1. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Chapter 12: Distribution Customer Service and Logistics

2. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill When you finish this chapter, you should 12-2 Chapter 12 Objectives 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. 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. 8. Understand the important new terms.

3. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Exhibit 12-1 12-3 Understanding Physical Distribution Costs ($) Customer Service Level 0 0 90% Transporting Cost Lost Sales Inventory Cost Total Cost of PD

4. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Coordinating Logistics Activities Better Information-EDI and Internet Chain of Supply JIT Reducing Conflict Sharing and Shifting 12-4

5. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Transporting Function 12-5 Modes of Transportation Water Air Rail Truck Pipeline

6. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill The Storing Function Price Stability Flexibility Costs Specialized Function 12-6

7. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Exhibit 12-6 12-7 Comparing Private and Public Warehouses Adequacy Control Fixed Investment Characteristics Private Highly adequate High Very high Flexibility Low Public May not be convenient Low managerial control No fixed investment High Type of warehouse Unit Cost High if volume is low Very low if volume is very high Low

8. For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Containerization Piggyback Service Freight Forwarders Storing Inventory Private Warehouses Public Warehouses Distribution Center JIT Physical Distribution (PD) Logistics Customer Service Level PD Concept Total Cost Approach Chain of Supply Electronic Data Interchange Transporting Pool Car Service Diversion in Transit 12-8 Key Terms