Page 227 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes suppliers to meet emergency needs, progress report, proper handling of products, post purchase
services, prompt replacement of defective goods, and warranties. Customers’ inventory
requirements affect the expected level of physical distribution service. The company must
determine the relative importance of these aspects. Paying attention to customer needs and
preferences is necessary for increasing sales and getting repeat orders. For example, an auto
manufacturer with a low inventory of replacement parts requires fast, dependable supply from
suppliers of component parts. Repair service facility and time for car buyers is very important.
Anne G. Perkins found that even when the demand for products is unpredictable, suppliers must
be prepared to respond fast to inventory needs. Under these situations, distribution costs may
be a minor consideration compared to the importance of service, dependability, and timeliness.
Most customers are concerned with speedy and dependable delivery of what they want and
don’t care how a product moves from a manufacturer to the point of delivery from where they
acquire it.
Minimising Total Distribution Costs: Companies strive to minimise their distribution costs
associated with order processing, inventory management, materials handling, warehousing,
and transportation. However, decreasing costs in one area often increases them in another. The
company has to develop an economical system without compromising the minimum guaranteed
service delivery level and to achieve this trade-offs between service level and costs becomes
unavoidable. Taking a systems approach to distribution, the focus from lowering costs of
individual activities shifts to minimising overall distribution costs. Adoption of total cost
approach requires analysing costs associated with distribution alternatives, such as comparing
inventory levels against warehousing costs, materials cost against expenses involved with
various modes of transportation, and all distribution costs against customer service requirements.
Lowest overall distribution system cost should be compatible with company’s stated minimum
expected level of customer service objectives. This requires trade-offs costs because higher costs
in one area of distribution system may be necessary to obtain lower costs in another. In many
cases accounting procedures, asking customers to rank their preference and employing statistical
procedures and computer simulations are used to determine total costs.

Curtailing Time-cycle: Time-cycle refers to the time it takes to complete a process. It is an
important objective of physical distribution to reduce time-cycle to reduce costs and increase
customer service. Many businesses such as overnight delivery companies and major news media
strive to slash time-cycle to gain competitive advantage.

Example: FedEx overnight delivery service conducts research and employs new
techniques and procedures to be the fastest overnight delivery service. FedEx offers its customers
package-tracking software so that they can track the progress of their package. In such situations,
speed is important than costs.

Task Determine how Apple distributes its products across India and its
neighboring countries.

Self Assessment

State whether the following statements are true or false:
13. Logistics is concerned with the management of physical distribution of material.

14. Logistics, supply chain management and physical distribution are one and the same thing.
15. Supply chain management starts after physical distribution.

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