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 339

Coordinating all of the elements of PD has always been a challenge—even in a

single firm. Trying to coordinate PD throughout the whole supply chain is even

tougher. Keeping track of inventory levels, when to order, and where goods are when

they move is complicated. The Internet is becoming more and more important in

finding solutions to these challenges.

Many firms now continuously update their marketing information systems—so

they can immediately find out what products have sold, the level of the current

inventory, and when goods being transported will arrive. And coordination of phys-

ical distribution decisions throughout channels of distribution continues to improve

as more firms are able to have their computers “talk to each other” directly and as

managers can get information from a website whenever they need it.

Until recently, differences in computer systems from one firm to another ham-

pered the flow of information. Many firms attacked this problem by adopting

electronic data interchange (EDI)—an approach that puts information in a stan-

dardized format easily shared between different computer systems. In many firms,

purchase orders, shipping reports, and other paper documents were replaced with

computerized EDI. With EDI, a customer transmits its order information directly to

the supplier’s computer. The supplier’s computer immediately processes the order

and schedules production, order assembly, and transportation. Inventory informa-

tion is automatically updated, and status reports are available instantly. The supplier

might then use EDI to send the updated information to the transportation provider’s

computer. This type of system is now very common. In fact, almost all international

transportation firms rely on EDI links with their customers.

EDI systems were originally developed and popularized before the World Wide

Web and Internet gained widespread use. Most traditional EDI systems are expen-

sive to develop, rely on proprietary computer networks, and use specialized software

to exchange data securely. Alternatives to this approach that rely on the Internet

are gaining in popularity. However, there are still some obstacles. While it’s easy for

firms to share many types of information that use the standard HTML web-page for-

mat, HTML is not well suited for exchanging numerical data (like sku numbers,

sales volume, purchase quantities, and the like) between software programs on dif-

ferent computers. However, a new standard format, called XML, is gaining

popularity and fostering easier EDI-type data exchanges over the Internet.^10

This improved information flow and coordination affects other PD activities too.

Instantaneous order processing or using an EDI system or the Internet, for example,

can have the same effect on the customer service level as faster, more expensive

transportation. And knowing what a customer has sold or has in stock can improve

a supplier’s own production planning and reduce both inventory costs and stock-

outs in the whole channel.

Better coordination of PD activities is a key reason for the success of Pepperidge

Farm’s line of premium cookies. It was making the wrong products and delivering

them too slowly to the wrong market. Poor information was the problem. Delivery

truck drivers took orders from retailers, assembled them manually at regional offices,

Internet Exercise Large corporations often turn to other firms that specialize

in logistics_transportation and warehousing services, consultants, developers

of software for e-commerce, and the like_to help implement the physical

distribution aspects of their marketing strategies. The website of the Virtual

Logistics Directory (www.logisticdirectory.com) lists many logistics specialists

and what they do. Go to the website and select the Integrated Logisticscate-

gory. Review the descriptions of some of the firms listed, and then pick one.

Explain why a large corporation with a logistics problem might seek its help

rather than just trying to tackle the problem internally.

Internet

Better information

helps coordinate PD

Electronic data

interchange sets a

standard