For use only with Perreault and McCarthy texts. © 2006 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin CHAPTER ELEVEN CHAPTER ELEVEN Distribution Customer Service and Logistics

1. Understand why physical distribution (logistics) is such an important part of Place and marketing strategy planning. 2. Understand why the physical distribution customer service level is a key marketing strategy variable. 3. Understand the physical distribution concept and why it requires coordination of storing, transporting, and related activities. 4.See how firms can cooperate and share logistics activities to improve value to the customer at the end of the channel. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin When we finish this lecture you should

5. Know about the advantages and disadvantages of the various transporting methods. 6. Know how inventory decisions and storing affect marketing strategy. 7. Understand the distribution center concept. © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin When we finish this lecture you should

Physical Distribution Gets It to Customers © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Logistics or Physical Distribution

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Physical Distribution Customer Service +

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Trade-Offs of Costs, Service and Sales Exhibit 11-1

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Physical Distribution Concept Focuses on the Whole Distribution System Info on Product Availability Order Processing Time Backorder Procedures Inventory Storage Order Accuracy Damage in Transit Online Status Information Advance Info on Delays Delivery Time Compliance with Customers Defect – Free Deliveries Factors Affecting PD Service Levels Factors Affecting PD Service Levels Handling Adjustments/ Returns

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Physical Distribution (PD) Concept

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin A Cost Comparison of Alternative Systems Exhibit 11-3

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Total Cost Approach +

Shifting and Sharing JIT Conflict Handling Chain of Supply © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Coordinating Logistics Activities

Better Information Helps Coordinate PD © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Internet Electronic Data Interchange Continuously Updated Information Systems Areas Where Computers Help PD Service Areas Where Computers Help PD Service

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Product Availability Product Availability False expectations about delivery speed Selling products that are not available Running out of popular products Coordination of PD Coordination of PD Intentional delays in order confirmation Shifting the burden of holding inventory Ethical Issues May Arise

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Physical Distribution Customer Service Level

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Transporting Function Adds Value to a Marketing Strategy

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Which Transporting Alternative Is Best? Exhibit

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Water Transportation +

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Airfreight Is Expensive but Fast and Growing +

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Interactive Exercise: Transportation Modes

Achieves Production Economies of Scale Keeps Prices Steady Needed When Production Doesn’t Match Consumption Builds Channel Flexibility © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin The Storing Function and Marketing Strategy

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Goods Are Stored at a Cost Exhibit 11-5

© 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Specialized Storing Facilities May Be Required Exhibit

Logistics Physical distribution Customer service level Physical distribution concept Total cost approach Chain of supply Electronic data interchange (EDI) © 2006 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Key Terms Transporting Containerization Piggyback service Storing Inventory Private warehouses Public warehouses Distribution center