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

350 Chapter 12

Today, modern one-story buildings away from downtown traffic are replacing the

old multistory warehouses. They eliminate the need for elevators and permit the use

of power-operated lift trucks, battery-operated motor scooters, roller-skating order

pickers, electric hoists for heavy items, and hydraulic ramps to speed loading and

unloading. Most of these new warehouses use lift trucks and pallets (wooden trays

that carry many cases) for vertical storage and better use of space. Bar codes and

UPC (uniform product code) numbers make it easy for computers to monitor inven-

tory, order needed stock, and track storing and shipping costs. Some warehouses

have computer-controlled order-picking systems or conveyor belts that speed the

process of locating and assembling the assortment required to fill an order.^27

Exhibit 12-7
A Comparison of Private
Warehouses and Public
Warehouses

The Distribution Center—A Different Kind of Warehouse

Discrepancies of assortment or quantity between one channel level and another are

often adjusted at the place where goods are stored. It reduces handling costs to regroup

and store at the same place—if both functions are required.But sometimes regrouping is

required when storing isn’t.

A distribution centeris a special kind of warehouse designed to speed the flow

of goods and avoid unnecessary storing costs. Anchor Hocking moves over a mil-

lion pounds of its housewares products through its distribution center each day.

Faster inventory turnover and easier bulk-breaking reduce the cost of carrying inven-

tory and lead to bigger profits.

Today, the distribution center concept is widely used by firms at all channel lev-

els. Many products buzz through a distribution center without ever tarrying on a

shelf; workers and equipment immediately sort the products as they come in and

then move them to an outgoing loading dock and the vehicle that will take them

to their next stop. While these “cross-docking” approaches have become more effi-

cient, the basic benefits of the distribution center approach are still the same as they

were over 25 years ago when the idea was pioneered. In fact, a good way to see how

the distribution center works is to consider an early application.

Pillsbury—the manufacturer of baking products—used to ship in carload

quantities directly from its factories to large middlemen. Initially, plants were as

close to customers as possible, and each plant produced the whole Pillsbury line.

As lines expanded, however, no single plant could produce all the products.

When customers began to ask for mixed carload shipments and faster delivery,

Is storing really
needed?

Don’t store it,
distribute it

Pillsbury’s distribution
system was
overwhelmed by
expanding product
lines and sales

Type of warehouse

Characteristics Private Public

Fixed investment Very high No fixed investment

Unit cost High if volume is low Low: charges are

Very low if volume is made only for

very high space needed

Control High Low managerial control

Adequacy for product line Highly adequate May not be convenient

Flexibility Low: fixed costs have High: easy to end

already been arrangement

committed