There is a definite relationship between marketing and logistics
MARKETING AND LOGISTICS HAVE MUCH IN COMMON
Prof. E.F. RICCIO
There is a definite relationship between Marketing and Logistics. In fact, the two professions are really inseparable, both in theory and in function. Before we examine this hypothesis, however, I suggest it will be a good idea to first clarify just what the profession of Logistics entails and how that profession shares some of the concerns of its Marketing colleagues. BASIC LOGISTICS Firstly, it must be made clear that although LOGISTICS, until recently, has been treated during the modern era as simply a branch of military knowledge, the fact is logistics knowledge, problems and techniques have been with us since the earliest cave man hollowed out his log in order to be able to transport himself along rivers and lakes. The story of Noah and his Ark brings to mind the Logistics specialty of transporting live animals today, and one may imagine that at least the interior of modern ocean going vessels and aircraft designed for this purpose may well resemble the interior of Noah’s ark. There are several Biblical examples of applied Logistics, or even the lack of logistics forethought. For example the exodus from Egypt led by Moses. But we may go beyond the biblical references and find that right up to, and including, the modern era, Logistics was in the forefront of human development.
Going back to the earliest pre-history, one finds that when our pre-historic ancestors moved from mere subsistence farming to exchange, or barter, agriculture, the need for some sort of organizing structure also came into existence. In order to effect exchanges of surplus crops, at least transport had to be arranged and made feasible. Vehicles were needed to carry the produce from one place to another. Was this the impetus behind the development of dug-out canoes and perhaps even the invention of the wheel?
Perhaps the earliest “carrier” was, indeed, a carrier, i.e. a human who was able to carry the produce on his back, or even perhaps precariously balanced on his/her head. But how? Some sort of packaging would have been necessary else the human carrier would have been limited to carrying only what he could hold in his hands. So, which came first we can only guess, but our pre-historic ancestors faced the necessity of inventing both vehicles and packaging. As these grew in size and capacity, we can envision that some sort of lifting, or materials handling, equipment became necessary. By the time of the ancient Egyptian civilization, this development must already have occurred, and thus enabled the Egyptians to undertake the successful building of the pyramids and the moving of the very heavy (estimated at 2.5 tons each) and bulky building materials used
in those undertakings by moving the blocks along a circular ramp which had been constructed around the pyramid site. We note that Archimedes (287-212 B.C.) discovered the principles of leverage in the second century B.C.
Along with mobilizing large numbers of people for purposes of construction, there developed mass armies; large numbers of men mobilized and moved from place to place for purposes of conquest or defense. Probably Genghis Khan was the first master of the art of military logistics. He successfully developed the highest skills in living off the land. This was the principle method of military logistics until the early 20th century. Ghengis Khan, Vladimir of Kiev, Napoleon, Sherman, Grant, and many others all lived off the land during their campaigns.
With modern warfare, living off the land became unsatisfactory. Napoleon and Bismarck together destroyed the medieval concept of warfare being a trade to be engaged in only by the nobility. Concepts of total war, envisaged by Karl von Clausewitz in “ON WAR,” put entire populations into battle; either at the battle front or at the home front - everyone was in the war. One result on the battlefield itself, was that there were too many men. Neither the land nor the conquered populations could feed them, let alone re-supply and re-arm them. In fact, during WW I and before US entry into the war, the Germans allowed an American charitable organization to supply food and medicines to the Belgian population in occupied areas. This may not have been motivated entirely by charitable considerations. This aid effort permitted the Germans to use locally grown food stuffs for their own army while the U.S. fed the population which was needed to grow the food.
With the coming of the modern era, after the renaissance period, commerce began to spread beyond feudal and later national boundaries. Goods, however, had to travel in caravan for the safety of both the goods and the merchants. Although different in goals and intensity, the traveling army and the traveling merchant caravan had many logistic features in common,
Both had to use transport. Horses, mules, camels, oxen; whatever animal was able to carry a man and/or pull a vehicle containing supplies or trade goods. The animals had to be fed. If there was insufficient grass with which to feed them en route, then food had to be carried - by even more animals, which also had to be fed.
The towed vehicles also had to be maintained during the march. Roads were not very good and vehicles were of wood and iron construction and vulnerable to breakdown. This meant men and spare parts capable of repairing the vehicles had to be in the column. So, more men, more supplies to feed them, more animals and more food for them.
You see a never-ending cycle in which the more assets a military or commercial column carried, the more liabilities that column incurred, and the more liabilities incurred, the more the logistics function was changed and expanded. Eventually, the traveling army's baggage train was far larger than the artillery or front line train. Likewise the commercial
caravan’s support elements exceeded in size the goods haulage elements.
But at the same time, some people were experimenting or inventing better ways to build wagons and other implements needed by either the military or commercial caravan. Among other such inventions was the use of stirrups when riding a horse. Imagine the great improvement in individual transport resulting simply from the fact of being better able to remain on the horse once mounted!
These basic problems still exist, even to the extent of space travel: How much load can a vehicle, or animal, carry? How to fuel the vehicle (or animal)? How to keep the vehicle self-sustaining? How to accomplish the basic goals of logistics?
Examine the recent history of the space station MIR and see how difficult it is to keep something operating on a self-sustaining basis.
I myself was faced with this exact problem upon my arrival in Ukraine in 1994; how to keep a motorized caravan carrying humanitarian aid materials from Germany into Ukraine, as far east as the Don Bas, moving. It was a relatively easy problem to solve as long as the caravan was in the territory formerly known as West Germany, but from there throughout the territory formerly included in the Soviet bloc, maintenance and re-supply was a serious problem. Where were the automotive service stations which are so common in the west? How do we re-fuel the vehicles en route? How do we feed the drivers en route? How do we take care of necessary and unexpected repairs? Those were only a few of the logistics problems which had to be anticipated and solved.
The solution was that the caravans had to be self-sustaining; there was no outside support available. For more than a few centuries Logistics, whether the word was used or not, was deemed by most people, even the military, to consist primarily of transport of armies from one place to another. The word itself came into general use, at least in the military, during the Napoleonic age, when the word was subjected to precise definition for the first time. This effort was made by one Antoine-Henri Jomini, a well-known French military thinker and writer. According to Jomini, the word derived from the 18th century French military title: major general des logis,
the officer responsible for administrative arrangements for marches, encampments and troop quarters (logis
). This delineation of Logistics duties matched those of the Prussian counterpart of the day, the Quartiermeister.
Even Jomini’s basic approach to Logistics went beyond the mere movement of armies. In order to move armies, one had to have roads along with the means to feed the army en route and to re-supply the army in order to replace expended ammunition and gun powder. All of these concerns and their solutions became part of the Logistics function. 2 (ENCYCLOPAEDIA BRITTANICA, vol. 29 WAR, THEORY AND CONDUCT OF).
In the modern era, the military column, as well as the civilian enterprise, face even more
complex problems of logistics with much of the materials required by both being
consumable, and thus timely (rapid and usable) replacement is vital. The materiel used
today is a far-cry from the bundled arrows which supplied the Normans at the battle of
Hastings in 1066, or the wooden cart wheels used by the traveling merchant in the Middle
Ages. Now such materiel is very heavy, very technical and technologically tender during
transport. It cannot be put on the back of a camel but often requires very special and
scarce vehicles or rail cars for transport.
Of course, we should not overlook the very old military uses of Logistics. For many
decades, the civilian use of Logistics was totally overlooked by the world community in
favor of its military applications. Now there is a constant interchange of techniques and
technology between the military logistician and the commercial logistician.
But around 1900 the civilian use of Logistics came out of hiding. Notions of distribution
were expanded so as to include “physical distribution,” i.e. transportation and its
concomitant channels. In reality, it was the marketing profession which brought concepts
of Logistics into the world of civilian business. Among other incremental steps in
Logistics, developed by marketing people, was the realization that demand was not only a
function of purchasing power, or ability to purchase, but also reflected desire. At the
same time, advertising and salesmanship were demonstrating that desire could be molded
by factors other than the mere existence of supply.
The early development of commercial Logistics, then, constituted in reality, an extension
of the marketing discipline. As time went on, however, Logistics concepts grew to the
extent that Logistics became an independent, though complimentary, discipline. Even
now it is true that Marketing people and Logisticians share many ideas in common and
work together on many joint projects. In fact, many institutions of higher education,
world-wide, include a course in Logistics in their Marketing major. Some marketing
departments even play host to the one or two Logistics courses thus required.
Over time, both disciplines have come to recognize a certain division of labor in the
business world, with each function providing one or more customer satisfactions, or
utilities. For example, manufacturing provides form utility, Logistics provides place and
time utility, and marketing provides possession utility. The opinion seems to be rather
general by now that the Logistics contribution to customer satisfaction is not limited only
to delivery of product, but includes as well all of the VALUE ADDED capabilities of the
Logistics activity. PRICE:
Of course Logistics costs have a strong bearing on the final selling price of a
product, but two important questions must be asked: what are the logistics costs, and are
they under control? Certainly, the direct, mile per mile, or “pure” freight costs are part of
the calculation, but in Logistics we prefer to look at the TOTAL COST of Logistics.
3 Bartels, Robert, HISTORY OF MARKETING THOUGHT 2d edition (1976). 4 Lambert, Douglas M. and James R. Stock, STRATEGIC LOGISTICS MANAGEMENT (Boston, Mass.: Irwin McGraw-Hill, 3rd ed., p. 9 (1999))
Thus we would include, for purposes of comparison, the total cost of holding inventory
and, as well, the cost of money while it is frozen in a large inventory holding and, as well,
the cost of being out of stock.
All of the foregoing have a bearing on, and are affected by, marketing interests and
Perhaps one of the most striking examples of Logistics in the service of good marketing,
is found with those firms which distribute furniture in “knocked down,” i.e.
disassembled, form. The ramifications of this strategy in the minds of consumers are far
reaching indeed. PRODUCT:
As to product decisions, again the Logistician on the team can be of more
help than one might at first expect. Such issues as type and bulk of consumer packaging
(usual marketing issues) may impinge directly on the pure freight costs of distribution
and thus warrant input from the Logistics department. Again, think about the sellers of
“knocked down” furniture. PROMOTION:
Problems of promotion and their relation to the Logistics Department
are too numerous to recount in full. They most often, but not exclusively, concern the
frequent running of a major promotion by the sales department without informing
Logistics and production that a large supply of product would be needed at a specific
time period in the near future. The result of these occurrences is usually a failure of the
promotional effort due to lack of product at the right place, at the right time.
Even the design and implementation of a production scheme may invite participation of
the Logistics department. The Viagra experience provides a well known and useful
illustration of how the close relationship among the functional departments of a firm can
be profitable and useful in avoiding disaster.
Issues of Place are a bit more ambiguous than the other utilities as Place
includes issues of both transactional and physical distribution. The transactional
decisions usually involve a decision as to whether a manufacturer will deal directly with
retailers or deal with middle-men only.
Serving the market through middle-men can work out relatively easily in respect of
domestic market opportunities, but on the international level such an arrangement can
produce a variety of intractable problems.
We might make these issues a bit clearer if we first understand that issues of Place are not
limited to matters of pure transport, but rather to matters of the time the product spends
locked within the delivery pipeline. If we ask how long does it take from the time the
buyer decides to buy and the time the buyer actually receives the product and is able to
offer it for sale, we might be a bit shocked. Logistics provides the customer satisfaction
as regards issues of PLACE, but it does not perform this function solely by making
5 Riccio, “The Logistics/Marketing Interface” SIATRIBTUION & LOGISTICS, Kiev, February, 2004
delivery, but rather by managing and expediting everything which affects delivery beginning with the time it takes a buyer to decide to buy, and all activities which follow that decision up to and including final delivery. So, you see a close relationship between both Logistics and marketing is a necessary requirement for the firm which intends to perform with maximum efficiency, in providing value added service to its customers. SEE PGE 10 FOR A SLIDE. Lambert PGE 42 SLIDE
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