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 341

Now that you see why the coordination of physical distribution activities is so

important, let’s take a closer look at some of the PD decision areas.

The Transporting Function Adds Value to a Marketing Strategy

Transporting aids

economic development

and exchange

Transporting can be

costly

Sand and gravel

1%

3%

Bituminous coal

Cabbage

Iron ore

Manufactured food

Chemicals and plastics

Factory machinery

Electronic equipment

Pharmaceuticals

Products Cost of transporting as percent of selling price

4%

6%

8%

20%

38%

42%

55%

Exhibit 12-4

Transporting Costs as a

Percent of Selling Price for

Different Products

Transportingis the marketing function of moving goods. Transportation provides

time and place utilities—at a cost. But the cost is less than the value added to prod-

ucts by moving them or there is little reason to ship in the first place.

Transporting can help achieve economies of scale in production. If production

costs can be reduced by producing larger quantities in one location, these savings

may more than offset the added cost of transporting the finished products to cus-

tomers. Without low-cost transportation, both within countries and internationally,

there would be no mass distribution as we know it today.

Transporting costs may limit the target markets a marketing manager can consider.

Shipping costs increase delivered cost—and that’s what really interests customers.

Transport costs add little to the cost of products that are already valuable relative to

their size and weight. A case of medicine, for example, might be shipped to a drug-

store at low cost. But transporting costs can be a large part of the total cost for heavy

products of low value—like many minerals and raw materials. You can imagine that

shipping a massive roll of aluminum to a producer of soft-drink cans is an expensive

proposition. Exhibit 12-4 shows transporting costs as a percent of total sales dollars

for several products.^13

Government often plays an important role in the development of a country’s

transportation system—including its roads, harbors, railroads, and airports. And dif-

ferent countries regulate transportation differently—although regulation has in

general been decreasing.

For example, as part of their move toward unification, most European countries

are reducing their transporting regulations. The construction of the tunnel under

the English Channel is a dramatic example of the changes taking place. The “chun-

nel” allows trains to speed between England and the rest of Europe.

As regulations decreased in the U.S., competition in the transportation industry

increased. As a result, a marketing manager generally has many carriers in one or

more modes competing for the firm’s transporting business. Or a firm can do its own

transporting. So knowing about the different modes is important.^14

Governments may

influence

transportation