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.

Marketing Logistics

Logistic managers are given the task of marketing logistics as well as communicating logistics with a purpose of positioning logistics in the present competitive environment. The cut-throat competition so commonly associated with many current organizations has caused most businesses all over the world to remain proactive and any organization which ignores the importance of logistics has to blame itself. The entire purpose of logistics is defined when the logistics managers start to take marketing initiatives.
Logistics and marketing management are concerned with the effective flow of products and services in the economy and pertain to the distribution of both consumer and industrial goods. Marketing is considered to be a vital part of an economy and there is a need for an efficient marketing system which can ensure that all marketing activities are carried out in accordance with the predefined goals of the business.




Logistics managers and executives nowadays are entrusted with the added responsibility of taking important decisions and they want a better due in return for their work by being recognized as members of the pivotal winning team.
Wholesalers, manufacturers, business firms and retailers are facing the urgent need to formulate implement policies pertaining to marketing. This can be done by the execution and development of executive marketing programs and strategies. The logistics executives and managers are primarily concerned with expansion of product line and product development, choice of the channels of distribution and are also concerned with the overall development of promotional programs and establishment of pricing methods and policies.
Logistics is primarily concerned with a high degree of development in the relations that concern marketing exchange. It is commonly believed that an effective marketing strategy creates opportunities for the implementation of logistics in addition to building up effective and efficient logistics systems.
A developed economy or an economy which is expanding its horizons for its overall development requires the integration of both logistics and marketing. This greatly influences the facilitation of the concepts of logistics and marketing. There is interplay between flow-oriented logistics and the market-oriented concept of marketing. Thus, the manufacturer of a product is benefited in such a way that he is enabled to increase the informational and material properties of the product as evaluated by the end-consumer. This integration also helps in stimulating the emergence of marketing logistics within the logistics structure to provide the customer with a wide range of options.
The concept of effective marketing which is widespread in the developed countries of the world allows modifications on the part of commercial mediators, their concerned functions and objectives. These mediators shift their base from traditional catering to solvent demand for goods which are demanded by the customers to respond to customer groups' particular demand. The marketing strategy allows the commercial mediators to get involved in supplying various means of production besides raising the standards of servicing by efficiently and effectively performing their functions. This also leads to a reduction in the levels of price and costs through the streamlining of product flows.
Thus, it can be rightly concluded that marketing and logistics are inter-related to each other and an organization which wants to achieve equilibrium of stability and overall development must consider them as an integral part of the organization.

What is the Difference between 1PL, 2PL, 3PL, 4PL and 5PL logistics ?

The rise of 3PL in logistics and supply chain is now well evident but how far has 4PL developed and what is 5PL?

- A first-party logistics provider (1PL) is a firm or an individual that needs to have cargo, freight, goods, produce or merchandise transported from a point A to a point B. The term first-party logistics provider stands both for the cargo sender and for the cargo receiver.
A 1PL can be a manufacturer, trader, importer/exporter, wholesaler, retailer or distributor in the international commerce field. It can also be institutions such a government department or an
individual or family removing from one place to another.
Anyone having goods moved from their place of origin to their new place is considered to be first-party logistics provider.

- A second-party logistics provider (2PL) is an asset-based carrier, which actually owns the means of transportation. Typical 2PLs would be shipping lines which own, lease or charter their ships; airlines which own, lease or charter their planes and truck companies which own or
lease their trucks.

- A third-party logistics provider (3PL) provides outsourced or 'third party' logistics services to companies for part or sometimes all of their supply chain management function.
Well known 3PLs include DHL, Wincanton, Norbert-Dentressangle, CEVA & NYK Logistics

- A fourth-party logistics provider (4PL) is an independent, singularly accountable, non-asset based integrator who will assemble the resources, capabilities and technology of its own organisation and other organisations, incuding 3PLs, to design, build and run comprehensive
supply chain solutions for clients.

- A fifth party logistics provider (5PL) will aggregate the demands of the 3PL and others into bulk volume for negotiating more favourable rates with airlines and shipping companies.
Non asset based, it will work seamlessly across all disciplines.
The central ethos of 5PL is its commitment to collaboration and to obtaining a higher degree of resource utilisation in order to achieve savings and open up opportunities to secure the best possible solution at minimum cost/carbon etc.

Why Is Logistics Important?

Saturday night finds you as the host for a special birthday celebration for a friend at a local restaurant. You carefully planned everything ahead of time—the number of guests, the expected cost of the dinner, and the menu. Unfortunately, by the end of the evening, everyone agrees that the restaurant experience was a disaster. Your food arrived late, the specials were sold out, the wrong meal was served, the food was cold, and the wait staff were unresponsive. You will never return to this restaurant. How did this happen?
A dining logistician would say that the cooks, servers, and managers in the restaurant used poor logistics practices. The cooks did not determine the volume and lead times from ordering to delivering the goods, the servers did not communicate the order to the cooks, the staff did not follow quality assurance procedures, and the management did not communicate clearly with the customer.
Logistics is similar to dining at a restaurant. Simply put, “logistics is the flow of material, information and money between consumers and suppliers (Frazelle 2002)1. It incorporates the planning and execution of activities to move products from origin to destination. Logistics is often called supply chain management because a chain of partners, products, money, and information ultimately delivers the food (supply) to the patron (customer).
Figure 1, a distribution plan or pipeline for a typical supply chain, shows the many partners, facilities, and shipments that can make up a supply chain. Products arrive at a destination port by an ocean vessel, plane, or truck carrier; then a customs broker clears them through customs. Depending on the terms and service of the transportation, which defines who is responsible for what, another carrier transports the goods to a central warehouse, also called a distribution center. From there, products move through the distribution system until they reach the client.
Even before the shipment reaches the port, many transactions; negotiations; and steps that include product selection, forecasting, financing, and procuring the products; must be completed efficiently. All the steps involve a number of stakeholders.


If the people who attended the disappointing dinner party were asked why logistics is important, they might answer that the correct logistics in the restaurant would probably have resulted in better customer service. In fact, logistics and customer service are mutually dependent. Customer service drives logistics practices, and logistics practices impact customer service. In the field of public health, without product availability, a program or campaign will not be successful. Although customer service may be defined differently between corporate logistics and public health or disaster relief logistics, all logisticians operate according to the same six rights.

The Six Rights

• The right product


• In the right quantities


• And the right condition


• To the right place


• At the right time


• For the right cost.