Ways to reach the Customer – the routes through the channels
As Geoff Lancaster says in his article, the art/science of Logistics Management arose through military activities, in terms of supplying materials to an army on the move. Some students studying Promotions Management may think that it is much easier than Distribution Management. Yes – it is more visible, we are exposed to companies’ promotional activities, and the employment positions in advertising, media etc sound exciting. But the money and the best jobs are in Distribution Management. And it is harder to grasp the concepts because they are less visible and less tangible. But they are going to become even more important in the future.
These four key factors are inter-related, and should not be viewed in isolation. Often compromises need to be reached – maybe the cost-containment aspects force us to compromise on lowering our standards of customer service.
The Demand of the Customer is at the centre of the picture – with expectations of the “Four Rights” – Price is the price we sell to the customer at, and Cost is the total cost to the customer (including all the other expenses they bear). Conditions and Time are important – Electrocomponents is not the cheapest supplier of electronic and technical products, but they guarantee next-day delivery anywhere in the UK.
The four Logistics activities of Purchasing, Inventory/Packaging/ Warehousing and Transportation work together in organizing the Resources in the left panel, to deliver the benefits in the right panel. Systemized Information is integral to the whole process.
EDI – in the retail sector the movement of information is key to the objectives of minimizing stock and maximizing product availability. The information on the barcode scanned at the checkout is in the distribution centre 30 seconds later. JIT is about freshness of product, minimizing stock levels, reducing waste.
Where are we going to locate our Distribution Centre? How will we arrange transport – our own or someone else’s? Factory Gate Pricing?
In Grocery Retail there are three types of Warehouse (and transport systems) – Ambient, Chilled and Frozen. In each of these warehouses, products are stored by the weight and unit dimensions of the pallet – the contents are irrelevant. Filling the warehouse to capacity – but still having room to accept deliveries – is the key to success.
Forecasting – what will the weather be like in three weeks’ time? What will customers’ response to our promotional offer be? Suppliers selected on Price, Quality, Ability to Deliver to Schedule, Complaint Level, Customer Demand.
Containment – what are they packed in? to ease handling, reduce cost and waste. Protection - to minimize damage and loss Apportionment – how many units in a pack? Unitization – how big is a unit? Communication – the Information System
Third Party Logistics (TPL) – companies such as Bibby, Exel Logistics, Wincanton. Operating transport, Warehouses, maybe supplier collection systems. Exel have a depot in China run on behalf of Toys’R’Us. Strategic Logistics Partnering – See interview with the Body Shop and their Logistics Contractor The Lane Group towards the end of “Crazy Ways for Crazy Days” – video in the Library (Tom Peters).
Managing Retailing, Wholesaling, and Logistics Marketing Management, European ed Lecture 8 Place
Retailers’ Marketing Decisions (cont.) Store atmosphere Store activities Communications Locations Selfridge’s store in Birmingham
Retailers’ Marketing Decisions (cont.) Selfridge’s store in Birmingham General business districts Regional shopping centres Community shopping centers Retail Parks Community shopping centres Retail Parks Location within a larger store.
“ That part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption in order to meet customers’ requirements”
LOGISTICS SYSTEM These four key factors are inter-related, and should not be viewed in isolation. Often compromises need to be reached – maybe the cost-containment aspects force us to compromise on lowering our standards of customer service.
LOGISTICS TRENDS SAME TIME, SAME PLACE DISTRIBUTION Technology-driven reduction in waiting times between channel members. BOUNDARYLESS DISTRIBUTION Multiple market entry facilitated by coordinated logistics systems. THIRD-PARTY LOGISTICS Channel members are increasingly “outsourcing” logistics functions. STRATEGIC LOGISTICS PARTNERING Alliances between channel members will become a mainstay of competitive distribution advantage .