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What is Logistics?
Chapter-16: Logistics and Supply
Chain Management

Logistics is the management of the flow of physical materials.

In the context of marketing channels Logistics is a process of

systemizing information to facilitate the efficient and cost-

Lecture-12

Course: Marketing Channels

(MKT 450)

effective flows of goods & services to produce customer

satisfaction.
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Faculty: Abdullah Al Faruq (AFq)

Logistics in marketing channels involves the processing and

tracking of factory goods during warehousing, inventory
control, transport, customs documentation and delivery to
customers.

North South University (NSU)

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In sum logistics creates the rights of passage in marketing

channels.

The Building Blocks of Logistics

Right Place

Right Cost

The building blocks of logistics are:

a. Inventory.
b. Order fulfillment and transportation.
Right Product

c. The documentation.

Inventory
Right Time

Inventory is the stocks of goods or the components of goods

that will be used for the production or successful delivery of a

Right condition

service.
Figure: The logistics Rights of Passage

There four good reasons for holding inventory they are:

a. Demand surge management.

b. Economies of scale in production.

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Inventory (Cont.)
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There four good reasons for holding inventory they are (Cont.):

c. Reduce the transportation loss time.

Order Fulfillment and Transportation (Cont.)

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The concept of cross-docking came into implementation.

The cross-docking is an effective and efficient process of order

The steps of cross-docking are:

d. To meet uncertainty.

fulfillment and transportation of a goods for end-users.

Order Fulfillment and Transportation

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Orders product

The implementation of logistics ensures orders are receive quickly

Retailer

from a customer and dispatch as early as possible.

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Packs the product

and transfer to
delivery unit

Manufacturer
Factory
F t

Transportation is another important element in marketing channel

Delivery
Unit
U it
Ships the product

which has been made manageable by the implementation of

logistics.
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Transportation in marketing channel does not only involve the

product being transported to the shops/end-users but also the point

process efficient and effective.

where the raw-materials are acquired and brought to the factory.

Documentation
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The final blocks of logistics is removal of documentation i.e. filling up

order form, invoices, receipts etc are heavily minimized with the

What is Supply Chain Management?

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chain as efficiently as possible.

The main player here has been the utilization of computers and
third-party computer software that has remove filling up bundles of

Supply chain management (SCM) is the process of planning,

implementing and controlling the operations of the supply

utilization of logistical concept.

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Nowadays, even third-party logistics provider is used to make the

Supply Chain Management spans all movement and storage of

raw materials, work-in-process inventory, and finished goods

papers and substituted it with click and drag.

from point-of-origin to point-of-consumption.

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The concept of SCM goes all the way back to the point where
the manufacturers acquires the materials to be used for
production of a product, how it reaches the factory, how it
leaves the factory to reach to the doors of the
wholesalers/retailers to be consumed by the end-user.

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Approaches to Supply Chain Management (SCM)

i. Efficient Consumer Response (ECR)
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Efficient Consumer Response (ECR) is a joint trade and industry

body working towards making the grocery sector as a whole
more responsive to consumer demand and promote the removal
of unnecessary costs from the supply chain.

Th principle
The
i i l off ECR was to
t find
fi d outt a way to
t better
b tt serve the
th
customers supplying only what was required.

There are four areas of ECR:

a. Continuous Replenishment Program (CRP)

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The practice of replacing stock based on speedy knowledge of

consumer sales.

Which SCM Approach to choose?

ii. Quick Response (QR)/Rapid Response

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Quick Response (QR) was developed in the early 1980s and it comes from the

Both the approaches has benefits but however, which approach to choose is a

The answer lies in the product/service itself i.e. certain products are

critical question that needs to be answered by the manufacturer.

fashion industry. The basic idea of QR is to let clients tell the whole channel what to
make and what to distribute and then do it fast. QR contains keeping production

categorized as functional products/brands i.e. these are products whose

flexibility as to what to do and how many to do

demands are predictable, serves basic stable need, people buy in many outlets

The Areas of QR

and long life cycles. For example, toothpaste, bread, tools etc.

a. Unstable Market Nature

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Initially designed to face the unstable and changing demand of the market with

are unpredictable, does not serve stable and basic need, products are highly

ease.
b.

Manufacturing oriented

QR is more manufacture based and thinks less of promotion and pricing thus they

differentiated. For example, cars, dresses etc.

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are heavy users of flexible manufacturing techniques.

c.

Transportation

QR is about shipping the product as quickly as possible and if required pay premium
pricing for transportation

On the other hand, innovative products/brands has less age life cycle, demands

Functional products require holding down cost, fast delivery and as demand
are predictable decision taking are easy so ECR fits the profile i.e. physically
efficient production.

Innovative products needs to be market responsive i.e. product designs needs

to equip to change or postponement any time, performance are less cost
driven so QR fits the profile here.