Developments and trends in logistics - Marketing Management

A number of developments and trends in the area of logistics have implications for the marketer with regard to the design and operation of their marketing logistics systems. Some of the more important of these developments and trends are now outlined.

Information Technology and logistics

As we have seen, the impact of developments in IT on marketing management has been profound. This impact is particularly pronounced in the area of logistics with IT acting as an enabling factor in more effective logistics management. There are a number of major trends that are having an impact on the use of IT in logistics. Integration and flexibility are important. Advance transaction processing systems which enable management to monitor inventory at all locations throughout the organization are commonplace. The level of flexibility and sophistication in software is continually being enhanced, enabling organizations to manage the whole supply chain system to give them competitive advantage.

We have seen developments such as Electronic Data Interchange (EDI) where customers and suppliers interact through an on-line system to conduct transactions. EDI is not a new concept, but increasingly the emphasis on the way it is being used is moving from one-off tactical benefits to strategic benefits i.e. its use for developing closer supply chain relationships. Suppliers and customers are now able to work more closely for mutual benefit by co-ordinating integration. A series of developments in IT has enabled a totally paperless supply chain.

Much IT hardware is small, fast and cheap enabling it to be implemented in parts of the logistics process that were previously never considered because of space and cost considerations, e.g. the use of hand-held bar code scanners. Various developments such as point of sale terminals, satellite tracking, electronic funds transfer and EDI systems have resulted in substantial gains in logistical efficiency. Another area of IT development that has affected logistics is developments in mobile communications.

The growth of cellular technology-based mobile voice communications and developments in digital service provision offer the possibility of voice and data services, and more one-to-one contact has led to better client–supplier relationships. Developments in computing power and software systems have enabled marketers to cope with the complexities of managing interactions and trade-offs.

Channel partnerships/supply chain management

The earlier example of Toyota illustrates that the notion of developing channel partnerships with a view to managing the overall supply chain is not new. However, companies like Marks & Spencer have developed effective channel partnerships and supply chain management; Toyota is different, in that they work to 4-hour tactical time windows for delivery of critical supplies whereas Marks & Spencer’s time windows are longer and less critical from an operations point of view. In part, this is linked to the application of IT inasmuch as this technology facilitates the complex management and exchanges of information required for effective channel partnerships and supply chain management.

Channel partnerships take many forms, ranging from simple information sharing and joint facilities like warehousing through to joint management of the whole supply chain by its members. Supply chain management includes every facet of the supply chain from the manufacturer through to raw material suppliers. The demand chain refers to the chain from end customers to the manufacturer. The supply chain plus the demand chain is known as the value chain. As one would expect, much greater trust between different members of the supply chain is required together with exchanges of information. This is one reason for the growth of the relationship marketing approach. As a result of supply chain management, companies use a smaller number of suppliers so these must be 100 per cent reliable.

The output of the logistics system is the level of service received by the customer, so effective supply chain management must reflect this. An interesting further development that reflects this outputbased view is the growth of the concept of enhanced consumer response (ECR). Initially developed in the USA for manufacturing industry, ECR represents the application of total supply chain management to the retailing sector with Asda supermarket group being one of the first companies in the United Kingdom to adopt this. By working in close partnerships with other members of the supply chain, not only as regards logistics, but also in areas like promotion, product development and packaging, they have found that non-essential costs can be cut out of the system.

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