Chapter 12:

Distribution Customer Service and Logistics

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Chapter 12 Objectives
When you finish this chapter, 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. 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.
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

12-2

Understanding Physical Distribution

Total Cost of PD Inventory Cost

Costs ($)

Lost Sales

Transporting Cost

0 0 90%

Customer Service Level

Exhibit 12-1
12-3
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Coordinating Logistics Activities

Sharing and Shifting

???? ???? ???? ???? ????

12-4

Reducing Conflict

JIT

Chain of Supply Better Information-EDI and Internet

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

The Transporting Function

Rail

Truck

Modes of Transportation

Air

Pipeline
Water
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

12-5

The Storing Function

Price Stability

Flexibility

Costs

Specialized Function
12-6
For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Comparing Private and Public Warehouses

Type of warehouse Characteristics
Private

Public
No fixed investment
Low Low managerial control May not be convenient High

Fixed Investment
Unit Cost Control Adequacy Flexibility
Exhibit 12-6
12-7

Very high
High if volume is low Very low if volume is very high High Highly adequate Low

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill

Key Terms

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

Containerization Piggyback Service Freight Forwarders Storing Inventory Private Warehouses Public Warehouses Distribution Center JIT

12-8

For use only with Perreault and McCarthy texts. The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill