
Time from order receipt to order shipment
Order size and assortment constraints
Percentage of items out of stock
Percentage of orders filled accurately
Percentage of orders filled within a given number of days from receipt of the order
Percentage of orders filled
Percentage of customer orders that arrive in good condition
Order cycle time
Ease and flexibility of order placement

16. Key Elements of Customer Service13
Key Elements of Customer Service
Product availability
Order cycle time
Distribution system flexibility
Distribution system information
Distribution system malfunction
Post-sale product support

17. Logistics Management vs.
Objective 7: 13
Logistics Management vs.
Channel Management
Logistics management
Concerned primarily with the product flow.
Channel management
The administration of all the major channel flows (ref. Ch. 1).

18. Interfaces Between Logistics and Channel Management
Objective 8: 13
Interfaces Between Logistics
and Channel Management
Interface 1:
Determining logistics' service standards
Interface 2:
Evaluating whether the logistics program meets channel members’ service standards
Interface 3:
Selling the logistics system
Interface 4:
Monitoring the results of the logistics program

19. Defining Logistics’ Service Standards13
Defining Logistics’ Service Standards
The higher the service standards, the higher the total costs associated with logistics.
Key Issue for Channel Manager:
Determining accurately the types and levels of logistics service desired by channel members (including end-run customers).

20. Evaluating the Logistics Program13
Evaluating the Logistics Program
If considered a major component of the channel manager’s approach to supporting channel members’ needs, the logistics program may be the key feature of a strategic alliance.
Key Issue for Channel Manager:
Ensuring that the program prepared is what the channel members want and need.

21. Selling the Logistics Program13
Selling the Logistics Program
Often a function of…
Minimizing stock-out occurrences
Reducing members’ inventory requirements
Strengthening relationship with members
Key Issue for Channel Manager:
Extending superior logistics capabilities to help members improve their logistics and marketing capabilities.

22. Monitoring the Logistics System13
Monitoring the Logistics System
Logistics systems must be continually monitored, both in terms of how successful they perform for the channel manager as well as how they meet members’ changing needs.
Key Issue for Channel Manager:
Continually monitoring members’ reactions to the logistical programs in place (e.g., through audits and internal research)