©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 13 Logistics and Channel Management Part 3: Managing the Marketing Channel

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Logistics Management Logistics Management Concerned specifically with product flow Channel Management The administration of all the major channel flows 7

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Third-Party Logistics Providers (3PLs) Specialize in performing most or all of the logistical tasks that manufacturers or other channel members would normally perform themselves Specialize in performing most or all of the logistical tasks that manufacturers or other channel members would normally perform themselves Provide service at lower cost than the firms who hire third-party providers Provide service at lower cost than the firms who hire third-party providers Currently growing rapidly into a major industry Currently growing rapidly into a major industry

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Total Cost Approach Total Cost Approach Management attempts to minimize the cost of using the components taken as a whole Basic components of A logistics system Basic components of A logistics system Systems Concept Management views logistics as a system of Interrelated components

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objective Systems Concept Warehousing Order Processing Materials Handling Inventory Control Transportation Packaging 4 Interrelated components of a system

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Transportation Most fundamental and necessary component Accounts for the highest percentage of the total cost of logistics Overriding issue facing the firm: Choosing the optimum mode of transportation to meet customer service demands Most fundamental and necessary component Accounts for the highest percentage of the total cost of logistics Overriding issue facing the firm: Choosing the optimum mode of transportation to meet customer service demands

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Materials Handling Range of activities & equipment involved in the placement & movement of products in storage areas Issues: 1. Minimizing the distances products are moved within the warehouse during the course of receiving, storage, & shipping 2. Choosing the kinds of mechanical equipment that should be used 3. Making the best use of labor when receiving, shipping, & handling products Range of activities & equipment involved in the placement & movement of products in storage areas Issues: 1. Minimizing the distances products are moved within the warehouse during the course of receiving, storage, & shipping 2. Choosing the kinds of mechanical equipment that should be used 3. Making the best use of labor when receiving, shipping, & handling products

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Order Processing Its importance in logistics lies in its relationship with order cycle time—the time between when an order is placed & when it is received by the customer. Issue: Developing an efficient order processing system Its importance in logistics lies in its relationship with order cycle time—the time between when an order is placed & when it is received by the customer. Issue: Developing an efficient order processing system

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Inventory Control The firm’s attempt to hold the lowest level of inventory that will still enable it to meet customer demand Issue: Keeping inventory at the lowest possible level while concurrently placing orders for goods in large quantities The firm’s attempt to hold the lowest level of inventory that will still enable it to meet customer demand Issue: Keeping inventory at the lowest possible level while concurrently placing orders for goods in large quantities

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Warehousing The holding of products until they are ready to be sold Issues: 1. The location of warehouse facilities 2. The number of warehousing units 3. The size of the units 4. The design of the units 5. The question of ownership The holding of products until they are ready to be sold Issues: 1. The location of warehouse facilities 2. The number of warehousing units 3. The size of the units 4. The design of the units 5. The question of ownership

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Packaging Packaging & its associated costs can affect the other components of the system Issue: Using packaging to make a significant difference in the effectiveness & efficiency of the logistics system Packaging & its associated costs can affect the other components of the system Issue: Using packaging to make a significant difference in the effectiveness & efficiency of the logistics system

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Timberland Company is one of the world’s best known manufacturers of casual shoes and sports boots. For many years the company’s logistical system was geared to large orders. Hence priority was given to major department stores and retail chains that purchased in large quantities. But market reports were indicating that consumers were shopping in increasing numbers at small independent retailers and boutiques for the kinds of shoes and boots sold by Timberland. So, the problem facing Timberland was how to service the large numbers of small retailers with their tiny orders while still maintaining high levels of efficiency and low order processing costs. To meet this challenge, Timberland reengineered its logistical system by using modern scanning equipment to control inventory, track merchandise and handle all paperwork automatically. Does this situation represent an interface between channel management and logistics management? Explain. Discussion Question #2

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Elements of Customer Service Customer service (desired outcome of logistics) is the activities performed in filling orders and keeping customers happy or creating in the perception that an organization is easy to do business with. LaLonde Classification of Customer Service: 1.Product availability 2.Order cycle time 3.Distribution system flexibility 4.Distribution system information 5.Distribution system malfunction 6.Post-sale product support

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Defining Logistics Program Service Standards The higher the service standards, the higher the costs. Key issue for Channel Manager: Determining precisely the types and levels of logistics service desired by channel members

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. If included as a major component of the manufacturer’s overall approach for supporting channel member needs, the logistics program may be the key feature of a strategic alliance. Key issue for Channel Manager: Ensuring that the program the experts prepare is what the channel members want. Evaluating the Logistics Program

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1.Minimize out-of-stock occurrences. 2.Reduce channel member inventory requirements. 3.Strengthen the manufacturer-channel member relationship. Key issue for Manufacturers: Extending superior logistics capabilities to help channel members improve their logistics and marketing capabilities. Selling the Logistics Program

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Logistics systems must be continually monitored, both in terms of how successfully they are performing for the manufacturer and how well they are meeting changing channel member needs. Key issue for Channel Manager: Continually monitoring the channel members’ reactions to logistics programs. Monitoring the Logistics System

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. U.S. Jaguar dealers used to wait at least one week to receive parts from England. Parts were shipped in bulk by Jaguar to a U.S. warehouse where they were split up, repackaged and then shipped to individual dealers. Working closely with Federal Express, Jaguar initiated a new logistics system that shortened the time by four days. Under the new system, dealers order a part directly from Jaguar in England and the part is then air expressed via Federal Express. The time between order placement and receipt at the dealership is no longer than three days. Comment on the change in Jaguar’s logistics system in terms of its relevance for providing customer service and the possible trade-offs in higher costs. Discussion Question #3