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!
Dynamo Furniture makes a wide variety of stylish upholstered sofas and chairs. Over time, an increasing share of the company's business has come from special orders which consumers place through furniture stores, most of which handle a number of competing lines. As special orders increased, Dynamo slowly increased the choices among upholstery fabrics--and the firm now offers more than 250 colors and patterns. Some customers seem to be delighted with this unique array of choices. Even so, sales have slowly tapered off--and at a recent dealer meeting, several retailers complained that not many customers were willing to wait eight to twelve weeks for Dynamo to produce and deliver a custom order. Dynamo's sales manager urged the retailers to carry more chairs and sofas in stock, so that they could sell more Dynamo furniture "off the display floor."
Problem:
b) Recommendation: