Market Logistics
Physical distribution starts at the factory. Managers choose a set of warehouses (stocking points) and transportation carriers that will deliver the goods to final destinations in the desired time or at the lowest total cost. Physical distribution has now been expanded into the broader concept of supply chain management (SCM). Supply chain management starts before physical distribution and includes strategically procuring the right inputs (raw materials, components, and capital equipment), converting them efficiently into finished products, and dispatching them to the final destinations. The supply chain perspective can help a company identify superior suppliers and distributors, improve productivity, and reduce costs. Some companies choose to partner with third-party logistics specialists for help with transportation planning, distribution center management, and other valued-added services that go beyond shipping and storing.18
Market logistics includes planning the infrastructure to meet demand, then implementing and controlling the physical flows of materials and final goods from points of origin to points of use to meet customer requirements at a profit. Market logistics planning has four steps:19
- 1. Deciding on the company’s value proposition to its customers. (What on-time delivery standard should we offer? What levels should we attain in ordering and billing accuracy?)
- 2. Selecting the best channel design and network strategy for reaching the customers. (Should we serve customers directly or through intermediaries? How many warehouses should we maintain, and where should we locate them?)
- 3. Developing operational excellence in sales forecasting, warehouse management, transportation management, and materials management.
- 4. Implementing the solution with the best information systems, equipment, policies, and procedures.
