IGNOU : M.COM : IBO 5 : UNIT 1 : Q - 3. Why do you regard logistics as an important activity of marketing? Explain it with special reference to international trade.

 

Ans. IMPORTANCE OF MARKETING LOGISTICS

The importance of a logistics system lies in the fact that it leads to ultimate consummation of the sales contract. The buyer is not interested in the promises of the seller that he can supply goods at competitive price but that he actually does so. Delivery according to the contract is essential to fulfilling the commercial and legal requirements. In the event of failure to comply with the legally penalized, if the sales contract so specifies. There is no doubt that better delivery schedule is a good promotional strategy when buyers are reluctant to invest in warehousing keeping higher level of inventories. Similarly, better and/or timely delivery helps in getting repeat orders through creation of goodwill for the supplier. Thus, as effective logistics system contributes immensely to the achievements of the marketing objectives of a firm. It creates time and place utilities in the products and thereby helps in maximizing the value satisfaction to consumers. By ensuring quick deliveries in minimum time and cost, it relieves the customers holding excess inventories. It also brings down the cost of carrying inventory, material handling, transportation and other related activities of distribution. In nutshell, an efficient system of physical distribution has a great potential for improving customer service and reducing costs.

The ready acceptance of the dynamics of marketing logistics has been due to a number of factors, including :

i) Technological advancement in the fields of information processing and communication

ii) Technological development in transportation and material handling

iii) Change in the attitude towards the total cost approach rather than direct cost approach.

As a result of these developments, the decision maker has a number of choices to work out the most ideal marketing logistics system. Essentially, this system implies that people at all levels of management Link and act in terms of integrated capabilities and adoption of a total approach to achieve pre-determined logistics objectives. Logistics is also important on the global scale. Efficient logistics system throughout the world economy are a basis for trade and a high standard of living for all of us. Lands, as well as the people who occupy them, are not equally productive. That is, one region often has an advantage over all others in some production Speciality. Ancient logistics system allows a geographical region to exploit its inherent advantage by specializing its productive efforts in those products in which it has an advantage and by exporting these products to other regions, The system allows the products landed cost (production plus logistics cost) and quality to be competitive with those from any other region. Common examples of this specialization have been Japan's electronics industry, the agricultural, computer and aircrafts industries of United - sates and various countries dominance in supplying raw materials such as oil, gold, bauxite, and chromium.

The other reasons why logistics has gained importance in the international trade can be summarized as follows:

1. Any companies are restructuring their products on a global basis. Some manufacturers are centralizing production to gain economies of scale.

2. Product lines are proliferating. More and more product line variety is needed to satisfy the growing range of customer tastes and requirements, and stock levels in both field and factory inevitably rise.

3. Product life cycles are contracting. Companies that have gone all-out to slash costs by turning to large scale batch production regularly, find themselves saddled with obsolete stocks and are unable to keep pace with competitors' new-product introductions.

4. In many industries, the value added by manufacturing is declining as the cost of materials and distribution climbs.

5. The balance of power in distribution chain is shifting from the manufacturers to the trader.

6. The advantage of low-cost, high volume data processing and transmission is revolutionizing logistics control systems. Because of new technologies, managers can now update sales and inventory planning faster and more frequently, and factories can respond with more flexibility lo volatile market conditions.