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 337

chicken because they worried that they had only a few days after it was delivered

to sell it. They didn’t want it to spoil—at their expense—on the shelf. They also

didn’t want to sell their customers something that wasn’t fresh.

Shelf life had not been a problem with Holly Farms’ raw chicken. It sold in higher

volume and moved off shelves more quickly. The source of the problem with the

roast chicken was that it took too long to ship from the plant to distant stores. Cou-

pled with slow turnover, that didn’t leave grocers enough selling time. To address

the problem, Holly Farms changed its transportation arrangements. It also devel-

oped new packaging that allowed grocers to store the chicken longer. Holly Farms

also shifted its promotion budget to put more emphasis on in-store promotions to

speed up sales once the chicken arrived. With these changes, Holly Farms was able

to win cooperation in the channel and establish its product in the market.^7

We introduced the concept of just-in-time (JIT) delivery in Chapter 7. Now that

you know more about PD alternatives, it’s useful to consider some of the marketing

strategy implications of this approach.

A key advantage of JIT for business customers is that it reduces their PD costs—

especially storing and handling costs. However, if the customer doesn’t have any

backup inventory, there’s no security blanket if something goes wrong. If a supplier’s

delivery truck gets stuck in traffic, if there’s an error in what’s shipped, or if there

are any quality problems when the products arrive, the customer’s business stops.

Thus, a JIT system requires that a supplier have extremely high quality control in

production and in every PD activity, including its PD service.

For example, to control the risk of transportation problems, JIT suppliers often

locate their facilities close to important customers. Trucks may make smaller and

more frequent deliveries—perhaps even several times a day. As this suggests, a JIT

system usually requires a supplier to be able to respond to very short order lead times.

In fact, a supplier’s production often needs to be based on the customer’s produc-

tion schedule. Thus, e-commerce order systems and information sharing over

computer networks are often required. However, if that isn’t possible, the supplier

must have adequate inventory to meet the customer’s needs. Moreover, the supplier

in turn may need better service from firms that it relies on, say, for raw materials or

supplies.

JIT requires a close,

cooperative

relationship

To help a manufacturer of soccer

balls reduce its logistics costs,

CNF ships the balls to Europe

uninflated and then pumps them

up before the last leg of their

journey to individual outlets.