International Logistics Management

Definition- Logistics is the process of planning, implementing, and controlling the efficient, effective flow and storage of rawmaterials, work-in-progress inventory, finished goods, and the related services and information originating from a firms tiers of vendors and culminating with its ultimate customers.Seven Rs - right product, right quantity, right condition, right place, right time, right customer, right priceLogistics Network

Plants Distribution CentersVendors Customers

Vorravee Pattaravongvisut

What is a Distribution Channel?What is a Distribution Channel?

A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.

Channel decisions are among the most important decisions that management faces and will directly affect every other marketing decision.

Distribution Channel FunctionsDistribution Channel Functions

ContactContact

FinancingFinancing

InformationInformationRisk TakingRisk Taking

PromotionPromotion

MatchingMatchingNegotiationNegotiation

PhysicalDistribution

PhysicalDistribution

Consumer Marketing Channels & LevelsConsumer Marketing Channels & Levels

Direct

Indirect

Direct

Indirect

MM WW JJ RR CC

MM WW RR CC

MM RR CC

MM CC

Channel 1

Channel 2

Channel 3

Channel 4

Channel Level - A Layer of Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Buyer.

Channel Behavior & ConflictChannel Behavior & ConflictThe channel will be most effective when:

each member is assigned tasks it can do best.all members cooperate to attain overall channel goals and satisfy the target market.

When this doesnt happen, conflict occurs:Horizontal Conflict Horizontal Conflict occurs among firms at the same level of the channel.Vertical Conflict Vertical Conflict occurs between different levels of the same channel.

For the channel to perform well, conflict must be managed.

Types of Vertical Marketing SystemsTypes of Vertical Marketing SystemsCorporate

Common Ownership at Different Levels of the Channel

CorporateCommon Ownership at Different

Levels of the Channel

ContractualContractual Agreement Among

Channel Members

ContractualContractual Agreement Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

Greater

Lesser

Degreeof

DirectControl

Degreeof

DirectControl

Vertical Marketing SystemsVertical Marketing SystemsVertical

Marketing Systems (VMS)

Vertical Marketing

Systems (VMS)

CorporateVMS

CorporateVMS

ContractualVMS

ContractualVMS

AdministeredVMS

AdministeredVMS

RetailerCooperatives

RetailerCooperatives

FranchiseOrganizations

FranchiseOrganizations

WholesalerSponsored

Voluntary Chain

WholesalerSponsored

Voluntary Chain

Service-Firm-Sponsored

Franchise System

Service-Firm-Sponsored

Franchise System

Manufacturer-SponsoredWholesaler

Franchise System

Manufacturer-SponsoredWholesaler

Franchise System

Manufacturer-Sponsored

RetailerFranchise System

Manufacturer-Sponsored

RetailerFranchise System

Channel Design DecisionsChannel Design Decisions

Analyzing Consumer Service NeedsAnalyzing Consumer Service Needs

Setting Channel Objectives & ConstraintsSetting Channel Objectives & Constraints

ExclusiveDistributionExclusive

DistributionSelective

DistributionSelective

DistributionIntensive

DistributionIntensive

Distribution

Identifying Major AlternativesIdentifying Major Alternatives

Evaluating the Major AlternativesEvaluating the Major Alternatives

Provide a Targeted Level of Customer Service at the Least Cost.

Maximize Profits, Not Sales.

Higher Distribution Costs/ Higher Customer Service

Levels

Lower Distribution Costs/ Lower Customer Service Levels

Logistics SystemsLogistics Systems

InventoryWhen to order

How much to orderJust-in-time

InventoryWhen to order

How much to orderJust-in-time

CostsMinimize Costs ofAttaining Logistics

Objectives

CostsMinimize Costs ofAttaining Logistics

Objectives

WarehousingStorage

Distribution

WarehousingStorage

Distribution

Order ProcessingSubmittedProcessed

Shipped

Order ProcessingSubmittedProcessed

Shipped

LogisticsFunctionsTransportation

Water, Truck, Rail,

Pipeline & Air

Transportation ModesTransportation Modes

RailNations largest carrier, cost-effective for shipping bulk products, piggyback

RailNations largest carrier, cost-effective for shipping bulk products, piggyback

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

WaterLow cost for shipping bulky, low-value

goods, slowest form

WaterLow cost for shipping bulky, low-value

goods, slowest form

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

AirHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items

AirHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items

Choosing Transportation ModesChoosing Transportation Modes

1. Speed.2. Dependability.3. Capability.4. Availability.5. Cost.

Checklist for ChoosingTransportation Modes

Integrated Logistics ManagementIntegrated Logistics ManagementConcept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires

TeamworkTeamwork, Both Inside the Company and Among All the Marketing Channel Organizations.

Cross-Functional Teamwork inside the Company

Cross-Functional Teamwork inside the Company

Building Channel PartnershipsBuilding Channel Partnerships

Third-Party LogisticsThird-Party Logistics

Supply Chain Activities

Demand ForecastingOrder Processing ProcurementPlant and Warehouse Site LocationWarehousing and StorageTraffic and TransportationProduction PlanningMaterials HandlingInventory Control

Customer ServiceIndustrial PackagingDistribution CommunicationsReturn Goods HandlingParts and Service SupportSalvage and Scrap Disposal

Supply Chain ManagementSCM entails managing the flow of material and information in a sequence beginning with supplier and ending with customers.For the purpose clarity and transparency the SCM sequence is often broken up into smaller segments beginning with inbound logistics (materials management), followed by operational logistics which concerns the issues while the goods are being produced, and ending with outbound logistic(customer service and distribution channels)

Materials Management Functions

Materials planning and controlProcurementTransportationMaterial receivingInbound quality control

Inbound warehousing Production planning and controlOutbound quality controlOutbound warehousingSalvage and scrap disposal

Materials management concerns the planning and control of inbound materials, the work-in-process, and the storage of thefinished goods. Typical activities include the following:

Procurement ActivitiesNeeds analysisDefine user requirementsMake or buy analysisIdentify type of purchase (rebuy, modified rebuy, new buy)Market analysis on supply sourceGenerate supplier list

Prescreen suppliersEvaluate suppliersSelect supplierDelivery and performance measurementPerformance evaluation

Vendor Selection CriteriaNecessary Criteria

QualityReliabilityCapabilityFinancial considerations

Desirable CriteriaLocationReputationTrainingSupport

Final selection of vendors can be facilitated by scoring vendors based on a factor-based scoring system

WarehousingIssues in warehousing for inbound raw materials, sub-assemblies and supplies is similar to issues in warehousing outbound finished goods warehousing. They differ primarily in terms of the following:type of facility usedvalue of materialperish ability

Production Planning and ControlDemand ForecastingProduction Scheduling- quantities, timingResource Allocation

machineslabormaterialbudget

TransportationThe transportation activities concern bridging the spatial and temporal gaps between the vendor and the firm and the firm and its customers.Some issue that need to be addressed include:

controltransportation moderates and cost analysisroutescarrier servicesclaims handling

Receiving and Quality ControlReceiving

Inspection- variance checking between order and shipmentPhysical damage-claims, legal issues

Quality Controlquality benchmarksvariance measurement and analysisstatistical quality control

Channels of DistributionA series of cooperating entities who facilitate the flow of goods and services from the producer to the end user. Wholesaler, retailers, producers sales branches, agents, brokers etc are examples of such entitiesPrimary benefits include cost efficiencies and customer convenienceConventional channel versus Vertical Marketing System

Intensive, Exclusive and Selective DistributionCooperation, conflict and Competition within and between channels

PeopleTraining Learning - KnowledgeTeam Work Cross-FunctionalityBuy-in

ManagementWorkers

TechnologicalInformation Substitution

E-commerceE-logisticsE-procurement

Materials SubstitutionGreener MaterialsPackaging Advances

Delivery Mechanisms