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Logistics and Channel Management

Logistics and Channel Management

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Logistics and Channel Management

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  1. Part 3: Managing the Marketing Channel

    Logistics and Channel Management

  2. The definition of, logistics The meaning of supply chain management The role of logistics The systems concept of logistics Logistics system components The output of a logistics system Logistics management Key interface areas between logistics and channel management
  3. Logistics 1 Definition: Planning, implementing, and controlling the physical flows of materials and final goods from points of origin to points of use to meet customers’ needs at a profit.
  4. Supply Chain Management 2 Definition: Logistical systems that emphasize close cooperation and comprehensive inter-organizational management to integrate the logistical operations of the different firms in the channel.
  5. The Role of Logistics 3 Its Essence The movement of the right amount of the right products to the right place at the right time
  6. Third-Party Logistics Providers (3PLs) Specialize in performing most or all of the logistical tasks that manufacturers or other channel members would normally perform themselves Provide service at lower cost than the firms who hire third-party providers Currently growing rapidly into a major industry
  7. Systems Concept 4 Transportation Materials Handling Warehousing Interrelated components of a system Order Processing Inventory Control Packaging
  8. Total Cost Approach Basic components of A logistics system Systems Concept Management views logistics as a system of Interrelated components Total Cost Approach Management attempts to minimize the cost of using the components taken as a whole
  9. Logistics System Components 5 Transportation Materials Handling Order Processing Inventory Control Warehousing Packaging
  10. Transportation Most fundamental and necessary component Accounts for the highest percentage of the total cost of logistics Overriding issue facing the firm: Choosing the optimum mode of transportation to meet customer service demands
  11. Materials Handling Range of activities & equipment involved in the placement & movement of products in storage areas Issues: 1. Minimizing the distances products are moved within the warehouse during the course of receiving, storage, & shipping 2. Choosing the kinds of mechanical equipment that should be used 3. Making the best use of labor when receiving, shipping, & handling products
  12. Order Processing Its importance in logistics lies in its relationship with order cycle time—the time between when an order is placed & when it is received by the customer. Issue: Developing an efficient order processing system
  13. Inventory Control The firm’s attempt to hold the lowest level of inventory that will still enable it to meet customer demand Issue: Keeping inventory at the lowest possible level while concurrently placing orders for goods in large quantities
  14. Warehousing The holding of products until they are ready to be sold Issues: 1. The location of warehouse facilities 2. The number of warehousing units 3. The size of the units 4. The design of the units 5. The question of ownership
  15. Packaging Packaging & its associated costs can affect the other components of the system Issue: Using packaging to make a significant difference in the effectiveness & efficiency of the logistics system
  16. The Output of a Logistics System 6 Customer service is the collection of activities performed in filling orders and keeping customers happy or creating in the customer’s mind the perception of an organization that is easy to do business with.
  17. Logistics Service Standards Time from order receipt to order shipment Order size & assortment constraints Percentage of items out of stock Percentage of orders filled accurately Percentage of orders filled within a given number of days from receipt of the order Percentage of orders filled Percentage of customer orders that arrive in good condition Order cycle time Ease & flexibility of order placement (9 Standards developed by Heskett, Galskowsky, & Ivie)
  18. Key Elements of Customer Service LaLonde Classification of Customer Service: Product availability Order cycle time Distribution system flexibility Distribution system information Distribution system malfunction Post-sale product support
  19. Logistics Management 7 Logistics Management Channel Management Concerned specifically with product flow The administration of all the major channel flows
  20. Key Interface Areas betweenLogistics & Channel Management 8 Interface 1 Defining of logistics service standards Interface 2 Making sure the logistics program meets channel members’ service standards Interface 3 Selling the logistics program Interface 4 Monitoring the results of the logistics program
  21. Defining Logistics Service Standards The higher the service standards, the higher the costs. Key issue for Channel Manager: Determining precisely the types and levels of logistics service desired by channel members
  22. Evaluating the Logistics Program If included as a major component of the manufacturer’s overall approach for supporting channel member needs, the logistics program may be the key feature of a strategic alliance. Key issue for Channel Manager: Ensuring that the program the experts prepare is what the channel members want.
  23. Selling the Logistics Program Minimize out-of-stock occurrences. Reduce channel member inventory requirements. Strengthen the manufacturer-channel member relationship. Key issue for Manufacturers: Extending superior logistics capabilities to help channel members improve their logistics and marketing capabilities.
  24. Monitoring the Logistics System Logistics systems must be continually monitored, both in terms of how successfully they are performing for the manufacturer and how well they are meeting changing channel member needs. Key issue for Channel Manager: Continually monitoring the channel members’ reactions to logistics programs.
  25. Discussion Question #2 Timberland Company is one of the world’s best known manufacturers of casual shoes and sports boots. For many years the company’s logistical system was geared to large orders. Hence priority was given to major department stores and retail chains that purchased in large quantities. But market reports were indicating that consumers were shopping in increasing numbers at small independent retailers and boutiques for the kinds of shoes and boots sold by Timberland. So, the problem facing Timberland was how to service the large numbers of small retailers with their tiny orders while still maintaining high levels of efficiency and low order processing costs. To meet this challenge, Timberland reengineered its logistical system by using modern scanning equipment to control inventory, track merchandise and handle all paperwork automatically. Does this situation represent an interface between channel management and logistics management? Explain.
  26. Discussion Question #3 U.S. Jaguar dealers used to wait at least one week to receive parts from England. Parts were shipped in bulk by Jaguar to a U.S. warehouse where they were split up, repackaged and then shipped to individual dealers. Working closely with Federal Express, Jaguar initiated a new logistics system that shortened the time by four days. Under the new system, dealers order a part directly from Jaguar in England and the part is then air expressed via Federal Express. The time between order placement and receipt at the dealership is no longer than three days. Comment on the change in Jaguar’s logistics system in terms of its relevance for providing customer service and the possible trade-offs in higher costs.
  27. Discussion Question #7 Walmart is contacting all of the manufacturers that supply its more than 4,000 U.S. stores with a logistics proposition: The world’s largest retailer wants to use its own fleet of trucks to pick up products directly from manufacturers and deliver the merchandise to Walmart’s stores. In short, Walmart’s truck fleet would replace manufacturers’ or common carriers’ trucks. By doing so, Walmart believes it will enjoy substantial cost savings while allowing manufacturers to concentrate on what they do best—making products rather than managing logistical systems. Walmart, with about 6,500 trucks and over 50,000 trailers, believes it has the capacity to implement this new logistical program. Do you think Walmart’s logistical initiative is a good idea? Why or why not? Explain.