108 / 188
106
15-30%. Altogether these logistics costs (including purchasing costs) add up to 2/3 of
the turnover of an average industrial company.
The developing information control opens new possibilities also into co-
ordination and combining of the transportation both in the companies and between
the companies. The companies must look if the transportation costs can be reduced by
the co-ordination of scattered transportation phases and controlling the material chain
coherently from the supply source to the customer. Also the possibility of achieving
savings while combining transportation into larger material flows must be considered.
The increase of the significance of transportation requires the companies and
company administration to achieve the setting of transportation objectives to serve better
the company as a whole. At the same time, it must be ensured that the transportation
organisations are capable through both the structure and knowledge to continually
respond to tougher challenges.
5.1.1 Distribution
The purpose of the distribution function of the company is to deliver an ordered
product to the customer according the service objective set by the marketing at the
smallest possible costs. Distribution is the part of the transportation chain that makes
commodities available to the customers. The producer of the commodity can manage
the distribution but quite a common practise is the use of some kind of wholesale
function between the producer and the consumer. For example, the majority of food
and other retail articles are delivered via wholesalers.
The journey of a commodity from the producer to final consumer can contain
several supplier-customer relationships (for example factory – wholesaler, wholesaler –
retailer, retailer – consumer). In every stage of the chain, the buyer wants commodities at
the right quality and demands appropriate customer service. The quality of the product
must not diminish in the chain, which sets certain quality demands to the material
functions of the whole chain.
Marketing creates a certain vision of the expected service level for the customer.
When the distribution process is concluded, the customer finds out if there are any
differences between the promised and experienced customer service. When the customer
relationship is working, the supplier gets immediate feedback about possible deviations
from the customer. The feedback helps the supplier to take actions towards possible
problems in the distribution or match the marketing service level that better meets the
limitations set by transportation activities. This way the company can avoid exaggerated
or unrealistic expectations on the part of the customer.
When planning the transportation functions, an all-inclusive prospective must
be obtained. All transportation needed by the business activity must be considered as
a part of the whole. The main objective of the product transportation is to keep the
promises (delivery time and place) whose the marketing has made to the customer. The
transportation organisation of the company must present the alternatives, which the
marketing can use to meet its objects. Also the cost structure on different service levels
must be clarified. With this information, the marketing can make the decisions about
the marketing parameters they use (see Figure 5.2).