When you finish this chapter, you should: Understand why physical distribution (logistics) is such an important part of Place and marketing strategy planning; understand why the physical distribution customer service level is a key marketing strategy variable; understand the physical distribution concept and why it requires coordination of storing, transporting, and related activities;. | Chapter 12: Distribution Customer Service and Logistics When you finish this chapter, you should 12-2 Chapter 12 Objectives 1. Understand why physical distribution (logistics) is such an important part of Place and marketing strategy planning. 2. Understand why the physical distribution customer service level is a key marketing strategy variable. 3. Understand the physical distribution concept and why it requires coordination of storing, transporting, and related activities. 4. See how firms can cooperate and share logistics activities to improve value to the customer at the end of the channel. 5. Know about the advantages and disadvantages of the various transporting methods. 6. Know how inventory decisions and storing affect marketing strategy. 7. Understand the distribution center concept. 8. Understand the important new terms. Exhibit 12-1 12-3 Understanding Physical Distribution Costs ($) Customer Service Level 0 0 90% Transporting Cost Lost Sales Inventory Cost Total Cost of PD Summary Overview Physical distribution (PD) is the transporting, storing, and handling of goods to match target customers’ needs with a firm’s marketing mix. Logistics is another name for physical distribution. PD provides time and place utility and makes possession utility possible. PD activities typically make up half or more of total marketing costs. For this reason, even small savings in PD costs can be significant. Physical Distribution Customer Service Customer Service Level. Customers think about PD in terms of how rapidly and dependably a firm can deliver what the customer wants. Customers, in short, care about their own needs, not about how the product was moved or stored. Invisible. PD is mostly invisible to customers -- and should be. In well-developed macro-marketing systems, PD is taken for granted by customers. Discussion Note: Marketing managers work hard to ensure that things stay this way. Part of the marketer’s profit is justified by taking care of PD activities for | Chapter 12: Distribution Customer Service and Logistics When you finish this chapter, you should 12-2 Chapter 12 Objectives 1. Understand why physical distribution (logistics) is such an important part of Place and marketing strategy planning. 2. Understand why the physical distribution customer service level is a key marketing strategy variable. 3. Understand the physical distribution concept and why it requires coordination of storing, transporting, and related activities. 4. See how firms can cooperate and share logistics activities to improve value to the customer at the end of the channel. 5. Know about the advantages and disadvantages of the various transporting methods. 6. Know how inventory decisions and storing affect marketing strategy. 7. Understand the distribution center concept. 8. Understand the important new terms. Exhibit 12-1 12-3 Understanding Physical Distribution Costs ($) Customer Service Level 0 0 90% Transporting Cost Lost Sales Inventory Cost Total Cost of PD
