In the dairy and ice cream industry, the term distribution management has typically included fleet operations and management, route delivery and transportation, while the term logistics management most likely just added warehouse operations and management (and possibly inventory management) to the pre-existing scope of distribution activities. Regrettably, the inclusion of finished product warehousing and inventory management under distribution or logistics management responsibility is still the exception in a good portion of the dairy and ice cream industry. The traditional industry management structure includes finished product warehousing and load out under production management. In that structure distribution management begins at the dock door and its operations are literally “out of sight.” All too often, they are also “out of mind” and managed accordingly.
As costs increase and new access to real-time communications and information makes distribution, transportation, fleet and warehouse management and logistics potentially more technologically complex, efficient and rapidly responsive, the need to reduce and eliminate redundancies, unnecessary steps and processes increases dramatically. That is why the term “marketing logistics” was first used in the mid 1980s by The Wilson Group to attempt to convey a more comprehensive view, or description, of the processes than what was provided by terms such as distribution or logistics. Marketing logistics encompasses all of the transactions and processes involved between the time a dairy or ice cream product comes off the filler line and when it reaches the point of consumer purchase, and should be managed accordingly.
In order to compete effectively in today’s marketplace, all of the activities between the filler and retail point of purchase must be organized, coordinated, staffed and managed as a single process, not a series of vertical organizations or departmental silos.
Marketing logistics is about getting the product to the point of retail purchase in the most timely, efficient and consistently reliable manner. In order to consistently achieve those goals, it must be viewed and managed as a single comprehensive, smoothly integrated multi-step process. Such a process not only includes traditional fleet management, transportation, distribution and warehousing management activities, but adds finished inventory management (including inventory replenishment management/production scheduling), customer order inputs, delivery receivables generation and should also include customer in-store inventory management and replenishment.
One way of “smoothing” this entire process would be to use an electronic delivery invoice input that automatically and simultaneously creates a seller’s receivable and inventory replenishment order, a customer’s payable and in-store inventory adjustment, updates the delivery route productivity management database with delivered volumes and elapsed times, updates the routing system with actual arrival and departure times and updates commissioned driver sales to payroll; all without manual intervention of the seller or customer.
The most efficient (and profitable) dairy and ice cream organizations will be organized and managed as a three-legged stool having equal legs of production, sales and marketing logistics. As with any stool, the legs must be equal (in responsibilities, decision-making authority, capital investment priority and management rank). No longer can a dairy or ice cream company continue to be successful with the management mentality of “we are in the dairy business not the distribution or transportation business.” Nor will it long survive with a second-level or afterthought distribution or logistics management structure or management talent. Other than possibly the creation of new value-added proprietary products and packaging, marketing logistics probably offers the greatest opportunity for dairy and ice cream industry profitability improvement today.