Page 392 - Introduction to Business

366 PART 3 Marketing

Determine the percentage of sales accounted for by differ-
ent types of products.
Use computers to improve information flow and accuracy.
Use automated, computer-driven retrieval systems to
handle goods instead of relying exclusively on people
and forklift trucks. Once the acquisition costs of these
systems are recovered, companies will enjoy much lower
operating costs.

Providing adequate levels of customer service at the
lowest possible cost is a main responsibility of logistics
management. This can be achieved by ensuring that orders
are received on time, the time required to process orders
is minimized, emergency and out-of-stock shipments are
provided, frequent and small-size shipments are made, and
that the status of orders is made available to customers.
Such concessions to customers increase a company’s costs,
but the company hopes that increases in revenue will occur
because the improved level of customer service will result
in obtaining more customers and retaining a higher per-
centage of them. Academy is a large retailer of sporting
goods and apparel located primarily in Texas. The company
was experiencing significant growth, so it felt expansion
into Louisiana, New Mexico, and Oklahoma was justified.
The problem was that many of these stores would be
greater than 300 miles from the Houston headquarters—
300 miles being the greatest distance its current logistics
system could replenish inventory within 24 hours. A new,
An L.L. Bean catalog warehouse
uses conveyors and computers to $6 million logistics operation was developed in order to overcome this obstacle to
store and move merchandise. expansion.
A main trend in logistics management is for companies to outsource all or part
of their logistics operations to third parties. These specialized third parties may be
able to perform these operations more efficiently than manufacturers, reducing
their costs. Manufacturers also benefit because they are freed to concentrate more
on their core competencies—activities they are skilled at doing, such as R&D, pro-
duction, and marketing.

International Challenges. When a company decides to begin selling its
products overseas, it encounters a new set of variables that affect its logistics oper-
ations. In countries like Italy and Japan, there will be more distribution layers than
in the United States. Often, these wholesalers and retailers will be small inefficient
operations. These factors result in more complicated and costly logistic operations.
Poor logistics infrastructures are frequently the norm; bridges, tunnels, roads,
ports, railroads, and airports may be of poor quality. Foreign buyers are more likely
to accept longer delivery times than domestic customers, but once the buyer and
seller agree on delivery dates and times, buyers expect deliveries to be on time.
Because buyers may be separated from sellers by thousands of miles—making it
difficult to deal with the various problems that may arise—international buyers
demand that orders received are complete (no items missing), accurate (the correct
products are received), and in good condition (not broken).
The greater distance required for international shipments results in sellers hav-
ing to put more emphasis on the package designed to protect products in transit.

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