Académique Documents
Professionnel Documents
Culture Documents
atad custontet
3t5
sAlke
INIRODUCflON
marketing cost'S:t}T:::t"::::
Selling and distribution coss, no doubt, broadly represent
a.-""a, secure orders and retain customeb'. Distribution costs cov-er
packed product is made available,l":^1y:"*
il"' *c""li:".
;;ilil;;i"i.
H;;;;;;il;Jd"
;il;;;;:'
following:
l.
2.
into the
orqce' These could be su6-divided
depreciation ot
Transportation such as fteight and insurance' operating expenses'
delivery vehicles, etc.
of warehouses' loss in
Warehousing and storage rent' insuranc and depreciation
warehouse, stock record - keeping costs, etc'
S.Administrativecostssuchascostofcartyingandbuyingofsupplies'administration
overheads apportioned to distribution costs'
Cosrs
costs arises due to the
The necessity for a proper classification and enalysis of distribution
following teasons
profitability
> To determine cost ofsales of diffelent jobs and productr' and the extent of
of each of them.
>
)
>
standa'rl"';i;;;;t"
"t" ;hi'h
be i&ntined with
:1ffi:ffiT:."iffi;:J*#':*;ffi;t* '*c
'o.'td
product, division, unit, etc.
sales
s86
Inventory record-keeping
preparing invoices
Ba3 ol Allocatlon
1.
2.
3.
4.
Inventoryrecord-keeping
5.
6.
7,
8.
Transpoftation
Sales promotion
Sales solicitation
eflorts
9.
Ordr entry
10.
Billing
11.
Credit extension
2.
Sou/ra. Crowningshied Gerald R and Gorman, Kenneti A. Cost Accounting: Principlss and Managarial
Applications (Boston: Houghton Mitllin Company, 1974), R i186.
distibution
cosrs, cortt
s87
)
>
>
>
>
)
>
Order
sizes.
ELEnmNTs oF TorAL
Cosr
Tiansportation costs
Railway Cost
Railway costs can be classified into fixcd cost and operating cost. Fixed costs are large, sunk'
>
i
o
o
C,ost of vehicles
Expcnditure on miscellaneous.
Capital cost for premises and buildings needed for garage, office, repair shops'
e tc.
I
:
I
lsss
>
following costs:
OPerating C,osts includes the
o RePairs and maintenance cost
o
o
o
o
Cost of AirwaYs
cost includes huge cost
cost and operating cost. capital
capital
includes
airways
of
cost
t"i.,att" tadar equip"'et'tt' meteorological
which is involved in airport t"*;;;;t'i"ii
of air traffic control tower' etc'
devices cost, the runway cost' cost
Ground expenses include
ground erq2enses and fl1ing expense-s'
costing of
seaways
tcl*
costs' operating
n seaways
-'p"*i::advertisine
l
and promotion
costs,
costs'
Inventory Costs
costs:
There are three types of inventory
1.(}de'tlgCosbltincludescostofstationery,Postage,telegram,etc.'inplacingan
order.
2.
Cost of Matoiak:
and taxes if anY'
It
exertl"'
;;;;;
38e
Warehouse Costs
the
The costs ol maintaining a warehouse building are largely fixed and independent of
land,
include
amount of stock it holds or rhe amount of handling required. These fixed costs
are very
building cost, administrative cost, material handling' insurance and taxes' There
fcw variable costs at warehouses
Material Costs
of material
The cost of material handling includes the cost of protective packaging' the costs
is that of
cost
important
most
The
handling'
in
handling equipment and of loods damaged
inventory'
the
labour associated with packing, loading and unloading
Packaging Costs
On
Packaging cost is in{luenced by mode of transport and material handling equipments'
characteristics
the
determines
th" otl".L.d, the selecrion of a particular rnode of transport
of packaging.
)
)
)
)
)
)
Operating efticiencY
Financial efiiciencY
Sewice level efficiencY
Marketing efficiencY
Personnel effi.ciencY
OrganisationalefficiencY.
rate
For example, operating efiiciency can be measured in terms of fuel consumption
is
known
efficiency
per tonne kilometer, maintenance cost per tonne kilometer, etc' Financial
ilo*gh op"r",ing profft to gross eamings, operating profit to capital employed etc' Service
l"*l iffi.i..r.y i, -"as.,red th.o.tgh n.,-b"' oidoot-to-door services rendercd to total number
etc' Marketing
of services made, number of onltime setvices to total number of services'
sso
efffciency depends on market share, rate of growth in gross earnings, etc. Organisational
efticiency is seen in the adherence to schedule, wider communiry coverage, flexibility, etc.
L.ogistics system should have a snategic orientation, i.e,, linkages with inner and outer
environments. A strategic logistics system must ffrst of all be planned, organised, executed
and connolled. The managerial functions need to be conducted with regard to raw materials,
work in-process inventory as well as {inal goo&. For all this, we require, human resources
committed to the system,
Consumer
In
Utility
Place Utility
Enoenl
Movernent
Competiliv
Inwntory, Ordr
EdSe
processing, \ty'are,
housing,
Transporting,
Packaging,
Communication,
Consumr
Sd6faclion
MANAGauEr.rr
The following ratios are suggested by the Asian Productivity Organisation (APO) for physical
and financial productivity measures
1
Risht Detiverv
ooo
Accidents Ratio
No' of accidents/year
verude
brea(aqes KanO =
'
distibutiotu
7.
costs,
3911
Business Efficiency
(Jperatf nq h\Press
Ratio: 'Ionne
kilometre planned/day
,.
f(dtfo
9.
10.
I'rompl
'
Net orofit
Total eamings
-,,I
No. of prompt
neSS l(atlo --=-=---
deliveries/Year
ln custoncr services, therc are threc elements, which are important for the marketcr,
in decision makius.
PRE-TRANSACTIONAL
ELEMENTS
Statementof policy
Organisation
TRANSACTIONAL
ELEMENTS
Working Relations
StatlTraining in handling
POST-
TRANSACTIONAL
ELEMENTS
lnstallation, wananty
Repairs,
customers
System Development
Technical services
Hopkins and Bailey have very precisely described thc functions involvcd in service aftcr
sales. These functions are:
>
>
Warrantyadministratjon
see l
selectior. of cb@tflals
lcruNNnr-
Marketing, Intermediaries
rhepeopreandorganisations^tilt*rul".*-;ilff;li::ffi'i3*"'S;:';
as market
.rlr,o*"4
are known
i1".Tffi,-r
between
as an intermediary
just about anybody acting
to
refers
Middlemen
#i!i::i$;;1;ilx';#ili#ft :$f;:l
'$i:-T,!;#,il'-'1ff
g",,.onv
'#ll{Il':#1tr,Ji;#,#""*:l,T#
-:I\
t;::,nit:l'H-i"'i tlI.:fl:dff
liil"'"' iTt"nt or broker r,'
business'
Xglni.-
.frl""ii'"-t"ff"t'
more comfir(
This situation is becoming
in real estate
'wFb*e,y\***;:'filt"i;Hi"'1'!;lTtn*:ti*illl*..'iTl'..i
and organisational cust
,ft" ."t?tftt or other intermediaries'
;#?'Hf;n*T :ri; ::::'i:::::*::'i'-TJil:
:ff:*,lilT iT:.[*"
'
'
>
>
producer'
,-
^-^li-;
r..,
These
variew of intermediaries.
ffi
t:-':'rl*;t
ffifffl'".]J:i:',5:
KJ,'L:.il:#1":il:::"i, :;ilTili;;:;oi*..
lss6
sales and
distribution mandgernent
Merchants: They are intermediaries that assume ownership of the goods that they sell
to customers or othcr intermediaries. Merchants usually take physical possession of the
goods that thcy sell.
Fa.ilitating (C&F Agents) Agents: They are people and organisations that assist the
flow of products and information to marketing channels and include banking and
insurance functions. The following are thc serviccs where assistance is required:
.
r
o
Because of the wide varicty of channel arrangements that exist, it is diflicult to generalise
the structure of channels across all industries. However, distribution channels are usuallv of
rwo rypes
)
>
l*vel)
This type ofchannel has no intermediaries. ln this distribution system, the goods go fiom the
producer directly to the consumer, e.g., EurellFot::l
0 Level
Producer
Consumer
l.
one-leuel chanrch In this type of channel there is only one intermediarv between
producer and consumer. This intermediary may be a retailer or a distributor.
Level
producer ------------->
R"tlit"r--------------+ con"u,nur-
If the intermediary is a distributor, this type of channel is used for speciality products like
washing machines, refrigerators or industrial products.
Producer
2.
-__+,
Tuo-leuel chooneb rhis type of channel has two intermediaries, namely, wholesaler/
distributor and retailer.
selection of
cbannels
2 Levet
Producer
--'------+
-----'-+
Wholesaler/Distributor
Retailer
Consumer
-rl':e-re:,ercy:l*:'ili**::\n::'rTi:'.'fr"$il[';l1]*i,1""'0"''
and retarter'
wholesaler
3 Level
Producer '--'--'--------'
4'
Distriburor----->
Wholesaler
-------+
Retailer
----)
Consumer
u
F our'te
etc
4 Level
Producer
---+ Agent'--'
ln addition
Oistributor
Wholesaler
--)
channels'':-:
--+
Retailer
products, viz'
(ii) Consumer dr
(i) Consumer
*t t'i*:'J":',::::::ffi
dirrerent
"tvpes
1'::
Consumer
tt"Jil::::il::'::T:l':iilI;
**,oi.Ti"'."":.:i:.111'"1il1!ii,+iT{::iill..lr",'.ffi
uPon the ottt"'";;r;'es
also depends
---)
1fi fi
j:l;:ml
.*.'T:,::,:iu::ffilruHml
services.Therefore,wecanSaythatfordifferentproducts'thet
lll* f;n:n::':fii:rt::'::"";iffii""
Channel Selection Criteria
el:,i{';
r:T:[1T:Tail::iT]::::"1;;;:r5:t',*:ffi
i,,,-.J.aru,i".,it"","',""1;1;{ffi
:*i;':X*'fi
Jl[::
:1"'e.lj'};"'"1?iltt
:r::ti'S'^ji:il:1::":::
:ilX::'L:l;Iff .T'::""'11""'
Market Factors
l.
+[ru:*:xi:::Tii:?:i:'i:i;jff'fj;:|f.llil""fi
comPeutors:
to the tYPes of
'];il;"c'"gr'om"""*""
l4oo
sales
Competitors
Often a good channel choice is one that has been overlooked or avoided by competitors. In
some cases, the marketer may try to duplicate his competitors' channel in order to have his
products replace that of a competitors'.
Product Factors
Even products that end up at the same retail location may need different intermediaries
earlier in the channel.
Lite Cycle: A product category's stage in the life cycle can be an irnportant factor in
selecting a channel and channels may have to be adjusted over time. Customers require
less support once the product has established itself.
>
Complexity; Some products are so complicated and require so much support that
producers need to stay closely involved. This indicates either a direct sales force or a
limited number of highly qualiffed intermediaries. Scientiffc equipments, let aircrafts,
nuclear reactors, pharmaceuticals and computers are products whose complexity affects
the way in which they are marketed.
>
Valwr The value of the product also affects its distribution channel choices. Items
with low cost and high volume are usually distributed through large, well-established
distribution networks such as grocery wholesalers.
Size anil Weigltt A product with significant size and weight can face restricted
distribution channel options, particularly if it is also of low value.
>
>
Othcr ftoduct Fdctors, Depending on the product in question, other factors may enter
into the decision as well. Some ofthese include whether a product is fiagile or perishable
and whether or not it requires signiffcant customer satishction.
sales
l+ro
Rcadily
RcgularlY
Equitably, and
ln
a fresh form.
25.1
Possession
Ti
Marketing
Flows in a
)
1
)
)
Finanong 't
Risk Bearing )
. Ordering ')
Payment
Information ,
Promotion
Channel
System
Negotiation
ll
le
l
Risk Bearins -)
Ordering
Payment
lnformation
Possesslon -7
Tifle
Promotion
)
)
Negotiation
Financlng
e Risk Eearing )
e Ordering
Payment
lnformalon -,
lPrrrnnNs on DrsrnrsurtoN
selectcd th".tvp" of 'hut".'"1,:T::::::.:n:,*T::::ili:il'.n*:t:;
After a produccr has serectcd
*hich specifies the numbcr of
"irlt'i.l
the next stcP is to dctermine tht
products'
;';i;;i;;;;'-"diaries that will carrv the
lcvels of intcnsity may
objectives and custo:ncrs' the
Depending on a firm's- product'.
as a product
intcnsity is.frcquentlv modified
distribution
Also'
case
to
casc
from
iliffer
bu,i. l"u.i, of intensitv to choosc
Drosresses through its rir" .y.r.]iiiir.l',""*
i-,i, ln,"nriu", Selective and Exclusivc'
products availablc in as
stratcgy that secks to makc
> Interuiue Distribution: A channer
possible'
many appropriatc places as
of products to a few
strategy that Iimits availability
)- Selectiue Disrribution: A channel
,"l".t"d otttl"tt in a given markct arca'
lilli,"iil;;;,;;r'
;;;;';i;";
;;"li;
distibution
@ANDCoMPANY's
COMPARISON
DISTRIBUTION SYSTEM
DI
STRI B U T ION
DIRECT DISTRIBUTION
TH ROIJ G H SE LLI N G
D/SIRiBUTORS
CompanY aPPoints wholesalers
SD appoint wholesellers
(SD
Good WS doesn't want to work with SD
alwavs sees his Interest while passing
Incentives schemes' etc somelime
"oarn'aa'on",
appoints his relative for his sake )
-o
atter
SM reports to SD (information to Co- comes
filtration and fabrication)
5D does not provide SM, in proper quantity and
SD
i" |.""pon"iblu
fo|.
WS i"
Co
"l*ay"
*point,
p|.op",
"nd
co
it ut""yt
st,t-ou"tity
"oooint"
"ales
fast
ti-tty *s
nign to
Io reaches
Co
""n
"o.."nd
co