Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

12. Distribution Customer
    Service and Logistics

Text © The McGraw−Hill

Companies, 2002

Distribution Customer Service and Logistics 335

inventory in a warehouse to fill orders on time. And the company was also surprised

at the extra cost of carrying the inventory in transit. Good Earth’s managers also

found that the cost of spoiled vegetables during shipment and storage in the ware-

house was much higher when they used rail shipping.

In this case, total cost analyses showed that airfreight, while more costly by itself,

provided better service than the conventional means—and at a lower total distri-

bution cost. The case also illustrates why it is important to get beyond a focus on

individual functional elements of PD and instead consider the costs and service level

of a whole system. This broader focus should consider how the whole channel oper-

ates, not just individual firms.

Many firms are now applying this type of thinking to improve value to customers

and profits. For example, after two years of work with the total cost approach,

Both Business Objects and

Sauder try to help customer firms

do a better job of tracking the

status of orders and making

certain that products are where

they are needed at the right time.

Total costs of

distribution by

rail with warehouse

$199,000

Total $254,000 $264,000

Total costs of

distribution

by airplane

$ 10,000

$ 5,000

$ 40,000

$ 15,000

$ 20,000

$110,000

$119,000

Damage

Packing

Inventory

Transportation

Exhibit 12-3

Comparative Costs of

Airplane versus Rail and

Warehouse