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

346 Chapter 12

Most transporting rates—the prices charged for transporting—are based on the

idea that large quantities of a good can be shipped at a lower transport cost per

pound than small quantities. Whether a furniture producer sends a truck to deliver

one sofa or a full carload, the company still has to pay for the driver, the truck, the

gas, and other expenses like insurance.

Transporters often give much lower rates for quantities that make efficient use of

their transport facilities. Thus, transport costs per pound for less-than-full carloads

or truckloads are often twice as high as for full loads. These quantity rate differ-

ences are one important reason for the development of some wholesalers. They buy

in large quantities to get the advantage of economies of scale in transporting. Then

they sell in the smaller quantities their customers need.

Freight forwarderscombine the small shipments of many shippers into more

economical shipping quantities. Freight forwarders do not own their own trans-

porting facilities—except perhaps for delivery trucks. Rather, they wholesale air,

ship, rail, and truck space. They accumulate small shipments from many shippers

and reship in larger quantities to obtain lower transporting rates.

Freight forwarders are especially useful in arranging international shipping. They

handle 75 percent of the general cargo shipped from U.S. ports to foreign countries.

They are also very helpful for handling international airfreight. For example, Air

Express International specializes in helping marketing managers find the most effi-

cient air cargo firm to speed deliveries around the world.^22

To cut transporting costs or get more control, some marketing managers do

their own transporting rather than buy from specialists. Large producers, like Levi

Strauss, often buy or lease their own truck fleets. Shell Oil and other large petro-

leum, iron ore, and gypsum rock producers have their own ships. Some firms now

buy their own planes for airfreight.^23

Economies of Scale in Transporting

Freight forwarders
accumulate
economical shipping
quantities

Should you do it
yourself?

Both SunLite and GE provide
logistics-related services that help
firms reduce big inventories and
improve customer service.