Marketing Series: Is Logistic Part of Marketing?

 LOGISTICS AND THE SUPPLY CHAIN

Marketers place a great deal of emphasis on logistics, the process of designing, managing, and improving the movement of products through the supply chain. Logistics is also a relevant consideration regarding product returns, recycling and material reuse, and waste disposal—reverse logistics.

Marketing Logistics (Duration: 5.23 minutes)

The Lowdown on Logistics

When a firm does logistics planning, the focus also should be on the customer. Logistics aims to deliver exactly what the customer wants—at the right time, in the right place, and at the right price.

 

1. Order Processing

• Order processing includes the series of activities that occur between the time an order comes into the organization and the time a product goes out the door.
• Fortunately, many firms automate this process with enterprise resource planning (ERP) systems. An ERP system is a software solution that integrates information from across the entire company, including finance, order fulfilment, manufacturing, and transportation. Data need to be entered into the system only once, and then the organization automatically shares this information and links it to other related data.

2. Warehousing

• Warehousing—storing goods in anticipation of sale or transfer to another member of the channel of distribution—enables marketers to provide time utility to consumers by holding on to products until consumers need them.
• Part of developing effective logistics means making decisions about how many warehouses we need and where and what type of warehouse each should be.
• Firms use private and public warehouses to store goods.
• • Private warehouses have a high initial investment but they lose less inventory due to damage.
  • Public warehouses allow firms to pay for a portion of warehouse space rather than having to own an entire storage facility.
  • A distribution center is a warehouse that stores goods for short periods and that provides other functions such as breaking bulk.

3. Materials Handling

• Materials handling is the moving of products into, within, and out of warehouses. Once in the facility the goods may be handled over a dozen separate times. Procedures that limit the number of times a product must be handled decrease the likelihood of damage and reduce the cost of materials handling.

4. Transportation

• Logistics decisions take into consideration options for transportation, the mode by which products move among channel members. Modes of transportation differ in their: 
  • Dependability: ability to deliver goods safely and on time
  • Cost: the total transportation costs to move a product from one location to another, including any charges for loading, unloading, and in-transit storage
  • Speed of delivery including loading and unloading 
  • Accessibility: number of different locations carrier serves 
  • Capability to handle different products such as large and small, fragile or bulky
  • Traceability: ability to locate goods in shipment
• Each mode of transportation has strengths and weaknesses that make it a good choice for different transportation needs.
• • Railroads: Railroads are best to carry heavy or bulky items, such as coal and other mining products, over long distances. Railroads are about average in their cost and provide moderate speed of delivery.
  •  Water: Ships and barges carry large, bulky goods and are very important in international trade. Water transportation is relatively low in cost but can be slow.
  • Trucks: Trucks or motor carriers are the most important transportation mode for consumer goods, especially for shorter hauls. Motor carrier transport allows flexibility because trucks can travel to locations missed by boats, trains, and planes. Trucks also carry a wide variety of products, including perishable items. Although costs are high for longer-distance shipping, trucks are economical for shorter deliveries. Because trucks provide door-to-door service, product handling is minimal, and this reduces the chance of product damage.
  • Air: Air transportation is the fastest and the most expensive transportation mode. It is ideal to move high-value items such as important mail, fresh-cut flowers, and live lobsters. 
  • Pipeline: Pipelines carry petroleum products such as oil and natural gas and a few other chemicals. Pipelines flow primarily from oil or gas fields to refineries. They are very low in cost, require little energy, and are not subject to disruption by the weather.
  • The Internet: As we discussed earlier in this chapter, marketers of services such as banking, news, and entertainment take advantage of distribution opportunities the Internet provides.

 

5. Inventory Control 

• Inventory control means developing and implementing a process to ensure that the firm always has sufficient quantities of goods available to meet customers’ demands. 
• Some companies are even phasing in a sophisticated technology (similar to the EZ Pass system many drivers use to speed through toll booths) known as radio frequency identification (RFID). RFID lets firms tag clothes, pharmaceuticals, or virtually any kind of product with tiny chips that contain information about the item’s content, origin, and destination. This technology has the potential to revolutionize inventory control and help marketers ensure that their products are on the shelves when people want to buy them.
• Firms store goods for many reasons, such as enabling production to meet seasonal demand and creating economies in ordering.
• Inventory control has a major impact on the overall costs of a firm’s logistics initiatives. Level loading is a manufacturing approach intended to balance the inventory holding capabilities and production capacity constraints of a manufacturer for a particular product through the implementation of a consistent production schedule employed both during and beyond periods of peak demands.
• Stock-outs are zero-inventory situations resulting in lost sales and customer dissatisfaction may be very negative. To balance these two opposing needs, manufacturers turn to just in time (JIT) inventory techniques with their suppliers. JIT sets up delivery of goods just as they are needed on the production floor. This minimizes the cost of holding inventory while it ensures the inventory will be there when customers need it.

SELF-CHECK: REFLECTION   Think about a store in which your can of beans has an RFID and can be located at any minute. What are the advantages of such a system (especially when tracking more expensive/volatile products than beans)?  Do you see any ethical implications? >POST YOUR REFLECTION HERE<

Pulling It All Together through the Supply Chain

• A large part of the marketer’s ability to deliver a value proposition rests on the ability to understand and develop effective distribution strategies. The supply chain includes all the activities necessary to turn raw materials into a good or service and put it into the hands of the consumer or business customer. A large part of the marketer’s ability to deliver a value proposition rests on the ability to understand and develop effective supply chain strategies. Cross-docking is a supply chain efficiency technique in which products are transferred off a supplier’s truck directly onto a buyer’s truck bound for the next distribution point, such as a retail store.
• Outsourcing occurs when firms obtain outside vendors to provide goods or services that might be supplied in-house. Outsource firms are organizations with whom the company has developed a partnership or cooperative business arrangement.
• Supply chain management is the coordination of flows among the firms in a supply chain to maximize total profitability. These “flows” include not only the physical movement of goods but also the sharing of information about the goods—that is, supply chain partners must synchronize their activities with one another. 
• Insourcing occurs when companies contract with a specialist who services their supply chains. Unlike the outsourcing process where a company delegates nonessential tasks to subcontractors, insourcing means that the client company brings in an external company to run its essential operations.
• The major difference between a supply chain and a channel of distribution is the number of members and their functions. A supply chain is broader; it consists of those firms that supply the raw materials, component parts, and supplies necessary for a firm to produce a good or service plus the firms that facilitate the movement of that product to the ultimate users of the product. This last part—the firms that get the product to the ultimate users—is the channel of distribution.

 

DISCUSSION The supply chain concept looks at both the inputs of a firm and the means of firms that move the product from the manufacturer to the consumer. Do you think marketers should be concerned with the total supply chain concept? Why or why not? >POST YOUR DISCUSSION HERE<

 

Emerging Trends in Logistics and Supply Chain

• Anticipatory shipping is a system of delivering products to customers before they place an order, utilizing predictive analytics to determine what customers want and then shipping the products automatically.
• The sharing economy refers to non-ownership forms of consumption that are popular as more consumers turn toward the renting, sharing, and bartering of products and services. This trend has implications for logistics, the supply chain, and channels and physical distribution.