Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Distribution Customer
Service and Logistics
Text © The McGraw−Hill
Companies, 2002338 Chapter 12
You can see that the JIT system shifts greater responsibility for PD activities back-
ward in the channel. If the supplier can be more efficient than the customer could
be in controlling PD costs—and still provide the customer with the service level
required—this approach can work well for everyone in the channel. However, it
should be clear that JIT is not always the lowest-cost or best approach. It may be
better for a supplier to produce and ship in larger, more economical quantities—if
the savings offset the distribution system’s total inventory and handling costs.
While not every firm can, or should, use a just-in-time approach, it is an impor-
tant idea. It focuses attention on the need to coordinate the PD system throughout
the channel. It also highlights the value of close working relationships and effective
communication between marketers and their customers. Whether or not a firm uses
the JIT approach, good information (and technology to share it quickly) is often the
key to coordinating PD activities and improving the customer service level.^8In our discussion, we have taken the point of view of a marketing manager. This
focuses on how logistics should be coordinated to meet the needs of customers at
the end of the channel of distribution. Now, however, we should broaden the pic-
ture somewhat because the relationships within the distribution channel are
sometimes part of a broader network of relationships in the chain of supply—the
complete set of firms and facilities and logistics activities that are involved in
procuring materials, transforming them into intermediate or finished products, and
distributing them to customers. For example, Toyota not only works with dealers
and customers further down its channel of distribution but also is coordinating with
all of the supplier firms from which it buys parts, supplies, and raw materials. Those
firms, in turn, are linked to other suppliers who come earlier in the chain of sup-
ply. What happens at each link along the chain can impact coordination further
down the chain. If the firm that produces seats for Toyota doesn’t get the fabric
from its supplier on time, the seats will be delayed in route to Toyota and the car
will be slow getting to the dealer and consumer.
Ideally, all of the firms in the chain of supply should work together to meet the
needs of the customer at the very end of the chain. That way, at each link along
the chain the shifting and sharing of logistics functions and costs are handled to
result in maximum value for the final customer. Further, all of the firms in the whole
chain of supply are able to do a better job of competing against competitors who
are involved in other chains of supply.
The practical reality is that coordination across the whole chain of supply doesn’t
always happen. The customer service level that a marketing manager needs to com-
pete may not be possible if firms earlier in the chain of supply can’t or won’t do what
is needed. In these situations the purchasing and manufacturing departments can’t be
expected to do the impossible. Resolving this sort of problem requires strategic
decisions by the firm’s top management. For example, the CEO might decide that the
firm needs to invest in costly new computer networks and software that will provide
e-commerce order systems that also give suppliers information they need.
The challenges of coordinating logistics functions across the complete chain of
supply have prompted some firms to put a high-level executive in charge of chain
of supply decisions. This person works with people in marketing, procurement, man-
ufacturing, and other areas to find the best ways to address problems that arise. Yet,
it’s still difficult for a manager in any one company to know what kind of logistics
sharing arrangement will work best, or even be possible, in a whole series of other
companies. Because of that, many firms turn to outside experts for help. For exam-
ple, specialists have developed to design e-commerce computer systems that link all
of the firms in a chain of supply. Similarly, there are consultants who use computer
models to figure out the best locations for inventory or the best way to shift logis-
tics functions among firms. In other cases, firms sometimes outsource the whole job
of planning andimplementing their logistics systems.^9Chain of supply may
involve even more
firms