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Marketing Logistics

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Logistics
Company engaged in marketing nationally :
main consideration is selection of a
dependable mode of transportation..
To ensure safe arrivals

In reasonable time

At a reasonable cost

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Logistics
As the Company grows : such a solution could
become extremely costly & inefficient.
The hardest part is not making a sale..
It is:
Getting the correct quantity of product to

customers
In the required time

At a cost that leaves enough margins for a

profit

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Importance of Logistics
Following Logistical Marketing
activities can impact customer
costs & operations:-
Transportation

Inventory management

Warehousing

Materials handling..

Order processing

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Importance of Logistics
Poor service in any area can cause :-
Delayed or inconsistent deliveries

Forcing customers to carry larger

safety stocks
Develop secondary sources of

supply or
Shift to another source entirely

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Relationship of Logistics & Physical
Distribution

Logistics
Physical Supply
Management of all activities involved in

making products & raw materials


available for manufacturing and..
Physical distribution
Providing finished products to customers

when , where & how they are desired

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Relationship of Logistics & Physical
Distribution

Typical Logistical Activities

Key Elements Supporting Activities


1.Transportation 1.Warehousing
2.Inventory Management 2. Materials handling
3.Customer Service 3. Protective packing
4.Order Processing 4. Production
scheduling
5. Info maintenance

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Logistics Management
When a marketer begins to grow the business rapidly ..

It is time to consider the concept of Logistics


Management
Logistics Management
A total systems approach to management of the
distribution process

It includes all activities involved in physically moving


In process inventory &
Raw materials
Finished goods inventory..
From point of origin to the point of use or
consumption

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Logistics Management

Interdependence of Physical Distribution


Activities
A physical distribution system involves more than the
physical movement of goods
It includes:-
Locating of plants & warehouses
Mode of transportation
Inventory requirements
Packing requirements
The concept of physical distribution system takes into
account interdependence of costs of each activity

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Logistics Management

Interdependence of Physical Distribution


Activities
A decision involving one activity affects the costs &
efficiency of one or all the other activities
This forces companies to focus on total costs-i.e. the
sum of the costs of all these activities ..
Consider the example given under to observe real
physical distribution costs of Air versus Ocean Freight..
In this example 44000 peripheral boards worth $7.7m
are shipped from Singapore to the US West coast.
Cost of financing inventories is 10% annually
or $2109 per day to finance $7.7m

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Real physical distribution costs of Air
versus Ocean Freight
To offset the slower ocean freight & the
possibility of unforeseen delays and still
ensure prompt customer delivery schedules
The company has to continuously maintain 30
days of inventory in Singapore and another 30
days of inventory at the companys
distribution centers..
Ocean Freight ends up exceeding Air Freight by
over $75000 !!...
Let us examine the above in a little more of
detail

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Real Physical Distribution Costs of
Air versus Ocean Freight
Particulars OceanAir
Transport costs $31790 $127,609
In transit inventory (in transit 21days) (in transit 3days)
Financing cost $44289 $6328

-Total transportation cost $76079 $133,487

-Warehousing inventory 60 Days@ $2109 per day


Costs, Singapore & US 126,540
-Warehouse rent 6500
______________________________________________________
Real physical distn cost $ 209,119 $133,487
Difference (Ocean Air) ($>75K)
______________________________________________________

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Benefits of Physical Distribution
System
There are more benefits to a physical distribution system
than just cost advantages
An effective physical distribution system can result in :-
Optimal inventory levels and

Optimal production capacity in multi plant operations

Better ( more dependable) delivery service to markets

As companies move to multinational markets and service

these markets from multinational production facilities,


they are increasingly confronted with cost variables
This makes it imperative to use a total systems approach

to manage the distribution process more efficiently

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Overall contribution of Marketing Logistics

Determines level of customer service


Effectiveness of Marketing logistics depends on
the following factors:-
Ability of the firm to effectively communicate to
the customers regarding firms capability to
provide services up to a certain level..
Sales persons must listen to customers to
understand their needs, demonstrate an
understanding of those needs and effectively
communicate the capability to meet those needs

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Overall contribution of Marketing Logistics

Procedures to meet emergency


situations like shipment of rush
orders or spare parts must be
developed..
Sales people should be capable of
explaining price differentials to
customers
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