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 351

Pillsbury added warehouse space and started hauling goods from plant to plant.

Over time, Pillsbury set up 100 branch warehouses—controlled by 33 sales

offices. Accounting, credit, and other processing operations were duplicated in

each sales office. PD costs were high, but the customer service level was still a

problem. It took Pillsbury a week just to process an order. And the company had

no effective control over its inventories. Pillsbury needed a change to distribu-

tion centers.

Pillsbury first specialized production at each plant to a few product lines. Then

Pillsbury sent carload shipments directly to the distribution centers—almost

eliminating storing at the factories. The distribution centers were controlled by

regional data processing centers, which quickly determined where and when

goods were to be shipped. Centralized accounting got invoices to customers

faster—resulting in quicker payment. Because each distribution center always

had adequate inventory, it could ship orders the most economical way. And

because the field sales organization no longer handled physical distribution or

inventory, it could focus on sales. Pillsbury could guarantee customers delivery

within three days.

There are many variations of the distribution center. The Pillsbury example

shows it within an integrated operation. But public warehouses offer similar

services.

Improved technology, coordination among firms, and efficient new distribution

centers are bringing big improvements to the PD area. Yet the biggest challenges

may be more basic. As we’ve emphasized here, physical distribution activities tran-

scend departmental, corporate, and even national boundaries. So seeing and taking

advantage of the opportunities for improvement often requires cooperation all along

the channel system. Too often, such cooperation doesn’t exist—and changing

ingrained ways of doing things is hard. But marketing managers who push for inno-

vations in these areas are likely to win customers away from firms and whole channel

systems that are stuck doing things in the old way.^28

The distribution center

brings it all together

Managers must be

innovative to provide

customers with

superior value

McKesson is a leading distributor

of drugs, and effective use of

technology has been a key

reason for its success. The

space-age gizmo on this man’s

arm combines a scanner,

computer, and two-way radio—to

speed up order assembly and

delivery from McKesson’s

distribution center.