MKT 3301 SmartBook Chapter 11

Storing allows mass producers to

achieve economies of scale

Amazon.com offers speedy distribution options to its customers. These customers are willing to pay a premium for this quick delivery. In these situations, Amazon.com should use ______ as a transport method.

airfreight

Logistics

also called physical distribution (PD) is the transporting, storing, and handling of goods in ways that match target customers' needs with a firm's marketing mix—both within individual firms and along a channel of distribution.

Public warehouses

are independent storing facilities. They can provide all the services that a company's own warehouse can provide. A company might choose a public warehouse if it doesn't have a regular need for space. For example, Tonka Toys uses public warehouses because its business is seasonal. Tonka pays for the space only when it is used. Public warehouses are also useful for manufacturers that must maintain stocks in many locations, including foreign countries.

Private warehouses

are storing facilities owned or leased by companies for their own use. Most manufacturers, wholesalers, and retailers have some storing facilities either in their main buildings or in a separate location. A sales manager often is responsible for managing a manufacturer's finished-goods warehouse, especially if regional sales branches aren't near the factory.

What can companies use to improve efficiency and add value for the customer when providing a large number of products?

data analytics

In general, government regulation of transportation system is _______ around the world.

decreasing

Galveston Machinery produces large quantities of its component parts for the oil and gas industry in Galveston, Texas. The company then ships the parts to its customers worldwide. The savings form producing in one location more than offset the added cost of transporting the parts to customers. This is an example of

economies of scale

some companies will try to centralize production, by having fewer manufacturing plants that each produce in larger quantities. This requires more transporting but offers

economies of scale in production

In order to address problems with sharing information between different computer systems, many firms rely on ______ to create a standardized data format.

electronic data interchange (EDI)

Physical distribution happens primarily away from customers' attention. In other words, physical distribution is typically _______ to most customers.

invisible

Inventory

is the amount of goods being stored.

Storing

is the marketing function of holding goods so they're available when they're needed. necessary when production goods dont match production, due to it being common to produce large quantities of products at a cheaper price

Transporting

is the marketing function of moving goods. Transporting costs limit the target markets a marketing manager can serve. Shipping costs increase delivered cost—and that's what really interests customers. Transport costs add little to the cost of products that are already valuable relative to their size and weight. picking best transporting alternative depends on the product, other physical distribution decisions, + service level company wants to offer. Best alternative should provide level of service (for ex, speed and dependability) required at as low a cost as possible.

Transporting, storing, and handling of goods in ways that match target customers' needs with a firm's marketing mix is called ______.

logistics

Developed economies, such as that in the United States, tend to spend a _______ percentage of GDP on logistics-related costs than developing economies do.

lower

rank products by cost of transportation as percent selling price w/ lowest products at top and highest products at bottom

pharmaceuticals electronic equip. factory machinery chemicals and plastics manufactured food iron ore cabbage bituminous coal sand and gravel

After reviewing the image, rank these products by cost of transporting as percent of selling price, with products with the lowest cost of transporting as a percent of selling price at the top of the list the highest cost of transport at the bottom of the list.

pharmaceuticals electronic equipment manufactured food sand and gravel

Logistics is also known as ________ distribution.

physical

One of the significant advantages of just-in-time inventory systems for business customers is that it reduces their ______ costs.

physical distribution

In the US, Shell Oil primarily uses _____ to transport its crude oil and natural gas from its oil fields to its refineries.

pipelines

A firm that owns or leases a storage facility for its own use is using a _____ warehouse.

private

A common problem with mass-produced goods that can be addressed by storing is that

production does not match consumption

Storage facilities that are not owned or leased by a single goods-producing firm are known as ______ warehouses.

public

When firms utilize a just-in-time system, it is critical that the supplier has high ______ in all physical distribution activities.

quality control

Which of the following transportation methods carries more freight in the United States than any other mode?

railroads

The physical distribution (PD) concept

says all transporting, storing, and product-handling activities of a business / whole channel system should be coordinated as one system that seeks to minimize the cost of distribution for a given customer service level.

Victor's Wholesale Supply delivers medical supplies and operates in a very competitive market. The products and prices of it competitors are very similar to those offered by Victor's, so it differentiates its marketing mix with a faster turnaround time from order placement to delivery. Customers have responded well, suggesting that Victor's strategy focusing on ______ appeals to customers.

service levels

To better respond to customers' needs, intermediaries should ______ stock at convenient locations.

store

Best Buy places appliances on display to entice customers to buy. Each of these appliances carries the interest expense of the money used to purchase it. The appliances require costly insurance to cover the risk of fire or theft. All of these costs are associated with ______ .

storing

Maintaining a supply of goods so they're available when they're needed is called

storing

A distribution channel is part of a broader network of relationships known as a _____ _____ that participates in the production, distribution, and sales of a product.

supply chain

John Deere is the leading manufacturer of agricultural machinery in the world. To meet the needs of its customers, Deere's management must coordinate delivery of parts needed to build its tractors, harvesters, and sprayers. Deere must also coordinate deliveries to the dealers that stock and sell its products. John Deere relies on its __________ to coordinate all of these activities.

supply chain

When choosing between transportation options, marketers should look for

the lowest cost alternative that provides the required level of service.

Costco offers a variety of frozen shrimp imported from Southeast Asia. There are very high shipping costs to deliver the shrimp to the retail stores, but they are less expensive than it would be to stock and maintain a supply of fresh local shrimp in each store. This saves customers money and Costco offers the product because it has calculated the _______ of choosing to sell the Asian shrimp.

total costs

Nancy goes to Target to buy a new television. The store keeps a limited amount of inventory on hand. However, the store manager promises to rush order a television for Nancy in order to not lose her business. The manager is _______ the cost of storing inventory for the extra cost of speedy delivery.

trading

Which marketing function is responsible for making products available when and where the customer needs them?

transporting

Through the course of transportation from producer to consumer, shipments often

travel by several modes of transport

The physical distribution concept argues that logistics activities, including transportation, storage, and handling of products, should be

treated as a single system for minimizing the costs of maintaining a given customer service level.

Dole Food Company is the largest producer of fruits and vegetables in the world. The company needs a mode of transportation that is able to handle relatively small quantities of goods over the short distances from its distribution centers to its customers. Dole should use ______ as a transportation method.

trucking

Use Exhibit 11.5 to rank the different methods of transporting in terms of cost, from lowest to highest.

water pipeline rail truck air

containerization

—grouping individual items into an economical shipping quantity and sealing them in protective containers for transit to the final destination. This protects the products and simplifies handling during shipping. Some containers are as large as truck bodies.

Supply Chain

—the complete set of firms and facilities and logistics activities that are involved in procuring materials, transforming them into intermediate or finished products, and distributing them to customers.

Which four of the following are examples of factors that affect physical distribution service levels?

- Procedures for handling returns - Advance information on product availability - Damage in shipping, storing, and handling - Accuracy and reliability in filling orders

Which of the following items have been replaced by electronic data interchange (EDI) in some companies?

- Purchase orders - shipping reports

Which two of the following are possible drawbacks of private warehouses?

- Purchasing or leasing a space may be expensive - Some space may go unused

What are some examples of common transportation infrastructure challenges in developing countries?

- Roads are often poor - Rail systems may be limited - Ports may be underdeveloped

Although more expensive than using distribution centers, shipping finished goods directly to retail stores has several benefits, including

- Stronger relationships with retailers - Improved understanding of customer needs - Faster delivery times

Which of the following are expenses that contribute to total inventory costs?

- costs of risks such as theft and fire - costs of inventory becoming obsolete - handling costs - cost of maintaining storage facilities

Which of the following factors are bringing improvements to physical distribution practices?

- improved technology - efficient new distribution centers - coordination among firms - more competitive market

The total cost approach considers physical distribution costs that might otherwise be ignored, including

- inventory carrying costs - the cost of lost sales due to poor customer service

Which three of the following help reduce the cost of physical handling in storing?

- locating storing facilities away from downtown traffic - using power operated lift trucks - bar codes, UPC cods, and RFID tags

What are three major benefits of shipping products via air?

- lower theft rates - less damage - less spoilage

Just-in-time systems have gained popularity because they allow firms to

- maintain target levels of customer service - cut inventory costs - minimize the amount of time it takes to replace inventory that has been sold

There are trade-offs involved in physical distribution decisions. Which of the following are included in those trade-offs?

- sales - costs - customer service levels.

What are two characteristics of a distribution center?

- speeds the flow of goods from producer to consumer - minimizes storing costs

Physical distribution functions. must. be coordinated within. the channel. Marketing managers. in charge of this. coordination effort must decide who will _____ the goods.

- transport - store - handle

In the developing economies of Latin America, logistics costs are typically ______ or more of GDP.

30%

distribution center

A distribution center is a special kind of warehouse designed to speed the flow of goods and avoid unnecessary storing costs. Today, the distribution center concept is widely used by firms at all channel levels. Many products buzz through a distribution center without ever tarrying on a shelf; workers and equipment immediately sort the products Technology is key to making distribution centers efficient.

pipelines for delivery

Pipelines are used primarily to move oil and natural gas. So pipelines are important both in the oil-producing and oil-consuming countries. Only a few major cities in the United States, Canada, Mexico, and Latin America are more than 200 miles from a major pipeline system. However, the majority of the pipelines in the United States are located in the Southwest, connecting oil fields and refineries.

railroads for delivery

Railroads are still the workhorse of the U.S. transportation system. They carry more freight over more miles than any other mode. However, they account for less than 10 percent of transport revenues. They carry heavy and bulky goods—such as coal, steel, and chemicals—over long distances at relatively low cost. Because railroad freight usually moves more slowly than truck shipments, it is not as well suited Page 295for perishable items or those in urgent demand. Railroads are most efficient at handling full carloads of goods.

trucks for delivery

The flexibility and speed of trucks make them better at moving small quantities of goods for shorter distances. They can travel on almost any road. They go where the rails can't. They are also reliable in meeting delivery schedules, which is an essential requirement for logistics systems that provide rapid replenishment of inventory after a sale. 75% us products travel by truck

water for delivery

Water transportation is the slowest shipping mode, but it is usually the lowest-cost way of shipping heavy freight. Water transportation is very important for international shipments and often the only practical approach. This explains why port cities such as Boston, New York City, Rotterdam, Osaka, and Singapore are important centers for international trade.

drawbacks of private warehouses

Yet private warehouses can be expensive. If the need changes, the extra space may be hard, or impossible, to rent to others

Which of the following best describes the physical distribution customer service level?

It refers to how quickly and reliably a company can provide inventory to customers.

factors making distribution center more helpful

More competitive markets, improved technology, coordination among firms, and efficient new distribution centers are bringing big improvements to the PD area. Yet the biggest challenges may be more basic. Physical distribution activities transcend departmental, corporate, and even national boundaries.

It has been estimated that, on average, _______ of a firm's total carbon emissions come from transportation.

more than 50 percent

Just-in-time delivery systems or (JIT)

reliably getting products there just before the customer needs them. key advantage of JIT is that it reduces business customers PD costs, especially storing and handling costs. BUT if customer doesn't have backup inventory, there's no security blanket if a supplier's delivery truck gets stuck in traffic, there's an error in what's shipped, or there are any quality problems. Thus, a JIT system requires that a supplier have extremely high quality control in every PD activity.

electronic data interchange (EDI)

—an approach that puts information in a standardized format easily shared between different computer systems. With EDI, a customer transmits his or her order information directly to the supplier's computer. The supplier's computer immediately processes the order and schedules production, order assembly, and transportation. Inventory information is automatically updated, and status reports are available instantly. The supplier might then use EDI to send the updated information to the transportation provider's computer.

Inventory refers to the ____ of goods being stored by a firm.

amount

environmental affects from transportation

Marketing managers must be sensitive to the environmental effects of transportation decisions. Trucks, trains, airplanes, and ships contribute to air pollution and global warming; estimates suggest that on average more than half of a firm's total carbon emissions come from transportation. There are other problems as well. For example, a damaged pipeline or oil tanker can spew thousands of gallons of oil before it can be repaired. rail is the cleanest way to move freight long distance

factors that may influence the customer service level (at each level in the channel).

Most important aspects of customer service depend on target market needs. Xerox might focus on how long it takes to deliver copy machine repair parts once it receives an order. The service level might be stated as "we will deliver 90 percent of all emergency repair parts within 24 hours." This requires that common parts be available on the service truck, that order processing be very fast, and that parts not available locally be sent by airfreight. Supplying this service level will affect the total cost of the PD system. But it may also beat competitors.

Dell Computers needs parts to be delivered when scheduled in the manufacturing process of their laptops computers. If the parts are late, it makes it a challenge for Dell to deliver the laptops to customer as promised. In regards to this issue, Dell is primarily concerned with the _____ that its suppliers have to offer.

customer service level

In coordination efforts of physical distribution, ______ sharing is most important in finding solutions to the problems that tend to arise.

information

______ warehouses are characterized by high control and very high fixed investment.

private

Efficiency in distribution centers is primarily based on

technology

The lowest-cost, but also the slowest, method of shipping heavy freight is by ______ .

water

customer service level

customers don't care how there item gets delivered. rather, they think about: the physical distribution "customer service level"—how rapidly and dependably a firm can deliver what they, the customers, want.

Selecting a Physical Distribution (PD) system

"total cost approach" involves evaluating each possible PD system and identifying all of the costs of each alternative. This approach uses the tools of cost accounting and economics. Costs that otherwise might be ignored—like inventory carrying costs—are considered. The possible costs of lost sales due to a lower customer service level may also be considered.

Which of the following statements about transporting costs are true?

- Costs associated with transporting can influence which target markets a company can serve - Transporting costs can in some cases significantly increase costs.

What are two benefits of containerization?

- Increased protection of goods - Simplified handling process

True or false: Storing only affects the activities of the firm holding the goods.

False

storing costs

Different kinds of cost are involved. Car dealers, for example, must store cars on their lots—waiting for the right customer. The interest expense of money tied up in the inventory is a major cost. In addition, if a new car on the lot is dented or scratched, there is a repair cost. If a car isn't sold before the new models come out, its value drops. There is also a risk of fire or theft—so the retailer must carry insurance. And, of course, dealers incur the cost of leasing or owning the display lot where they store the cars. The cost of physical handling is a major storing cost. Goods must be handled once when put into storage and again when removed to be sold. To reduce these costs, modern one-story buildings away from downtown traffic have replaced most old multistory warehouses. They eliminate the need for elevators and permit the use of power-operated lift trucks, battery-operated motor scooters, roller-skating order pickers, electric hoists for heavy items, and hydraulic ramps to speed loading and unloading.

airplanes for delivery

The most expensive cargo transporting mode is airplane—but it is fast! Airfreight rates are on average three times higher than trucking rates—but the greater speed may offset the added cost. High-value, low-weight goods—such as high-fashion clothing and parts for the electronics industry—are often shipped by air. Perishable products that previously could not be shipped are now being flown across continents and oceans. Flowers and bulbs from Holland, for example, now are jet-flown to points all over the world. And airfreight has become very important for small emergency deliveries, like repair parts. But airplanes may cut the total cost of distribution Using planes may reduce the cost of packing, unpacking, and preparing goods for sale and may help a firm reduce inventory costs by eliminating outlying warehouses. Valuable benefits of airfreight's speed are less spoilage, theft, and damage. Although the transporting cost of air shipments may be higher, the total cost of distribution may be lower. As more firms realize this, airfreight firms—such as DHL Worldwide Express, FedEx, and Emery Air Freight—have enjoyed rapid growth.

transportation in developing countries

Transportation choices are usually not so good in developing countries. Roads are often poor, rail systems may be limited, and ports may be undeveloped. Local firms that specialize in logistics services may not exist at all. Even so, firms that are willing to invest the effort can reap benefits and help their customers overcome the effects of these problems.

True or false: Public warehouses can provide all the services that a company's own warehouse can provide.

True

A common ethical issue for Internet retailers regarding physical distribution practices concerns _____.

communicating product availability