Page 226 - DMGT408DMGT203_Marketing Management

Unit 9: Managing Marketing Channels

Some authors view logistics as the transporting, sorting, and handling of goods to match target Notes
customers’ needs with a company’s marketing mix – within individual companies and along a
channel of distribution. Thus, logistics represents the value chain of a company, the starting
point is the procurement and at the end of the chain is the customer. Logistics management
includes both materials management and physical distribution. More and more companies are
realising the importance of managing the entire supply chain rather than just transportation and
warehousing decisions alone. The focus of managing supply chain is on removing inefficiencies
and hurdles in meeting customer demand at the time when it occurs.
Physical distribution of organisation starts at the factory and ends with the customer. Supply
Chain Management (SCM), is a broader concept, which starts before physical distribution and
involves procuring the right inputs, converting them efficiently into finished products and
despatching them to the final customers. A company works through a value network that
includes suppliers, its supplier’s supplier, its immediate customers and their end customers.
Market logistics involves planning the infrastructure to meet demand, then implementing and
controlling the physical flows of materials and final goods from point of origin to the customer
points, while generating a surplus.
Market logistics planning has four steps:
1. Deciding on the company’s value proposition to its customers.
2. Deciding on the best channel design and network strategy for reaching the customers.

3. Developing operational excellence in sales forecasting, warehouse management,
transportation management and materials management.
4. Implementing the solution with the best information systems, equipment, policies and
procedures.
Market Logistics Decisions: Four major decisions are:
1. Order processing: How should orders be handled?
2. Warehousing: Where should stocks be located?

3. Inventorying: How much stock should be held?
4. Transportation: Where should stocks be finally sent?
The concept of physical distribution is based on the highly acclaimed study of Howard T. Lewis,
James W. Culliton, and Jack D. Steele of Harvard University in 1956. It says that entire
transportation, storage, and product handling activities of a business and the total channel set up
should be coordinated as one system that aims to minimise distribution costs for a particular
customer service level because lower costs and better service contribute for increasing customer
value. Often, one channel member manages physical distribution on behalf of all involved
channel members. Tom Richman reported a trend toward centralisation, where one channel
member in the supply chain assumes responsibility and authority for physical distribution for
the entire channel.
Meeting Customer Service Requirements: Marketing strategy aims at satisfying customers’ needs
and wants. Physical distribution is invisible to most consumers. They pay attention to it only
when something goes wrong and it may be too late for the company to cheer them. It is not
unusual in India, particularly for service providers failing to meet customer service delivery
expectations.
Physical distribution systems must meet the factory needs towards supply chain and the
customers. First of all it is necessary to find out what are customers requirements and what
competitors are providing. Customers want timely delivery, efficient order processing, willing

LOVELY PROFESSIONAL UNIVERSITY 219