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Objective: To provide the students with the basic elements of the logistics
administration and the physical distribution in order to take the right decisions.
Compendia:
b) Customer service, logistics and customer service and customer service vs. cost
d) Warehousing
a) The difficulty in shopping for food, clothing and other items if logical systems
do not conveniently bring all those items together in one place, such as a single
store or a shopping mall. Example:
c) The frustration of going to store to purchase an advertised item, only to find out
the store’s shipment is late in arriving. Example:
It is important to establish the meaning of the term. Logistics has been called
by many names:
a) Business logistics
b) Channel management
c) Distribution
d) Industrial logistics
e) Logistical management
f) Materials management
g) Physical distribution
h) Quick-response systems
j) Supply management
These terms have in common that they deal with the management of the flow of
goods and materials from point of origin to point of consumption and in some cases
even to the point of disposal
This definition includes the flow of materials and services in both the manufacturing
and service sectors. The service sector includes entities such as the government,
hospitals, banks, retailers and wholesalers. In addition the ultimate disposal,
recycling and reuse of the products need to be considered because of logistics is
becoming increasingly responsible for issues such as removing packaging materials
once a product is delivered and removing old equipment
Logistics play a key role in the economy in two significant ways. First, logistics is
one of the major expenditures for business, thereby affecting and being affected by
other economic activities. In the United States, for example, logistics contributed
approximately 10.5 % of the GDP in 1996.
Second, logistics supports the movement and flow of many economies transactions,
it is a important activity in facilitating the sale of virtually all goods and services. To
understand this role from a systems perspective, consider that if goods do not
arrive on time, customers can not buy them. If goods do not arrive in the proper
place or in the proper condition, no sale can be made.
The definition of customer service varies across organizations. Suppliers and their
customers can view the concept of customer service quite differently. In a broad
sense, customer service is the measure of how well logistics systems is performing
providing time and place utility for a product or service.
Customer service can be defined as: a process which takes place between
the buyer, seller and third party. The process results in a value added to the product
or service exchanged. This value added in the exchange process might be short
term as in a single transaction or longer term as in a contractual relationship. The
value added is also shared, in that each of the parties to the transaction than it was
before the transaction took place. Thus, in a process view: Customer Service is a
process for providing significant value-added benefits to the supply chain in a cost-
effective way. Example: KEY ACCOUNTS!!!
COMMUNICATION!!!!!
Exercise:
Channel of distribution
The specific structure depends to a large extent on the nature of the product and
the firm’s target market. There is no “best” channel structure within the framework
of the firm’s corporate and marketing objectives, its operating philosophy, its
strengths and weaknesses and its infrastructure of manufacturing facilities and
warehouses. If the firm has targeted multiple market segments, management may
have to develop multiple channels to service these markets efficiently
The “best” channel forms when no other group of institutions generates more
profits or more consumer satisfaction per dollar of product cost. Functions will be
shifted from one channel member to another in order to achieve the most efficient
and effective channel structure.
Efficient – Effective
'This engine is really efficient, it can run for 30 km on only 1 liter of fuel.'
If something is effective, it works well and produces the results that were intended.
Being 'Effective' means not just doing what you do well; it means doing the what's
most important first, and doing it well. When you are truly being 'Effective' you are
doing what needs to be done next to help you reach your final goal or vision.
Examples:
'The only effective way to avoid hay fever at this time of the year, if you are a
sufferer, is to stay indoors.'
For example, social, cultural, political and economic variables may support channels
that are not necessarily as efficient or effective as they should be
Product Characteristics
Customer service represents the place component of marketing mix. It can be used
to differentiate the product or influence the market price, if customers are willing to
pay more for better service. In addition the channel of distribution selected
determines the costs of providing a specified level of customer service. Customer
service is usually measured in terms of the level of product availability, speed and
consistency of the customer’s order cycle and communication
Profitability objectives
Management can use market research to formulate revenue estimates for each
alternative channel structure. It must estimate variable manufacturing costs for
different levels of activity and variable marketing and logistics costs (e.g. sales
commissions, transportation, warehousing and order processing) with accounts
receivable. Management should apply the corporate cost of money to accounts
receivable. It also should add to each channel alternative the assignable non-
variable costs incurred for each segment, including bad debts, sales promotion,
salaries and inventory carrying costs. Finally, management should use the
corporate opportunity cost of money as charge for all other assets required by each
channel alternative.
Warehousing
We can define warehousing as that part of a firm’s logistics system that stores
products (raw materials, parts, goods-in-process, finished goods) at and between
point of origin and point of consumption and provide information to management on
the status, condition, and disposition of items being stored. The term Distribution
Center (DC) is sometimes used, but the terms are not identical. Warehouse is the
more generic term.
Warehousing
Warehousing Optimization