LOGISTICS AND SUPPLY CHAIN MANAGEMENT

MARKETING AND LOGISTICS INTERFACE

What is the Marketing–Logistics Interface?

The Marketing–Logistics interface refers to the point where marketing (which creates customer
demand and expectations) meets logistics (which fulfills that demand through product delivery,
inventory management, and distribution).

Importance:

 Customer Satisfaction: Timely delivery, order accuracy, and product availability are often
as important as the marketing message.
 Brand Trust: A disconnect (e.g., promoting "next-day delivery" when logistics can't
support it) damages credibility.
 Efficiency: Coordinated planning reduces stockouts, overstock, and last-minute shipping
costs.
 Agility: Fast-moving markets require joint responsiveness to changes in demand or
supply chain disruptions.

Benefits of Strong Marketing–Logistics Integration

 Improved order fulfillment rates

 Higher customer satisfaction & retention
 Reduced inventory and logistics costs
 Faster response to market changes
 Enhanced brand image and loyalty
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How They Work Together

Area Marketing Role Logistics Role

Predict customer interest based on Prepare inventory and shipping plans

Demand Forecasting
campaigns accordingly

Promotes availability through ads and

Product Availability Ensures stock is distributed where needed
channels

Promotions & Plans product launches and sales Coordinates warehousing and delivery to
Launches events meet demand

Communicates delivery timelines,

Customer Service Fulfills delivery promises, manages returns
offers

Considers logistics costs in pricing Shares cost data for accurate pricing
Pricing
strategies models

CUSTOMER SERVICE AND CUSTOMER RETENTION

How Customer Service Drives Retention?

Service Strategy Retention Benefit

Fast response time Reduces frustration, builds trust

Personalized interactions Makes customers feel seen and appreciated

Let’s customers get help where they’re most
Omnichannel support
comfortable
Proactive support (e.g., follow-ups, status
Prevents issues before they become complaints
updates)
Easy returns/refunds Increases confidence in buying again

Feedback loops Shows you listen and act on customer input

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WHAT IS THE BOTTOM LINE?

The bottom line is a company’s net income, the final figure after all expenses are subtracted
from total revenue. It represents profitability and is a key measure of financial health.

How Logistics Affects the Bottom Line

Efficient logistics directly improves the bottom line by:

Logistics Area Impact on Bottom Line

Transportation Management Reduces shipping costs, fuel expenses, and delivery delays
Prevents overstocking (tying up capital) and understocking
Inventory Management
(lost sales)

Warehouse Efficiency Lowers labor costs and speeds up order fulfillment

Order Accuracy Reduces returns, refunds, and customer service costs

Avoids delays, minimizes waste, and improves vendor
Supply Chain Coordination
relationships
Technology Adoption (e.g.,
Cuts operational costs and increases throughput
automation)

LOGISTICS AND SHAREHOLDER VALUE

What is Shareholder Value?

Shareholder value refers to the returns delivered to shareholders in the form of dividends and
increased stock price. It’s driven by:

 Profitability
 Growth
 Efficiency
 Risk reduction
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How Logistics Enhances Shareholder Value

Here’s how logistics impacts the key drivers of shareholder value:

Value Driver How Logistics Contributes

Enables faster time-to-market, better product availability, and superior

Revenue Growth
customer service driving sales.

Reduces warehousing, transportation, and inventory costs, directly

Cost Efficiency
improving operating margins.

Customer Satisfaction & On-time, accurate deliveries improve loyalty, repeat business, and reduce
Retention customer acquisition costs.

Efficient logistics systems (like just-in-time inventory) minimize capital tied

Asset Optimization
up in stock and real estate.

Resilient supply chains reduce disruption risks, protecting revenue and

Risk Management
reputation.

Adaptive logistics systems enable businesses to pivot quickly, capture

Innovation & Agility
market opportunities, and scale smoothly.

LOGISTICS COST ANALYSIS

Logistics cost analysis is the process of evaluating all costs associated with the movement,
storage, and handling of goods within the supply chain. The goal is to identify cost-saving
opportunities, improve operational efficiency, and understand the impact of logistics on overall
profitability.

Areas of Logistics Costs

1. Transportation Costs

 Freight charges (shipping goods via air, land, or sea)

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 Fuel costs for transportation

 Third-party logistics (3PL) provider fees
 Transportation management system (TMS) software costs

2. Warehousing Costs

 Rent/lease of warehouse space

 Labor costs for managing the warehouse (inventory management, order picking, packing)
 Inventory handling and storage (including shelving, bins, etc.)
 Utilities (electricity, heating, and cooling in warehouses)

3. Inventory Costs

 Holding costs (interest, insurance, and depreciation of inventory)

 Stockouts (cost of lost sales, expedited shipping for urgent orders)
 Obsolescence costs (e.g., for perishable goods)

4. Order Fulfillment Costs

 Packaging (materials and labor for packing)

 Shipping labels and documentation
 Order processing costs (labor, technology, and administrative costs)

5. Returns Management Costs

 Reverse logistics (handling product returns, inspecting, and restocking)

 Transportation of returned goods

6. Administrative Costs

 Technology and software systems (e.g., Warehouse Management Systems (WMS),

Transportation Management Systems (TMS))
 Customer service and tracking systems
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Tools & Techniques for Analyzing Logistics Costs

1. Cost Breakdown Analysis: Divide logistics costs by categories (transportation,

warehousing, etc.) and analyze each one for cost-saving opportunities.
2. Activity-Based Costing (ABC): Allocate costs to specific activities (e.g., packing,
handling, transportation) to identify inefficiencies and opportunities for cost reduction.
3. Logistics Performance Metrics: Use KPIs like delivery times, cost per unit, and on-time
delivery rates to measure logistics performance and guide improvement efforts.
4. Benchmarking: Compare your logistics costs with industry averages or best practices to
identify areas where you may be overspending.
5. Scenario Analysis: Run "what-if" scenarios to analyze how changes in transportation
methods, storage techniques, or order volume affect logistics costs.

Benefits of Logistics Cost Analysis

 Cost Reduction: Pinpoint where unnecessary expenses are and optimize them.
 Increased Profitability: Reducing logistics costs improves the overall profit margin.
 Competitive Advantage: Streamlining logistics gives businesses the flexibility to offer
better pricing or faster delivery, enhancing customer satisfaction.
 Better Budgeting: Accurate logistics cost analysis allows for more effective budgeting
and forecasting.

TOTAL COST ANALYSIS

Total Cost Analysis is a comprehensive evaluation method that includes all logistics and supply
chain-related expenses to determine the true cost of a product or service through its entire
lifecycle, from procurement through distribution to end consumer.

TCA helps businesses understand the trade-offs between cost-saving measures (e.g., cheaper
transportation) and the impacts those decisions may have on customer service, delivery time, or
inventory levels.

Elements of Total Cost Analysis (TCA)

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TCA covers the full spectrum of costs in a logistics and supply chain process:

1. Procurement Costs
o Cost of raw materials, goods, and parts.
o Supplier sourcing and negotiation expenses.
o Supplier management and evaluation costs.
o Inbound freight (from supplier to warehouse or manufacturing).
2. Transportation Costs
o Freight charges (shipping, airfreight, ocean freight).
o Fuel costs (for road, rail, air, or sea transport).
o Third-party logistics (3PL) or transportation management system (TMS) fees.
o Transportation network optimization (route planning, carrier selection).
3. Inventory Costs
o Holding costs (storage, warehousing, insurance).
o Obsolescence costs (for perishable goods or seasonal products).
o Stockout costs (missed sales or expedited shipping).
o Inventory management software (WMS, ERP costs).
4. Warehousing Costs
o Storage fees (rental costs for warehouse space).
o Labor costs (for warehouse operations, picking, packing).
o Material handling (forklifts, shelf organization).
o Utilities (heating, cooling, and maintenance of warehouse).
5. Order Fulfillment Costs
o Packaging (materials and labor).
o Order picking and handling (time and resources).
o Shipping costs (final delivery to customer).
o Returns management (reverse logistics, handling of returns).
6. Customer Service Costs
o Service inquiries (customer support operations).
o Returns and refunds (costs associated with processing returns).
o Communication tools (customer service platforms, CRM systems).
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7. Supply Chain Risk Costs

o Contingency expenses (due to disruptions, stockouts, delays).
o Compliance costs (regulatory costs, customs fees).

How Total Cost Analysis Works?

TCA requires gathering data on all logistics-related costs, then analyzing how each component
contributes to the overall cost structure. The aim is to identify areas where savings can be
achieved without negatively impacting other aspects like delivery time or customer satisfaction.

1. Data Collection: Gather detailed data on every step of the supply chain (procurement,
transport, warehousing, fulfillment, etc.).
2. Cost Categorization: Break down the data into direct and indirect costs:
o Direct costs: Freight, warehousing, labor, etc.
o Indirect costs: IT systems, supplier management, customer service, etc.
3. Cost Allocation: Assign each cost to the relevant part of the supply chain. For instance:
o Inbound logistics: Transportation from supplier to warehouse.
o Outbound logistics: Transportation from warehouse to customer.
4. Evaluation: Assess the impact of each cost on overall performance. For example:
o How much does faster transportation increase costs?
o How do longer storage times or inefficiencies in warehousing affect profitability?
5. Scenario Analysis: Test different scenarios, such as using a lower-cost carrier,
consolidating shipments, or implementing automation in warehousing, to evaluate
potential savings and trade-offs.