ICA: Integrating physical distribution Introduction Successful marketers must pa
ID: 380726 • Letter: I
Question
ICA: Integrating physical distribution
Introduction
Successful marketers must pay attention to the distribution customer service they provide their customers. They also must worry about the cost of the service they provide--because ultimately the price of a product should cover the cost. Deciding on the right balance between the distribution customer service level and the costs of transporting and storing is sometimes difficult--and identifying how best to achieve that balance can be even more of a challenge. The job of integrating all of the logistics activities is even more complicated when it requires coordination among different firms in a channel. But the job must be done and done well. One firm can't just reduce its own PD costs if that raises costs somewhere else in the channel--or reduces the service level. For example some business customers may demand just-in-time delivery or expect the convenience and speed of electronic data interchange (EDI)--because that is what is required to make the whole channel more competitive.
Many marketing managers know about the physical distribution concept, but it's easy to fall into the trap of just accepting 'a firm's PD system as "the way it's always been"--never even bothering to think about how to improve it. This exercise gives you practice in analyzing different PD situations--and in applying the concepts discussed in Chapter 11 to improve a marketing strategy.
Assignment
Read each of the following situations carefully. Identify the major PD problem(s) and then make specific suggestions about how you might improve the strategy. State any assumptions that you think are important to your recommendation. In your answer, be sure to show that you understand the various concepts--including the different storing and transporting alternatives--discussed in the text. The first problem is answered for you as an example of the approach to take. But keep in mind that there may be more than one "correct" answer in each situation. The solution will depend, in part, on your creativity!
SunShadow Designs is the second largest producer of high quality coated fabrics used for outdoor awnings for fine homes, restaurants, and hotels, and in other applications--including boat covers. SunShadow Designs sells fabric directly to the thousands of awning fabricators who serve customers in their local markets. Once a consumer selects a fabric from a sample and tells a fabricator what to make, the fabricator calls the regional SunShadow Designs sales rep and places an order. Each week's orders are then processed through the home office and the bulky fabric is shipped by truck to the fabricator from either the company's east coast or west coast warehouse. This approach reduces transportation costs and makes it easier to manage the inventory in the warehouse. Although many fabricators are loyal to SunShadow Designs fabric, a new competitor from Europe has been taking a share of the market, apparently in large part because it is able to fill orders within a week rather than the three weeks it takes, on average, for SunShadow Designs. The SunShadow Designs marketing manager does not expect the new competitor to be able to survive, however, because its delivered prices are about 10 percent higher.
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Explanation / Answer
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