1. 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

2. Physical Distribution Gets It to Customers
Logistics
or
Physical
Distribution
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

3. Physical Distribution Gets It to Customers
Logistics is the transporting, storing, and handling of goods to
match target customers’ needs with a firm’s marketing mix.
Physical distribution (PD) is another name for logistics
Key Issues
•Physical distribution provides time and place utility and makes
possession utility possible.
•Physical distribution activities typically make up half or more of
total marketing costs.
•By making physical distribution more efficient, an organization
can increase its profits, cut prices, improve service, or achieve
some combination of all three.
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

4. Physical Distribution Concept Focuses
on the Whole Distribution System
Info on Product
Availability
Online Status
Information
Order
Processing Time
Advance Info on
Delays
Backorder
Procedures
Inventory
Storage
Factors
Affecting PD
Service
Levels
Delivery Time
Compliance with
Customers
Order Accuracy
Defect – Free
Deliveries
Damage in
Transit
Handling
Adjustments/
Returns
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5. Exhibit 12-3
A Cost Comparison of Alternative Systems
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

6. Coordinating Logistics Activities
Shifting and Sharing
Conflict Handling
JIT
Chain of Supply
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

7. •Chain of supply:
• the complete set of firms, facilities and logistics activities
involved in procuring materials, transforming them into
intermediate and finished products, and distributing them to
customers.
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

8. Better Information Helps Coordinate PD
Continuously
Updated
Information
Systems
Electronic
Data
Interchange
Areas Where
Computers
Help PD
Service
Internet
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

9. Ethical Issues May Arise
Coordination
of PD
Product
Availability
•
•
Selling products
that are not
available
•
Running out of
popular products
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
•
Intentional
delays in order
confirmation
•
False expectations
about delivery
speed
Shifting the
burden of
holding
inventory

10. Exhibit 12-4
The Transporting Function Adds Value to a Marketing Strategy
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11. Exhibit 12-5
Which Transporting Alternative Is Best?
+
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12. Water Transportation
+
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13. Airfreight Is Expensive but Fast and Growing
+
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14. Economies of Scale in Transporting
High
Shipping
Cost
$
Low
Low
High
Shipping Quantity
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15. Economies of Scale in Transporting
Most transporting rates are based on the idea that large
quantities can be shipped at a lower cost per pound than
smaller quantities. There are often significant cost differences
between full loads and smaller loads.
Key Issues
•Freight forwarders accumulate economical shipping
quantities.
»They combine the small shipments from many shippers
and reship them in larger quantities to obtain lower
transportation rates.
»Freight forwarders are especially useful in international
shipping.
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

16. Economies of Scale in Transporting
•A key question for some firms is, “Should you do it
yourself?”
»Some companies have their own fleets of trucks,
ships, or even airplanes.
»Taking on the transportation function increases the
amount of control a firm has over its physical
distribution and may save money.
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

17. The Storing Function and Marketing Strategy
Needed When
Production Doesn’t
Match Consumption
Keeps Prices Steady
Achieves Production
Economies of Scale
Builds Channel
Flexibility
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

18. Exhibit 12-6
Goods Are Stored at a Cost
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

19. Exhibit 12-7
Specialized Storing Facilities May Be Required
+
© 2005 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin