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UNIT-I
[Marketing Logistics: Concept, objectives and scope; System elements; Relevance
of logistics in international marketing; International supply chain management and
logistics; Transportation activity–internal transportation, inter-state goods
movement; Concept of customer service.]
Learning objective:
After reading this chapter you should be able to understand the following
•
Marketing logistics concept, objective, scope and its elements
•
Interface between international marketing and logistics & supply chain
management.
•
Role of transport in logistics.
•
Concept of customer service.
INTERNATIONAL LOGISTICS
Introduction: LOGISTICS
International marketing is becoming more important to companies as the world
shifts from distinct national markets to linked global markets. Globalization brings
homogenization of consumer needs, liberalization of trade, and competitive
advantages of operating in global markets. Companies are forced to think and act
globally in order to survive in such a dynamic environment. All these elements have
a deep impact on the development and the positioning of companies on international
marketplaces where competition is cruel. Furthermore, another significant change
concerns the customers since they are more demanding in term of quality, lead time
and order fulfilment. In this context, firms must be more and more flexible and
reactive to anticipate and to adapt to such changes. This quest for flexibility and
reactivity affects the conception and the management of firms and more generally
their logistic systems and contributes to the development of partnership relations, to
the emergence of mergers or strategic alliances between companies. As a result, a
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firm can no longer be considered as an isolated entity but as a component of a wider
supply network.
International Firms have begun to implement various strategies in order to remain
competitive in world market. Logistics is one of the key areas in the process of
international marketing as the delivery of goods to the buyer is as important as any
other activity in business and marketing. Quite often, the most crucial part in
International trade is the timely delivery of goods at a reasonable cost by the
exporter to the importer. In fact, the prospective buyer may be willing to pay even
higher price for timely supplies. The emergence of logistics as an integrative
activity, with the movement of raw materials from their sources of supply to the
production line and ending with the movement of finished goods to the customer
has gained special importance. Earlier on, all the functions comprising logistics
were not viewed as components of a single system. But, with emergence of logistic
as an important part of corporate strategy due to certain developments in the field of
international marketing has gained special significance. Before discussing the
various aspects of logistics, let us look at its definition:
According to Council of logistics management:
“Logistics is the process of planning, implementing and controlling the
efficient, effective flow and storage of goods, services and related information
from point of origin to point of consumption for the purpose of conforming the
customer requirement”.
This definition clearly points out the inherent nature of logistics and it conveys
that Logistics is concerned with getting products and services where they are
needed whenever they are desired. In trade Logistics has been performed since the
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beginning of civilization: it’s hardly new. However implementing best practice of
logistics has become one of the most exciting and challenging operational areas of
business and public sector management. Logistics is unique, it never stops!
Logistics is happening around the globe 24 hours a days Seven days a week during
fifty-two weeks a year. Few areas of business involve the complexity or span the
geography typical of logistics.
I - CONCEPT OF INTERNATIONAL MARKETING LOGISTICS
Word, ’Logistics’ is derived from French word ‘loger’, which means art of war
pertaining to movement and supply of armies. Basically a military concept, it is
now commonly applied to marketing management. Fighting a war requires the
setting of an object, and to achieve this objective meticulous planning is needed so
that the troops are properly deployed and the supply line consisting, interalia,
weaponary, food, medical assistance, etc. is maintained. Similarly, the plan should
be each that there is a minimum loss of men and material while, at the same time, it
is capable of being altered if the need arises. As in the case of fighting a war in the
battle-field, the marketing managers also need a suitable logistics plan that is
capable of satisfying the company objective of meeting profitably the demand of the
targeted customers.
From the point of view of management, marketing logistics or physical distribution
has been described as ‘planning, implementing and controlling the process of
physical flows of materials and final products from the point of origin to the point
of use in order to meet customer’s needs at a profit. As a concept it means the art of
managing the flow of raw materials and finished goods from the source of supply to
their users. In other words, primarily it involves efficient management of goods
from the end of product line to the consumers and in some cases, include the
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movement of raw materials from the source of supply to the beginning of the
production line. These activities include transportation warehousing, inventory
control, order processing and information monitoring. These activities are
considered primary to the effective management of logistics because they either
contribute most to the total cost of logistics or they are essential to effective
completion of the logistics task. However, the firms must carry out these activities
as essential part of providing customer with the goods and services they desire.
ii) - SIGNIFIGANCE OF MARKETING LOGISTICS
The important of a logistics systems lies in the fact that it leads to ultimate
consummation of the sales contract. The buyer is not interested in the promises of
the seller that he can supply goods at competitive price but that he actually does so.
Delivery according to the contract is essential to fulfilling the commercial and legal
requirements. In the event of failure to comply with the stipulated supply of period,
the seller may not only get his sale amount back, but may also be legally penalized,
if the sales contract so specifies. There is no doubt that better delivery schedule is a
good promotional strategy when buyers are reluctant to invest in warehousing and
keeping higher level of inventories. Similarly, better and/or timely delivery helps in
getting repeat orders through creation of goodwill for the supplier.
Thus, as effective logistics system contributes immensely to the achievements of the
business and marketing objectives of a firm. It creates time and place utilities in the
products and thereby helps in maximizing the value satisfaction to consumers. By
ensuring quick deliveries in minimum time and cost, it relieves the customers of
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holding excess inventories. It also brings down the cost of carrying inventory,
material handling, transportation and other related activities of distribution. In
nutshell, an efficient system of physical distribution/logistics has a great potential
for improving customer service and reducing costs.
Logistics has gained importance due to the following trends
•
Raise in transportation cost.
•
Production efficiency is reaching a peak
•
Fundamental change in inventory philosophy
•
Product line proliferated
•
Computer technology
•
Increased use or computers
•
Increased public concern of products Growth of several new, large retail
chains or mass merchandise with large demands & very sophisticated
logistics services, by pass traditional channel & distribution.
•
Reduction in economic regulation
•
Growing power of retailers
•
Globalization
As a result of these developments, the decision maker has a number of
choices to work out the most ideal marketing logistics system. Essentially, this
system implies that people at all levels of management think and act in terms of
integrated capabilities and adoption of a total approach to achieve pre-determined
logistics objectives.
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