Федеральное агентство по образованию

Российская экономическая академия имени Г. В. Плеханова

Кафедра иностранных языков

УЧЕБНОЕ ПОСОБИЕ

ПО СПЕЦИАЛЬНОСТИ «ЛОГИСТИКА»

Часть 2

Москва 2007

Составители:

Chapter 1. The Logistics/Supply Chain

Unit 1. Product.

….the first rule in dealing with other people’s cultures and customs is that you must follow them no matter what your role in the foreign land may be.

Lieutenant General William Pagonis

Before you read.

Discuss the following questions.

1. What is the logistics/SC product? Is it a special branch of logistics?

2. Mention as many kinds of product as you can.

3. How can you classify different products?

The logistics/SC product is a collection of characteristics that can be manipulated by the logistician. To the extent that product characteristics can be shaped and reshaped to better position them for the marketplace, a competitive advantage can be created. Customers respond with their patronage.

The product is the centre of focus in logistics system design because it is the object of flow in the supply chain, and, in its economic form, it generates the firm’s revenues. A clear understanding of this basic element is essential to formulating good logistics system designs. It is the reason for exploring the product’s basic dimensions, as represented by its characteristics, package, and price, as an element of customer service in the design of logistics system.

According to Juran, a product is the outcome, or result, of any activity or process. The product is composed of a physical part and an intangible part which together make up what is called a company’s total product offering. The physical portion of the product offering is composed of characteristics such as weight, volume, and shape as well as features, performance, and durability. The intangible part of the product offering may be after-sales support, company reputation, communication to provide correct and timely information, flexibility to meet an individual customer’s needs, and recovery to rectify mistakes. Any company’s total product offering will be a mixture of both physical and service characteristics.

Part 1. Classifying products.

Depending on who will use the product, the logistics system design should reflect the different use patterns. Broad product classifications are valuable for suggesting logistics strategy and, in many cases, for understanding why products are supplied and distributed in the manner that they are. One traditional classification is to divide goods and services into consumer products and industrial products.

Consumer products are those that are directed to ultimate consumers. Marketing people have long recognized the basic differences in the way consumers go about selecting goods and services, and where they buy them. A threefold consumer products classification has been suggested: convenience products, shopping products, and specialty products.

Convenience products are those goods and services that consumers purchase frequently, immediately, and with little comparative shopping. Typical products are banking services, tobacco items, and many foodstuffs. These products generally require wide distribution through many outlets. Distribution costs are typically high but are more than justified by the increased sales potential that is brought about by this wide and extensive distribution. Customer service levels, as expressed in terms of product availabilty and accessibility, must be high to encourage any reasonable degree of customer patronage for the products.

Shopping products are those for which consumers are willing to seek and com­pare: shopping many locations; comparing price, quality, and performance; and making a purchase only after careful deliberation. Typical products in this category are high-fashion clothes, automobiles, home furnishings, and medical care. Because of the customer's willingness to shop around, the number of stocking points is sub­stantially reduced as compared with convenience goods and services. An individual supplier may stock goods or offer services in only a few outlets in a given market area. Distribution costs for such suppliers are somewhat lower than for convenience products, and product distribution need not be as widespread.

Specialty products are those for which buyers are willing to expend a substantial effort and often to wait a significant amount of time in order to acquire them; exam­ples range from fine foods to custom-made automobiles, or services such as manage­ment consulting advice. Because buyers insist on particular brands, distribution is centralized and customer service levels are not as high as those for convenience and shopping products. Physical distribution costs can be the lowest of any product cate­gory. Because of this, many firms will attempt to create brand preference for their product line.

Industrial goods and services are those that are directed to individuals or organiza­tions that use them to produce other goods or services. Their classification is quite different from consumer products. Because vendors typically seek the buyers, a clas­sification based on shopping patterns would not be relevant.

Traditionally, industrial goods and services have been classified according to the extent to which they enter the production process. For example, there are goods that are part of the finished product, such as raw materials and compo­nent parts; there are goods that are used in the manufacturing process, such as buildings and equipment; and there are goods that do not enter the process directly, such as supplies and business services. Although this classification is valuable in preparing a selling strategy, it is not clear that it is useful in planning a physical distribution strategy. Industrial buyers do not seem to show preferences for different service levels for different product classes. This simply means that traditional product classifications for industrial products may not be as useful for identifying typical logistics channels as is the classification of consumer products.

Exercises.