Download Research on the Integration of Modern Logistics and Service Marketing

Research on the Integration of Modern Logistics and Service
Marketing
SONG Xuqin1, XIANG Xin2
1. Shipping and Management Department, Guangzhou Maritime College, P.R. China, 510725;
2. School of Law, GuangDong University of Technology, P.R. China, 510090
[email protected]
Abstract: In recent days, Modern Logistics has attracted more and more attention. This paper has
discussed the conceptions of Modern Logistics and service marketing and analyzed the status quo of
China’s enterprises on Modern Logistics. And then the author has provided an integrated model of
Modern Logistics and service marketing and given some advice on this integration. Finally, the author
argued that it is essential to integrate Modern Logistics and service marketing. Logistical enterprises of
China should pay attention to the improvement of customer satisfaction and the quality of logistical
service and then they will gain the competency of survival and development in recent competition.
Keywords: Modern Logistics; Service marketing; Customer satisfaction
1 Introduction
With the development of China’s economy, Chinese progressive manufacturing industry needs
stronger logistics supports. The concept of modern logistics is a fast-paced, multi-faceted, value-added
supply chain service for business-to-business (B2B) on a worldwide scale.
However, the situation is expected to change and the logistics market is destined to grow much
larger over the next 5-6 years. Chinese logistics firms are also beginning to see the need to outsource
their supply chain activities to specialist third-party logistics whose services include warehousing and
transportation, supply chain management, distribution and inventory management, etc. We can see from
table 1 that the ratio of total logistics expenditure to GDP increased largely in the first half of 2006.
Table 1 Ratio of Total Logistics Expenditure to GDP since 1991 in China(%)
Year
Transportation
Storage expenses
Management
Total expenditure
expenses
expenses
of logistics
1991
13.3
7.5
3.2
24.0
1992
12.7
7.2
3.1
23.0
1993
12.8
6.6
3.0
22.4
1994
11.6
6.8
3.1
21.5
1995
10.6
7.4
3.2
21.2
1996
10.7
7.2
3.2
21.1
1997
10.4
7.4
3.3
21.1
1998
10.3
6.7
3.2
20.2
1999
10.6
7.3
3.2
19.9
2000
10.1
6.0
3.2
19.3
2001
9.9
5.9
3.1
18.8
2002
10.0
6.0
2.9
18.9
2003
10.4
5.9
2.6
18.9
2004
10.6
5.6
2.6
18.8
2005
10.2
5.8
2.5
18.6
first half of 2006
10.2
5.8
2.4
18.4
Source from: http://okokok.com.cn/Abroad/Class126/Class108/200612/114013.html
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We can get the material from the same website that in the first half of 2006, transport cost was
RMB 932.9 billion, rising 12.9% compared to the 1st half of 2005, and its growth rate up 0.8 by 0.8%,
which maintained almost the same as compared to the 1st half of 2005 with a proportion of 55.6% to the
total expense. The storage cost was RMB 531.4 billion, rising 18.6% compared to the 1st half of 2005,
and its growth rate ascending by 2.4%, the storage cost shared 31.7% of the total expense, ascending by
1.2% compared to the 1st half of 2005. Management cost RMB 214.4 billion, rising 13.2% compared to
the 1st half of 2005, and its growth rate increased by 0.2%, moreover, it shared 12.8% of the total
expense, but the proportion declined by 0.1% compare to the 1st half of 2005.
So the development of modern logistics in China is prosperous and it can contribute to Chinese
economic development.
2 Research on logistics
Logistics includes integrated planning, control and monitoring of all internal and external business
flows of goods and information. Logistics provide customer- and process-orientated solutions for
departments, companies, corporate groups, networks and virtual organizations (Baumgarten, 2003)
In most literatures, logistics means continue providing the right goods to the right places at the
right time. Logistics can be defined as integrated planning, control and monitoring of all internal and
external business flows of goods and information (Baumgarten, 2003). The role of logistics stretches
over the entire value chain, from supplier to customer. Goods and information of satisfying quality must
be available at the right time, at the right amount and at the right place (Bloech and Ihde, 1997). This
implies that the assignment of logistics in a company is to minimize costs and maximize the internal
service level for required goods and information. Simultaneously, buffer stocks and waiting times should
be kept at a minimum and none value-adding activities should be avoided and reduced.
Therefore, warehousing, transportation, handling, distribution, commissioning, packaging and
order processing are basic activities in most logistics flows (Klaus and Krieger, 1998). These
assignments derive from customer’s requirements along with product and value chain characteristics
(Bloech and Ihde, 1997).
Bloech and Ihde (1997) state that logistics services usually deals with systems containing flows of
objects or information, which origins from decisions made by other functional operations. According
to Bloech, Ihde (1997), Klaus, Krieger (1998) and Pfohl (2004b) logistics generally has an integrating
function in organizations. That is, logistics interfaces between functions within a company. Logistics are
seldom viewed as an upper management issue, but rather as a management tool for linking company
activities together with each other as well as with customers and suppliers. Therefore, a number of
researcher (Steinmüller, 1997; Pfohl, 1997, 2004a; Klaus and Krieger, 1998; Dieler, Jansen, Reising,
2002) stresses that depending on the importance of the link, logistics can be viewed as a core
competence or as none vital support for other functions. As a consequence, companies that see parts of
their logistics as none core competence may choose to outsource these activities.
3 Research on service marketing
Service marketing is the stretch of marketing. The concept of service marketing borrows from the
traditional concept of marketing. In other words, service marketing means identify your customers,
identify their needs, and combine the firm's resources to meet those needs (Andraski and Novack, 1996).
With the development of economy and improvement of people’s livelihood, service marketing
made a great progress after 70s last century. The concept of service marketing is very different from the
concept of marketing. The concept of service marketing is based on market and it performs activities
around market requirements. But service marketing is based on service and its activities include design
of products, production, advertisement, distribution and after service. The beginning of service
marketing is the time that the products are sold.
Service marketing pays much attention to innovation and differentiation. Modern logistics should
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provide better service to customers and gain more competitive advantages. So service marketing is very
important to logistics enterprise to develop.
4 Integration of modern logistics and service marketing
The logistics and service marketing integration activities typically involve the sharing of very
timely and very sensitive demand and sales data, inventory data, customer data and shipment status data.
Data sharing often involves a firm giving direct access to its computerized data bases to its supply chain
partners. Marketing focuses on demand creation through product, price, and promotion mixes whereas
logistics typically is more operationally focused on demand satisfaction, namely, getting the right
product to the right place at the right time.
Klaus and Krieger (1998) points out that logistics services are special in nature and they have
characteristics, which separates them from tangible products. A misconception is that services must be
immaterial and none value adding. As an action a service is just as immaterial as an action in a
production process. The result from a service can however be just as material as the result from a
production process, but in contradiction to the production process the result must not be material.
Moreover, services are most often value adding, for example logistics services can be value adding in
the way that they reduce costs for the buyer, or lead to better service and higher customer loyalty for the
buyer’s customers.
In most logistics firms, logistics and marketing are often separate and distinct from one another
with functional managers tending not to collaborate or coordinate activities (Flint and Mentzer 2000;
Johnson and Borger 1977; Murphy and Poist 1996; Stock 1990).
Figure 1 pointed out the model of the integration of logistics and service marketing and we can see
that after the integration the functions include customer service, package service, distribution
channel, ·information flow, service tracking and survey of satisfaction. These functions are more
sensitive to customers’ feelings.
Modern logistics
·transportation
·storage
·handling
·warehousing
·delivery
·package
·order processing
Integration
·customer service
·package service
·distribution channel
·information flow
·service tracking
·survey of satisfaction
Service marketing
·price
·promotion
·combination of product
·market survey
· process of service
assembling
·participants
Source from： Casanovas, A. & Cuatrecasas, Ll. Logística Empresarial. Ed. Gestion, Barcelona. 2001.
Figure 1 The functions of Modern logistics and service marketing
Participants are the most important element of the modern logistics. The logistics executive has the
responsibility to develop a culture for stellar performance from the individuals in the organization.
Logistics service outputs are intangible and can be difficult to sell. Logistics customers are not
consumers in the traditional sense but individuals internal to the firm as well as individuals in other
organizations. This means that these customers judge logistics performance on how it helps them
achieve their goals. This makes it extremely important that the logistics organization be close to its
customers, understand their needs, and help them be successful.
Effective logistics marketing embraces this fragility and uses it as the basis to drive the logistics
organization to excellence in the minds of its customers. Successful logistics organizations realize that
customers decide how important logistics is to the firm. A Council of Logistics Management study finds
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that the value of the logistics function is significantly enhanced through “the capability to integrate
product, information, and cash flows for decision-making purposes that link both internal and external
processes”.
Activities
of
modern logistics
Activities
of
service marketing
Competitive
advantages
External
environment
Figure 2 The integrated model of modern logistics and service marketing
To sum up, the integrated model of modern logistics and service marketing can be described as
figure 2. If a logistical enterprise want to gain more competitive advantages to get better performance,
integrated model is important. Logistics and service marketing are not two separated parts, and they
have close relation between each other. In practice, logistical firms should perform the integrated
activities during the operations.
5 Conclusions
Logistics and Marketing have intertwined histories as business disciplines (Zinn, 2000).
Logisticians and marketers must work together effectively to leverage service operations for competitive
advantage (Bartels 1983; Bowersox, Mentzer, and Speh 1995; Felton 1959; Mentzer, Gomes, and
Krapfel, 1989). Traditional logistics services would include order fill, on-time delivery, zero damage,
and accurate invoicing. These are how firms competed with one another and gained competitive
advantage. This is no longer the case. Today, these logistics services can be called "reliability" services.
Customers expect 100 percent conformance at all times. Doing them well will not gain a firm business
but performing them poorly will cost a firm market share. For example, Nabisco Integrated Logistics
measures case fill by product family on a monthly basis and calculates lost revenue when case fill falls
below 100 percent. This helps communicate to upper management the impact of logistics service on the
firm's bottom line. It also helps justify investments in logistics resources to improve basic logistics
services (Andraski and Novack, 1996). Customer requirements will drive the service, or product,
offerings from logistics. Customers seem to be sensitive in their requirements and hence there is a
possibility to segment the logistical market and to use logistic services in order to achieve competitive
advantage. So managers of logistics enterprises should pay more attention to the importance of
integrating marketing and logistics activities both marketing and logistics functions play an important
role in creating satisfied customers. Because both marketing and logistics functions play an important
role in creating satisfied customers. To the extent that improved integration leads better customer service,
reduced costs, more satisfied customers, or increased profits, the findings of this research can help
managers enhance their performance.
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This paper sets up an integrated process model of logistics and service marketing. The
differentiation based on market segments and customer demands analysis and elaborates the design of
logistics service differentiation and the total cost service analysis. Business is becoming more aware of
the importance of customer service in customer satisfaction and retention. Customer service must be
positioned as something that ultimately depends on successful management of both organizational and
final consumer relationships across the supply chain. Unfortunately, traditional marketing curriculums
study the delivery of customer service as a static and isolated event rather than as a function of the total
business enterprise. Following suggestions for more integrative curriculums, the authors develop a
course that positions customer service as an outcome of the total system and uses concepts from various
research streams to promote successful delivery of customer service. Specific suggestions for course
content and pedagogy are presented. The integration of logistics and service marketing is a key to
effective supply-chains.
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