Marketing logistics value: Managing the 5 P's

In order to position logistics in its proper role in today's business environment, logistics leaders will have to do a better job of communicating, or marketing, logistics. The time for lamenting the lack of interest in logistics from senior management is over, and the time to become proactive is here. The logistics story will be understood when all logistics leaders begin to take the marketing initiative and the successes of the discipline are recognized.

Logistics executives are eager to be considered important players in the corporate game. They want to be involved in important decisions, to do something meaningful for the company, and to be recognized by their peers as members of a winning team. However, it seems that sales, marketing, and manufacturing enjoy the focus of management attention. Why? Let us suggest that logistics executives have done a poor job of marketing logistics within the organization.

This concept of "marketing" logistics borrows from the traditional concept of marketing. In other words, identify your customers, identify their needs, and combine the firm's resources to meet those needs. However, the concept of logistics marketing goes a little further. The purpose of this paper is to introduce the concept of the 5 P's and to provide the logistics executive with a framework for its implementation. The following discussion will focus on product, price, place, promotion, and people as elements of the logistics marketing mix.

The logistics executive does not have the traditional "product" to market. The logistics product is service, which can be different depending on the customer group. The first step, then, in logistics marketing is to identify the customer. Research has shown that logistics executives have multiple customers, both internal and external to the firm, and that the needs of these customers can be different. Internal customers, like marketing and manufacturing, might require superior logistics service on customer and plant deliveries. Senior management, as an internal customer, might require lowest possible logistics cost so the impact on the firm's bottom line can be minimized. The logistics executive must clearly understand how logistics influences other functions such as marketing and manufacturing. Logistics cannot be managed in a vacuum and the logistics executive must make the effort to thoroughly understand and appreciate the challenges being faced by the other functions.

The logistics needs of external customers are constantly growing and changing. The logistics executive must be sensitive to this, along with being aware of what is driving these changes. Most external customers are not traditional consumers but individuals in other organizations who are having their performance measured on certain goals. Logistics service offerings to these industrial customers must include not only the goals and requirements of the providing firm but also the goals of the receiving firm.

These customer requirements will drive the service, or product, offerings from logistics. Customers will no longer accept assembly line types of service offerings, or the "one size fits all" mentality. They expect logistics to be able to develop and implement service bundles that specifically meet their needs. This job shop mentality is what endears logistics to both internal and external customers.

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.

An evolving logistics product is what can be called "responsiveness" services. These would include store-built pallets, customer pick-up options, and special material handling options. These go beyond the basic logistics product and can actually increase a firm's market share if they are done well, as well as decrease market share if they are done poorly when compared to competitors. Procter & Gamble's Product Supply Group has a "toolbox" that it uses to assess customer needs and includes prescriptive solution tools to develop responsiveness programs for customers.5 These tailored logistics programs have helped Procter & Gamble differentiate itself in a competitive market.

Finally, the ultimate logistics product offering can be called "innovation" services. These involve integrating the logistics operations of the supplier and the customer into one coordinated logistics effort. Practices such as quick response logistics, continuous replenishment, vendor managed replenishment, and category management are examples of this product. Doing these well will provide the firm with a long term competitive advantage; doing them poorly will not usually affect competitive position. Becton Dickinson's supply chain management concept is a good example of innovation. The Supply Chain Services Division (SCSD) at BD establishes three levels of EDI integration with its major customers, where Level III is total seamless integration.