CHAPTER TWELVE

Distribution Customer
Service and Logistics

For use only with

Perreault and McCarthy
texts.
© 2005 McGraw-Hill
Companies, Inc.
McGraw-Hill/Irwin www.mhhe.com/fourps
When we finish this lecture you should

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.
© 2005 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.

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Physical Distribution Gets It to Customers

Logistics
or
Physical
Distribution

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Physical Distribution Customer Service

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Exhibit 12-1
Trade-Offs of Costs, Service and Sales

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Physical Distribution Concept Focuses
on the Whole Distribution System

Info
Info on
on Product
Product Online
Online Status
Status
Availability
Availability Information
Information

Order
Order Advance
Advance Info
Info on
on
Processing
Processing Time
Time Delays
Delays

Backorder
Backorder Factors
Procedures
Factors Delivery
Delivery Time
Time
Procedures Affecting
Affecting PD
PD
Inventory
Inventory
Service
Service Compliance
Compliance with
with
Storage
Storage Levels
Levels Customers
Customers

Defect
Defect –– Free
Free
Order
Order Accuracy
Accuracy Deliveries
Deliveries

Damage Handling
Damage in in Adjustments/
Transit
Transit Returns
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Physical Distribution (PD) Concept

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Exhibit 12-3
A Cost Comparison of Alternative Systems

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The Total Cost Approach

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Coordinating Logistics Activities

Shifting
Shifting and
and Sharing
Sharing

Conflict
Conflict Handling
Handling

JIT
JIT

Chain
Chain of
of Supply
Supply

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Better Information Helps Coordinate PD

Continuously
Continuously Electronic
Electronic
Updated
Updated Data
Data
Information
Information Interchange
Interchange
Systems
Systems
Areas
Areas Where
Where
Computers
Computers
Help
Help PD
PD
Service
Service

Internet
Internet

© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Ethical Issues May Arise

Product
Product Coordination
Coordination
Availability
Availability of
of PD
PD
• False expectations • Intentional
about delivery delays in order
speed confirmation
• Shifting the
• Selling products
burden of
that are not
holding
available
inventory
• Running out of
popular products

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Physical Distribution Customer Service Level

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Exhibit 12-4
The Transporting Function Adds Value to a Marketing Strategy

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Exhibit 12-5
Which Transporting Alternative Is Best?

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Water Transportation

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Airfreight Is Expensive but Fast and Growing

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Interactive Exercise: Transportation Modes

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Economies of Scale in Transporting

High

Shipping
Cost
$

Low
Low High
Shipping Quantity

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The Storing Function and Marketing Strategy

Needed
Needed When
When
Production
Production Doesn’t
Doesn’t
Match
Match Consumption
Consumption

Keeps
Keeps Prices
Prices Steady
Steady

Achieves
Achieves Production
Production
Economies
Economies of
of Scale
Scale

Builds
Builds Channel
Channel
Flexibility
Flexibility

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Exhibit 12-6
Goods Are Stored at a Cost

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Exhibit 12-7
Specialized Storing Facilities May Be Required

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Key Terms

• Logistics • Transporting
• Physical distribution • Containerization
• Customer service • Piggyback service
level • Freight forwarders
• Physical distribution • Storing
concept
• Inventory
• Total cost approach
• Private warehouses
• Chain of supply
• Public warehouses
• Electronic data
• Distribution center
interchange (EDI)

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