The Logistics Revolution:
Is logistics Management now more important than marketing?
By Robert D. Tamilia, Ph.D., Université du Québec à Montréal, Canada
http://www.esg.uqam.ca
Email: tamilia.robert@uqam.ca

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The paper traces logistics thought from its early development to its strategic importance today in corporate decision making and electronic commerce. Logistics as demand satisfaction was not considered as being separate from demand stimulation marketing. However, in the last thirty five years, the four P paradigm in academic marketing, with its emphasis on sales and demand stimulation, has dominated marketing management. As a result, logistics and marketing have become separated. The rise in information technologies has put logistics management at the forefront of corporate strategic thinking because it can assume the role of both supply and demand chain management. Logistics is now considered the nerve center of many firms, far surpassing the managerial importance of demand stimulation marketing.

The Limited is a very successful retail chain with over 3200 stores. According to Terpstra and Sarathy (1994, page 443), part of its success comes from its very sophisticated international logistical management system. Daily sales reports flow from all stores back to company headquarters in Columbus, Ohio. It then sends production orders via satellite to plants in the US and all over Asia. Goods are flown back to Columbus four times a week on a chartered 747. All merchandise is then sorted, priced, ticketed, and shipped within 48 hours after being received at the automated distribution center. The system is so efficient that it can have brand new merchandise delivered to all stores in less than 60 days after being designed.

The Gap is even more efficient in that it can have fresh merchandise in its store every six weeks, while such rapid style changes for Benetton can only be done every six months (Rossant 1995). Availability of new merchandise on such a frequent and timely basis is sufficient reason to get customers to come back to the stores again and again. Southland Corporation has installed a new logistical information system that links stores, distribution centers and headquarters. It is hoped that franchise owners will be able to "track inventory item by item and to analyze sales trends based on time of day, weather, and other factors," (Zellner and Thornton 1997, page 75).

The above examples illustrate well the strategic importance of contemporary logistics management. The management of logistics activities, also referred to as supply chain management, (i.e., product availability), has tremendous impact on sales and corporate efficiency as well. The importance of logistics to corporate strategy is not a new idea (Heskett 1977). However, with electronic commerce and information technologies, logistics management is now changing the very way modern organizations are doing business (Greis and Kasarda 1997). Logistics involves both supply and demand chain management. So profound these changes have been that they are forcing mainstream marketing, i.e., post 60s marketing, to take a back seat (Doyle 1996).

The paper traces the evolution of logistics thought. An attempt is also made to show why current marketing thought has lagged behind logistics management in helping a firm gain and sustain its competitive advantage. The paper discusses numerous decision areas where electronic commerce is more readily associated with logistics decision making than with mainstream marketing per se, confirming the supply and demand role assumed by modern logistics. Finally, category management and ECR (efficiency consumer response), are discussed briefly because they represent, among others, current logistics-initiated industry practices which are forcing a restructuring of current mainstream marketing decision making.

Mainstream marketing management, also referred to as sales and promotion-based marketing, with its penchant for demand stimulation is almost entirely concerned with demand stimulation, that is creating and obtaining sales. One need only look at any current marketing management textbook to note that the vast majority of topics discussed deal mainly with what firms need to do in order to get sales. The tools used to obtain sales are promotion-based, i.e., advertising, sales promotion, personnel selling, and so forth. These are all mixed with heavy doses of consumer behavior analysis using the tools of marketing research for market and segmentation analysis as well as understanding what makes the consumer buy.

What is missing in demand stimulation is servicing demand, that is the supply side of marketing, or what Converse (1954) called the other half of marketing. Servicing demand, the other half of selling, assures that customers will get what they bought, is almost never discussed in mainstream marketing thought. Why logistics separated from marketing according to Bartels (1982) is " the fact that marketing practitioners, as well as theoreticians have acted as though distribution were something apart from marketing (page 5). Emphasizing demand stimulation via the negotiatory functions (i.e., selling and promotion) led Bartels (1982) to say:

Marketing academics and practitioners, however, have become so pre-occupied with negotiatory and promotional aspects of marketing that they neglected the function of physical distribution of products. Advertising, market behavior, decision making, and social expectations became principle subjects, and qualitative and quantitative models for research and practice gave guidelines to actions (pp. 3-4).

As a result, the supply side of meeting customer requirements (supply chain management) has been a neglected domain of marketing management for too long.

Lewis and Erickson (1969), using systems analysis, clarified the notion that marketing decision making within the firm was made up of two separate but linked managerial entities, as illustrated in Figure 1. From Figure 1, we can see that one such managerial responsibility is concerned with obtaining sales via demand stimulation activities or functions, such as advertising, promotion, personnel selling, and so forth. This is similar to what characterizes mainstream marketing management today. Of course, such demand stimulation activities require market and segmentation analyses as well as researching consumer behaviour.

The other part of the marketing management process deals with satisfying demand through logistical means. Specifically, Figure 1 shows logistics is an essential component which needs to be integrated and coordinated with demand stimulation activities, if customer needs are to be met. The types of managerial activities under demand satisfaction are many and include order processing, billing, transportation, inventory control, materials handling, procurement, information management, customer services, among others, which are tasks within the domain of logistics management as we will show later in the paper.

The two halves of marketing can be further explained by using the notion of economic utilities. On the one hand, logistics' value added contributions are created by time and place utilities, two of the three economic utilities contributed by marketing. On the other hand, mainstream marketing emphasizes possession utility which is the value added by demand stimulation and selling. But value added by logistics and mainstream marketing cannot and should not be discussed separately, as if they were independent of one another. As Bartels (1982) explains:

That marketing creates value through exchange, however, is untenable for change of possession is the sum of existing values and is not the creation of additional value. Thus if marketing is deprived of time and place utilities, it has little conceptually to stand on from the standpoint of traditional terminology (page 5).

The idea that the marketing process is made up of two separate but synergistically-linked parts has never been part of mainstream marketing thought. The reasons are many and will be discussed in the paper. Suffice it to say that when academic marketing emerged at the turn of the century, it was clear that the marketing process was made up of two conceptually related parts. Shaw (1916), one of marketing's founding fathers, explained almost eighty five years ago:

The relations between the activities of demand creation and physical supply, in fact, illustrate again the persistence of the two principles of interdependence and balance. Failure to coordinate any one of these activities with its group-fellows and also with those in the other group, or undue emphasis or outlay put upon any one of these activities, is certain to upset the equilibrium of forces which means efficient distribution (page 101).

The physical distribution of the goods is a problem distinct from the creation of demand... Not a few costly failures in distribution campaigns have been due to such a lack of coordination between demand creation and physical supply (page 110).

The consequence of a truncated view of marketing under mainstream marketing thought is that today's students of marketing truly believe that demand stimulation is the essence of marketing management, and is what defines the current province of marketing management as espoused in current textbooks.

Demand stimulation activities may bring customers to the store, but will the desired merchandise be available? Logistics management highlights the fact that analyzing the market and making a sale is only half the battle. Customers need to be serviced after a sale is made on an on-going basis. In fact, it may be easier to sell a product than to get the product into a customer's hands at the right time, at the right place, in the right quantity and assortment, in the right condition, and at the right price, with return privileges, and so forth. Furthermore, once a purchase has been made, the responsibility of logistics is to ensure that the customer will continue buying again and again with minimum ease and maximum convenience. Logistics, therefore, is not only concerned with supply but does have demand stimulation responsibilities (Blackwell 1997).

Delimiting the content and scope of logistics has not been an easy task. It has been an evolutionary process, very similar to the development of marketing thought at the turn of the century. Over time, a clearer picture of this domain of management finally emerged. The Council of Logistics Management (known before as the National Council of Physical Distribution Management) has played a key role in consolidating the field. Its annual conferences over the past thirty five years brought academics and practitioners together and their joint efforts have contributed greatly to the development of what we now know about logistics.

The arrival of the electronic age further helped crystallize the domain of logistics which, by its very nature, cuts across numerous functional areas of the firm, including storage, sorting, order processing, billing, wrapping, shipping and delivery, production scheduling, purchasing, inventory management, sales, and even accounting, among others. In all fairness, the field of logistics management, as we know it today, really did not "exists" as such prior to the late 60s. There were no textbooks until the 60s and no academic journals (Karrenbauer 1985). In fact, it would be incorrect today to think of logistics in a traditional sense as a functional supply area because of its numerous intrafirm overlaps as well as its many channel interfirm and customer links.

As was shown above, greater cooperation between practitioners and academics in the development of logistics knowledge maybe one reason why logistics has become a permanent fixture in boardrooms nowadays. As strange as this may sound, a number of academic disciples of mainstream marketing have actually recommended a lessening of links with the business community (see Brown 1996). This controversial suggestion will certainly not help mainstream marketing arrest nor help regain the lost managerial influence it has given up to logistics.

Logistics management encompasses both inbound and outbound logistics. Inbound logistics (plant to plant) is more a manufacturing or assembly preoccupation. Outbound logistics (suppliers to resellers, up to final customers) is most relevant for managing the distribution supply chain and adding value to customers. According to the Council of Logistics Management, logistics deals mainly with those activities which provide spatial and temporal closure through movement and storage of products, information, as well as customer services (Coyle, Bardi, and Langley 1996; Langley and Holcomb 1992). In practice, this means that the three major focus of responsibilities for logistics are transportation, storage, and inventory management informationally-linked in such a way so as to provide services along the supply chain which are cost efficient and competitive.

Logistics management's focus is seeking and sustaining the firm's competitive position by reducing costs, achieving distribution efficiencies with suppliers and resellers, while remaining flexible and responsive to customers' requirements. Such an integrated mix of supply and demand business decision making has simply outflanked mainstream marketing's current raison d'être. Under logistics management, market information flows much more readily across all departments and divisions. Additionally, information from suppliers and customers flows easier upstream and downstream along the channel of distribution than under mainstream marketing.

Professor Bernard La Londe, one of logistics pioneering scholars, once said "if you are smart enough to make it, aggressive enough to sell it, then any dummy can get it there". Fortunately, logistics management is no longer viewed as mundane but is now an integral part of corporate decision making. That is why mainstream marketing is now at a crossroads. Marketing departments have been declared critically ill because they have failed to recognized the revolution in electronic commerce and its impact on logistics management brought on by information technology (O'Connor and Galvin 1997).

Marketing as distribution dominated academic marketing thought from its inception until it was replaced by the four P paradigm in the 60s (Hunt and Goolsby 1988). This paradigm is mainstream marketing's raison d'être. The paradigm underlying marketing as distribution has been referred to as the functional approach to the study of marketing. This approach is closely linked with the development of marketing thought at the turn of the century. One of its founders was Shaw (1916) who clarified what marketing functions were being performed by members in the channel.

Eventually, this led to the taxonomy of the exchange, physical supply, and facilitating set of marketing functions which became the essence of marketing education as distribution until the 60s. The physical supply function (i.e., logistics) occupied a prominent role in textbooks during the more than half century in which the content of most textbooks was based on the functional approach to marketing. Today's textbooks under the four P paradigm do not feature logistics as an important marketing management decision area. The managerial tools (i.e., the 4Ps) associated with the marketing concept simply cannot handle logistics properly. In fact, "place" conceptualized as one of the 4Ps marketing managerial variable is more often an uncontrollable one, being part of the channel and distribution structure of a market. As Bartels (1982) stated the "function grouped under marketing management had little, if anything, to do with physical distribution" (page 6).

Marketing as distribution, as shown in Figure 2, is much more than the use of a managerial technology or a set of tools enabling a firm to generate sales. Figure 2 views the marketing process

as an integral part of the total market, i.e., the economy. Resource markets (mining oil, agriculture), producers' markets, intermediate, institutional, commercial, and government markets exist, and so do consumer markets as well.

The Figure illustrates well the existence of a complex network of distributive agencies which exists all along this macro distribution chain and is made up of suppliers, resellers, and various intermediate and final sellers and buyers. Specific distributive agencies such as retailers are part of this macro value chain which also include logistical services providers. Of course, this macro view of the marketing process, that Otteson (1959) called the marketing in the economy approach, is in sharp contrast with today's more micro view of marketing as assumed under mainstream marketing.

Previously, logistics or physical distribution as it was called until the late 60s, was not considered an important management decision area as is the case today. It was, up until very recently, one of the most sadly neglected areas of management (Drucker 1962; Reese 1961). It was not held in very high esteem by both academics and practitioners of business. As a result, it did not enjoy high occupational status. For example, Drucker (1962) referred to the distributive work as "unskilled work," "donkey work," and that such activities were "low-grade nuisances" (page 266).

It was considered one of marketing's dark continents. That is, an unknown domain not only for the firm but for the economy as well. Perhaps business was not preoccupied about logistics simply because knowledge was lacking. Demand stimulation knowledge, however, was readily available as is the case today. From a life cycle analogy, perhaps demand stimulation marketing preoccupied managers until business became more knowledgeable about what logistics could do for the firm. Others stated that physical distribution was thought of as being "too applied and trade-schoolish to be part of the science and art of marketing," (Stock and Whitney 1989, page 55). In other words, mainstream marketing simply did not consider it scientific enough or behavioral enough to be part of mainstream marketing which emphasized the scientific study of consumers.

Its scope was confined mainly to storage and transportation which were not seen as being linked or interdependent (La Londe, and Dawson 1969; Stock and Whitney 1989). Many of the physical distribution tasks were spread among numerous functional areas such as engineering, traffic, shipping, warehousing, and even accounting. As a result, managerial responsibility for logistics was either confined to specific mundane and unrelated tasks such as storage, or it was very diffused in the firm. In some other cases, managerial responsibility was simply non existent. Drucker (1969) discussed a case where a company loaded and unloaded its products eight times when two would have been sufficient. More precisely, he stated:

The point is that all this loading and unloading is expensive and time consuming. The point is that an exceedingly capable management did not know about it and could not have known about it unless, for some reasons, the executives felt like going out with the trucks (page 3).

As a result, it was near impossible for any one individual to be responsible and financially accountable for all the physical work required to move products to market once they came off the assembly line. This work represented a large share of each dollar spent by consumers, more than fifty cents, according to Cox, Goodman, and Fichandler (1965). But prior to the 60s, business was not fully aware of the high costs of distribution. It was also rather difficult for business organizations to measure such costs, let alone manage them. After all, logistics as a legitimate area of managerial responsibilities had yet to be fully understood and developed, and the costing of its various activities were not fully known.

Not knowing what activities or functions constituted the domain of logistics management made it rather difficult for the available accounting techniques to use such costs information for improved managerial decision making (Culliton 1948). Thirty years later, Lambert (1978) found firms still lacked the proper accounting information needed to make sound distribution decisions. It was only in 1976 that a methodology for measuring inventory carrying costs was proposed (La Londe and Lambert 1976). Unlike mainstream marketing, much logistical work continues to be done by members in the channel before and even after a sales has been made, making it much harder for a firm to have a handle on such external cost behavior.

The domain of logistics began to materialize when the concept of integrated distribution management took hold in the late 60s and early 70s (La Londe 1994; La Londe, Grabner and Robeson, 1970, 1985). That is, the various physical distribution activities were found to be interconnected and intertwined, thus forming a system. The application of systems analysis revolutionized logistics thought development and gave rise to the physical distribution concept (Denham 1967). Notwithstanding the integrated communications approach (Schultz, Tannenbaum and Lauterborn 1994), systems thinking in mainstream marketing has never been a strong basis for conceptual thinking.

The systems view led physical distribution managers to seek the "least" total cost approach to distribution. That is, system analysis gave rise to the idea that trade-offs between distribution activities could be achieved which lowered operating costs without sacrificing product availability. For example, low inventory stocks could be traded-off by increasing the speed of movement of products through the distribution network. More specifically, a total lower distribution cost could be achieved, in certain cases, by using airfreight, the most expensive transportation mode. The higher airfreight costs can offset savings in other activities such as storing, loading and unloading, packing, as well as cost savings due to less damaged goods, lower insurance, and lower inventory carrying costs.

Furthermore, a systems perspective positioned logistics as having both supply and demand responsibilities. Corporations began to realize that the nature of their business involved more than just customers and achieving sales. It included relationships with manufacturers, suppliers, wholesalers and retailers, even transportation carriers. More importantly, since all of them were involved in one way or another in distribution, they had an impact on the availability of products and services customers demanded. They also affected the internal cost structure of the corporations themselves which impacted on the prices charged to customers.

Marketing management as being essentially demand creation and stimulation, or a promotion-based business domain is largely the result of the marketing concept philosophy with the 4Ps as its implementation tools. The marketing concept philosophy has become, at least for current students of marketing, the gospel truth, the new religion for marketing managers to follow.

Under the marketing concept, mainstream marketing management is not only essential, it may well be the only way a firm can achieve its organizational objectives and secure a competitive advantage. The academic interest given to the application of the marketing management technology into nontraditional areas such as nonprofit marketing, political and social marketing, among others, demonstrates the extent to which the marketing concept philosophy has achieved widespread acceptance, even among nonbusiness-oriented organization. However, the blind faith acceptance of such a simple management concept can no longer go unchallenged. As Brown (1995) stated:

The marketing concept is not the be-all and end-all of management, it is not the philosopher's stone, the ultimate secret of success in business (page 13)...Too many marketers are still living in a Kotlerite universe where marketing has all the answers (page 14).

This is especially true today, given that the marketing concept inadvertently gave marketing management a demand-only functional role that no longer works well in this electronic age of distribution management. As a result, the role of marketing decision making as espoused by the marketing concept philosophy has been increasingly questioned these past few.

According to Stock and Whitney (1989), the acceptance of the marketing concept in the 60s and beyond by both academics and marketing practitioners led to a restricted consumer-oriented view of marketing management. As a result:

This narrow focus opened a void for certain business and academic specialists to concentrate on efficiencies attainable through improved planning, coordination and physical distribution (page 58).

Unfortunately, the lack of attention to distribution and value chain management by mainstream marketing is contributing to marketing's reduced role within the firm. The marginalization of marketing management within companies is a topic that has received widespread attention, not only by academics, but by practitioners as well (e.g., Brady and Davis 1993; Brown 1995). A major study undertaken by Coopers and Lybrand in 1993

...declared that the marketing department was critically ill and that it had been outflanked by other disciplines, most notably finance and manufacturing (O'Connor and Galvin 1997, page 9).

And Webster (1990) further elaborated that:

Marketing in many companies has either been pushed out into the operating units of the business, ... or has been combined with strategic planning, usually with substantial reduced staffs. In other companies, such as Pillsbury after its takeover by Grand Met, marketing staffs are simply being cut in an effort to reduce costs (page 16).

The reassessment of marketing's contribution to management has gone beyond questioning the marketing concept per se but of questioning the whole of current marketing thought and theory (e.g., Brown 1996, 1997; Brown, Bell, and Carson 1996; Brownlie and Saren 1995).

The bulk of the literature cited above is not American-based but mostly European. It is perhaps the first time in the history of marketing thought that the long established "Americanization" of the marketing discipline is now being challenged. Further discussion of this issue is clearly beyond the scope of this paper. Suffice it to say that a recent book on the future of the marketing discipline by the Marketing Science Institute (Lehman and Jocz 1997) contains not a single reference to the European material.

Under the marketing concept, mainstream marketing is more behaviorally and sociologically-oriented with very little focus on the economics of selling and no concern whatsoever on the costs of distribution. As a matter of fact, current interests in mainstream marketing have largely become detached with the internal functioning of the firm. To make matters even worse, promotion-based marketing is almost exclusively aligned with the final consumer, ignoring for the most part the strategic importance of the network of distributive agencies which exists all along the value chain, as described in Figure 2.

Furthermore, another major problem with promotion-based marketing is that once new customers have been won over, keeping them satisfied no longer seems to be a major preoccupation or concern of the marketing department. O'Connor and Galvin (1997), among others, have even gone as far as to state that it is often not the responsibility of mainstream marketing:

Once a new customer is on board, the salespeople move on onto the next prospect. In too many companies, a game of "pass the parcel" is played with existing customers. Do they belong to operations? Or customer service? All too often they don't belong to anybody, least of all the marketing department (page 12).

Customer retention is one of logistics' demand management responsibilities because existing customers are easier to sell to than new ones. This is especially true if a contractual arrangement exists or the business bonding is more operationally-linked, such as with computer-assisted reordering and billing procedures, as is often the norm in electronic commerce.

The role given to mainstream marketing under the marketing concept merely gave lip service to its cross-functional internal links. Mainstream marketing's external links with suppliers, logistical service providers, and resellers are weak at best and are more often than not restricted to promotional ties. Contemporary marketing management has, unfortunately, isolated itself not only internally within the firm but externally as well with a truncated view of the market as being made up of only consumers.

Logistics, on the other hand, paid particular attention to the economics of distribution and to distribution costs not only inside the firm but "to distribution costs incurred outside or between distributors, as those incurred by storage and transportation specialists" (Bartels 1982, page 5).

Logistics' strategic importance is simply due to the fact that it has systematically found ways to cut internal operating costs as well as external costs of suppliers and resellers in the channel. Logistics has forced channels members to be more cost conscious and cost efficient with the resulting savings passed on to customers. Lower prices to customers is one of the strongest effects logistics can have on demand. Given the strategic importance of performing the logistics functions and their costs, it was inevitable that logistics would eventually rise above mainstream marketing in corporate responsibility. In fact, Bartels (1982) had already made such a prediction:

With rising costs of capital invested in inventories, especially as inventories have increased with the prolific differentiation of products for segmented markets...and with recognition that ultimate customer satisfaction is as dependent upon availability of physical products, parts, and services as it is upon psychological satisfactions, a void in management control has become increasingly evident. So significant seem the reward and savings achievable through distribution management that some shift of power in corporate structures from marketing to distribution management may not be unexpected (page 6).

Obtaining sales under demand stimulation views the channel of distribution as a transactional one. That is, the channel is considered a means by which a title transfer occurs, that is a sale, and includes only those participating in the buying and selling tasks (e. g., a consumer and a retailer).

On the other hand, the logistical channel is much more complex because this is where all the physical work is carried out by numerous outside logistical service agencies, from plant to store shelves. It involves many vertical layers of channel participants, including wholesalers and retailers with information flowing between them (see Figures 3 and 4). No wonder the logistical channel activities account for the high costs of distribution. Thus, the demand side of marketing is simply not integrated enough within the firm and with its supply chain environment to assure a firm's sustained competitive advantage.

For example, how can demand stimulation marketing work cross-functionally in the firm when its managerial responsibilities are largely promotional-based? How can the firm be more cost efficient and therefore more competitive using only demand stimulation activities? How can demand stimulation marketing help suppliers reduce their costs? This is especially pertinent given that logistical costs are more onerous than demand stimulation ones, as will be shown shortly.

The market impact and tangible cost efficiencies using market pull influences have always been difficult to measure. Do firms really know, even today, if their advertising or promotional expenditures are dollars well spent? And how can mainstream (i.e., promotion-oriented) marketing help the firm establish the strategic interorganizational links (i.e., strategic alliances or partnering as shown in Figure 3) with suppliers and resellers? Such interorganizational ties facilitated by data flowing electronically through logistics systems enable members to cut costs and improve efficiency all along the channel of distribution while responding to customer demands.

Such complex and all encompassing interorganizational links are just not possible or even feasible under demand stimulation marketing. It is easy to see why logistics management is now considered the link between supply and demand, upstream as well as downstream the distribution value chain. This important link was mainly the responsibility of mainstream marketing before the logistics-led managerial revolution. Moreover, the technology push on logistics management has revolutionized many aspects of marketing decision making, from sales forecasting, to marketing budget allocation, to product branding, and even brand management as been affected, as will be shown.

Perhaps one reason why the supply side of marketing has been largely ignored by mainstream marketing is that the logistics side of the marketing management process is more aligned with business-to-business marketing and less with final consumers per se. As a result, it is more concerned with the economics of distribution and the firm's internal and external cost structure and functioning and less involved in the psychology of consumer buyer behavior and consumer decision analysis. It is interesting to note that demand chain management relies less on the behavioral aspects of channel members and customers that mainstream marketing.

No doubt that the promotional mix is an important means of obtaining a "perceptual" competitive advantage in consumer marketing. But in business-to-business marketing, promotion is simply not enough to achieve a sustained competitive advantage. Organizations such as suppliers, resellers, and others want real cost savings, with real value added benefits to the point of demanding that those promising such benefits be held accountable for providing them. It simply makes good business sense to offer such tangible benefits when dealing with other firms. By their very nature, logistical customer services are much more tangible and measurable than those obtained through demand stimulation efforts.

Perceptual benefits or "feel good" ones are simply not enough for savvy firms. Even consumer advertising is now being questioned when the benefit offered to consumers "dwells on seemingly irrelevant points of difference, of promotions which are often just a fancy name for price cutting" (Brady and Davis 1993, page 17).

The trend today is that people respond more to offprice incentives than before. This especially true for business to business marketing. This means that logistical costs savings can be passed on to consumers in the form of lower prices. A lower price is a direct and tangible value added benefit which consumers can quickly and readily understand.

Logistics management is not only a passive supply function but an active demand stimulation one as well. After all, mainstream management does not have a monopoly on the use of demand stimulation tools. Logistics managers have also assimilated the importance of segmentation analysis, customer motivation, promotion, and so forth from mainstream marketing. Therefore, astute supply chain management which results in lower prices can have as much of an impact and even a greater one on sales than perhaps promotion-only marketing activities.

Consumers do not really care about what is needed to get a product on the shelves, as long as the product or service is available at time of purchase. How firms organize themselves internally and externally with their suppliers and resellers is really not decided by consumers. On the other hand, firms situated at various levels in the channel of distribution do care because it's a major cost component of doing business. How they are organized for distribution is often their competitive advantage and their means of obtaining sales and profits. What good is the world's best product if it cannot be distributed efficiently and effectively according to buyers' expectations?

Logistics has come of age in the latter part of this century due to firms' increasing need to cut costs and be more efficient as a result of increased international competition. But many other factors have contributed to put logistics at the forefront of this managerial revolution. The oil embargo of the early 70s, product recall legislation, product expiration dates, rapid changes in product styles, the rise in new product introductions, the growing power of certain retailers and wholesalers over manufacturers, store differentiation blurring caused by increased scrambled merchandising, increased ecological concerns over waste, and the recycling movement almost on a world scale are some of the reasons which have made logistics a central preoccupation not only for business but for society as well.

The importance of logistics in our economy cannot be overemphasized. The total contribution of logistics has been estimated to range from 14% to over 22% of GDP, depending on which activities are included (Stock and Lambert 1987; Coyle, Bardi, and Langley 1997). In comparison, advertising expenditures account for less than 1.5% of GDP.

In countries where logistics management is lacking or unsophisticated, buyers often face product shortages, lower product quality, and limited product assortment. In fact, logistics management may be in a better position to raise the standard of living in developing countries than mainstream marketing with its emphasis on obtaining sales through promotional means. The availability of goods and services in a greater assortment is a sure sign of greater economic well being.

Logistics is also an important societal force in helping to protect the environment by establishing reverse channels of distribution and making waste disposal more affordable, convenient and available. Logistics management, not promotion-based marketing, is at the forefront of bringing relief to those needy people suffering from malnutrition, diseases, lack of water or shelter, or in need of emergency assistance caused by natural disasters and other man-made calamities (Penman and Stock 1994).

At the firm level, logistics is no less important. The Council of Logistics Management, among others, has carried out numerous accounting studies, and has estimated that the ratio of logistics costs to demand stimulation ones as a percentage of sales can reach a ratio of four to one on the average. This means that demand stimulation costs represent five percent of sales while for logistics, the average is twenty percent of sales (Sharman 1984; Hardy and Magrath 1988).

For some firms, such as wholesalers, logistics costs as a percentage of sales, are much higher than this average, and can be well over 35% of sales. For example, Canadian petroleum refiners' transportation costs alone represent close to twenty-five percent of sales (Evans, Berman, and Wellington 1996). The transportation costs alone of many consumer and commodity products such as sand, gravel, cement, coal, and even watermelon can represent more than fifty percent of their selling price (Shapiro, Perreault, and McCarthy 1996).

A distribution center operated by Wal-Mart has over 300 trucks arriving daily. Nearly 200,000 cases of goods per day are electronically scanned and routed to their proper destination. Stated differently, a truck arrives almost every two and half minutes, assuming a 12 hour shift. Each truck needs to be loaded and unloaded in a timely manner. That is why their arrival and departure times need to be carefully scheduled and monitored. Otherwise, the cost of wasted man-hours and equipment would be very high. Moreover, product unavailability due to delays may have detrimental impact on sales and profits.

The development costs of logistical decision support systems required to obtain the cost savings from logistics represent a major investment for the firm. The Southland Corp. system mentioned at the beginning of the paper is estimated to have cost over $200 million. The VF Corporation's logistical systems costs $100 million. This quick response logistical systems enables VF Corporation, makers of Lee and Wrangler jeans, to replenish stock on shelves according to model and color within three days at JC Penny stores using in-store sales data which flow back to VF on a daily basis. It now takes up to 30 days for Levi to do the same thing (Weber 1995).

Even though such systems enable some firms to dominate their markets, their costs are often unexpected for decision makers. The assets are not as visible as bricks and mortar and are more intangible. Large capital expenditures in intellectual property are not easy decisions to make. Moreover, the higher customer service standards are set, the more costly the system to service those standards.

The conclusion is that logistics is a major cost component of any organization, in fact the second after production. Any increased cost efficiency in this area is bound to have a major impact on the firm's profitability and its ability to compete regionally, nationally and even internationally. That is why many large firms, including, GM, Nestlé, and Wal-Mart have vice-presidential positions of logistics. Often, such high level corporate positions can have strategic responsibilities greater than those of mainstream marketing (Master and Pohlen 1994).

Thanks to information technologies (i.e., the tools of logistics), logistics now plays a major role within the firm and has become its nerve center because of its cross-functional links. It has, in fact, become a firm's operational system not only on the inside but on the outside as well due to logistics' interorganizational connections with suppliers, resellers, distribution centers, and with intermediate and final customers as well. Examining Figure 3, we can see why we have labeled logistics as the nerve center of

The cross-functional responsibilities attributed to logistics enable the firm to establish relationships, alliances, partnerships, or bonds with supply chain members that can range from operational links up to legal ones, as seen in Figure 3. Logistics management is far more intraorganizationally and channel-linked than demand stimulation marketing. As a result, an efficient logistical system can yield very high cost savings not only for the firm, but for its customers, suppliers and other members of the supply chain as well.

Logistics management is at the heart of what has been called "relationship marketing." Logistics is ideally positioned within the organization to help establish the many business relationships that make the supply chain work more efficiently. Cooperative supply relationships between firms in the channel such as ordering, billing, delivering and inventory management can now be routinized, as illustrated in Figure 3. Logistical decision systems models inform the various interconnected computer networks when and how much to order, and where deliveries are to be made.

Such operational links mean that firms now share proprietary information. Very likely, the motive behind the sharing of information, as shown in Figure 3, is the logistical cost savings for all business partners concerned. In addition, what better way to retain customers when they are linked electronically with their suppliers. In all probability, customers' switching costs would not warrant linking up electronically to too many other suppliers. In effect, it would be in the supplier's best interest to increase the logistical business relations as much as possible in order to keep such customers over the long term.

Information technologies have given certain retailers and wholesalers, especially those that dominate certain retail segments, the means by which they can push the responsibility of holding inventory down the supply chain so as to reduce their costs. By carrying smaller inventories, they force their suppliers to assume a greater inventory management responsibility all along the logistical channel. As a result, suppliers need sophisticated logistical decision support systems to respond quickly, frequently and dependably to their customer orders. Thus, not only do suppliers need to offer many types of incentives (i.e., push marketing) to get wholesalers and retailers to buy their products, they must also be competent in logistics management.

It is no coincidence, according to the Bureau of Economic Analysis, that the wholesale and retail trades have far outranked any other growth sector in the economy between 1989 and 1994. Specifically:

The biggest gainer was the wholesale industry, which has contributed 15% of the economy's growth since 1989. Wholesaling calls up the images of decrepit warehouses and dusty showrooms. But wholesalers3/4 the middlemen between manufacturers and retailers3/4 have been some of the main beneficiaries of computerization. Using technology to reduce the costs of ordering, shipping, and inventory-holding, they boosted output by 23% without increasing employment (Mandel 1996, page 30).

Technology has made it possible for firms to provide better logistical customer services. In mainstream marketing, the focal point is consumer analysis. In logistics, it is customer services analysis. Given that the raison d'être of logistics management is to offer cost efficient customer services as the market requires, the next section explores the essence of this core concept in logistics.

Logistics is a lot more than having the right product, at the right place, at the right time, in the right condition, and at the right cost. Such a view of logistics fails to take into account the customer service standards expected by buyers and the firm's ability to meet them on a continual basis (Lambert and Sterling 1994). Logistics is not only concerned with satisfying demand but to service demand in such a way as to gain a competitive advantage by bonding with customers on a continual basis. Figures 3 and 4 present a schematic view of the importance of logistical customer services as the output of the logistics system (it could also be the input because the output of one channel member is the input of another).

To illustrate the strategic importance of customer service, Pepperidge Farm can move cookies from its bakeries to store shelves in about three days. It can take up to ten days for other cookie producers. Its fast distribution network allows the company to offer consumers fresher cookies. Such a fast customer service level helps support its promotion-based marketing efforts of being a high quality cookie producer and facilitates acceptance of its premium pricing strategy (Saporito 1986). The example shows well logistics' supply and demand chain management coordinated market impact.

The movement of information and goods results in specific logistical customer services which need to be established, coordinated, and evaluated against specified customer performance standards. Such customer services are the central focus of logistics management as they provide value added benefits sought by customers. These services are market-determined and reflect customer expectations (Lambert and Sterling 1994). But the logistical services provided must also be in line with the firm's ability (financial or otherwise) to provide them.

Logistical customer services as demand stimulation play a very powerful role in today's business environment. In fact, some customer service levels are now so important to the organization that they form the core of a firm's strategic competitive advantage. The examples of Pepperidge Farm, VF and the Gap discussed previously illustrate well the logistical service levels set by these firms as a being tied with the firms' core competitive advantage. The entire functioning of the firm revolves around achieving its customer service standard. In such instances, promotion-based marketing acts as a support function to logistics, and not the other way around.

Information technology has contributed greatly to the ubiquitous importance of electronic commerce, especially on the supply side of the marketing process. Electronic commerce has broadened the scope of logistics to make it not only a supply responsibility but a market-driven, demand stimulation, and a customer service-oriented one as well. Mainstream marketing, therefore, is not the only function within a firm that is market-driven and as such, it does not have a monopoly on seeking and obtaining customer satisfaction.

The various logistical (informational) tools which manage this almost "closed" system are, among others, EDI (electronic data interchange), which enables channel members' computers to send and receive information. Quick response systems (QR), which are part of a retailer's inventory control and reordering systems, are also such information decision tools. QR is really the application of just-in-time (JIT) delivery for retailers. JIT delivery links actual sales data coming from cash registers using the bar-code technology needed to read the universal product code (UPC). Of course, UPC, EDI, and QR, among other such technology-based tools, are at the heart of electronic commerce.

QR is also a data collection and recording system. Once such data are electronically recorded, they can flow the entire distribution supply chain, up to the manufacturer. Data transmission is facilitated by electronic data interchange (EDI) which allows computers to receive and send information among themselves independent of each one's operational system. With the use of bar-code technology, it is possible to reorder merchandise as it is sold. The marketing research implications of QR are obvious. Customer sales patterns can be used all the way down the supply channel. It can also serve as a way to assess the effectiveness of short-term sales promotional programs, such as in-store displays, new media advertising efforts, new brand introductions, or even the sales impact of retail price changes.

Of course, the same data can also be sent to the retailer's distribution center (DC) for control and reordering purposes. With QR applied at retailers' distribution centers, bar-coded cartons, preticketing merchandise, and prehanged goods can all move very quickly, often within one hour after being received, with only a few spot checks done for control. What has been done routinely in manufacturing with parts arriving just-in-time for assembly while by-passing quality control inspection (i.e., inbound logistics), the same can also be done in outbound logistics. Floor-ready merchandise can flow from suppliers to retailers' distribution centers without having to verify all but a handful of incoming bar-coded cartons for accuracy.

Service and customer satisfaction are thus the driving forces of modern logistical management. For example, if customers want frequent, fast and dependable delivery, with instantaneous shipment tracking information, with product stop-offs and shipment rerouting options, high order fill rate, low order errors, rush order capability, damage-free shipments, intermodal transportation choices, computer-assisted reordering and billing, and so forth, logistical management can provide some or all of these logistical services. But many such logistical customer services may not be financial feasible for the firm. The increased sales potential may not justify the added costs of changing a customer service level say, from every other day delivery to every day delivery. In other words, logistics management tries to achieve customer service standards according to customer requirements but in a cost effective way.

Logistics costs are sensitive to customer service standards. There is always a trade-off between the costs associated with increased sales and the costs of satisfying those sales. Logistics management needs to balance the costs of providing customer service standards against the consequences of not meeting customer requirements.

This is exactly the decision taken by some of Sears Canada's previous suppliers. The Sears Canada Way Program put into effect a few years ago, required that all suppliers have EDI capabilities when dealing with Sears, with the costs of the EDI service assumed by them. Sears established customer service standards for their suppliers. If delivered orders to Sears were late, incomplete, or mislabeled, Sears Canada penalized suppliers by deducting ten percent from their invoice. A second infraction resulted in a fifteen percent penalty (Lamey 1994). As a result, the costs of complying with Sears proved to be too much for certain suppliers and they opted out.

As we have seen, numerous scholars and international consulting firms have stated unequivocally that mainstream marketing is now facing a mid-life crisis and is increasingly being marginalized by other disciplines, most notably by logistics management. All too often, mainstream marketing overestimates its contribution to the organization. It has failed to recognize that demand stimulation alone is not and cannot be the only way to generate sales and to satisfy customers.

Some of the world's leading practitioners of marketing, including Procter and Gamble, Colgate-Palmolive, Kraft-General Foods, and RJR-Nabisco, among others, either have reorganized their marketing departments or have had to redefine marketing's decision making responsibilities and even its place within the organization (The Economist 1994). The following discussion presents six marketing decision areas that have had to change and adapt to current market realities as a result of the managerial revolution imposed by logistics management and the rise of electronic commerce brought on by information technologies.

Sales forecasting, for example, used to be a proverbial marketing decision. However, logistics can now link in-store sales patterns with available inventory all along the supply channel, up to the original manufacturer. The manufacturer can then schedule the needed production level and arrange for transportation and delivery to various stores or distribution centers before stockouts can occur. JIT delivery can be arranged according to pre-established logistical customer service standards. The service standards are also monitored and can be quickly corrected if they no longer meet customer's expectations.

Today's marketplace realities are forcing manufacturers and other suppliers to refocus their sales efforts on helping retailers and wholesalers generate more short term sales. The greater need to harmonize consumer demand stimulation with retailers' logistical supply and merchandising activities has resulted in a major shift in marketing budget allocation. The greater level of marketing expenditures going towards resellers is really not a recent phenomenon as McVey (1960) pointed out almost forty years ago:

No seller can afford to neglect the task of selling to middlemen he seeks as well as through them. Nearly every comprehensive campaign of consumer advertising allots substantial effort to dealer promotion and distributor promotion. Indeed, much consumer advertising is undertaken primarily for the stimulating effect it will have upon middlemen (page 63).

Presently, Canadian marketing budgets for FMCG (i. e., fast moving consumer goods) allocate approximately 75% to trade promotion, fees, discounts, and other merchandising incentives given to retailers and wholesalers (Mills 1995; Lahey 1998). Twenty five or thirty years ago, media advertising accounted for this share of marketing spending for such goods (Kessler 1986). The US figure is less than fifty percent, according to industry sources (Hume 1992; Mouland 1995). Haman (1995) actually puts the figure at 47%. Furthermore, the advertising share of Canadian marketing expenditures is half the US share for food and beverage products (13% vs. 28%). Thus, push marketing and trade promos are more heavily used in Canada than in the US.

Higher market concentration in the distributive trades in Canada may explain the heavier reliance on trade promotion than in the US. Whatever the reason, there is no doubt that the reversal in marketing spending in both countries from advertising or pull marketing efforts (i.e., demand stimulation) to push marketing (also referred to by some as trade marketing) is because of the greater importance of resellers in market distribution. Resellers, now more than ever, require compensation for doing much of the logistics and in-store merchandising work done on behalf of their suppliers. After all, over seventy percent of food purchase decisions are now made in-store (Point of Purchase Advertising Institute 1995).

Consumers' viewing habits have also contributed to the rise of trade-oriented marketing expenditures. Network television's share of viewing audience in the US has dropped from a high of over ninety percent in the 70s to less than fifty percent today (Grover 1998). In Canada, the equivalent network share has been estimated to be 56% (Brehl 1998). Cable television has fragmented audiences to the point that it has become not only difficult but more costly to reach a large percentage of television households. It now makes more economic sense to spend marketing dollars to the trade (i.e., retailers, wholesalers, and other resellers) than attempt to reach large scale TV audiences using demand pull marketing programs.

The dramatic shift toward trade marketing expenditures (i.e., push marketing) shows how important retailers and other members of the supply chain have become in product distribution. Retailers and other trade members have become very good at obtaining price concessions from their suppliers and letting them pay more of the in-store merchandising efforts. A Canadian study showed that up to two-thirds of suppliers' trade-oriented incentives offered no significant benefits to consumers (Hardy and Magrath 1988). Astute trade members are simply obtaining more marketing concessions from their suppliers.

We can now better understand why push marketing efforts have risen so dramatically over the years. Resellers now control more of what is bought and sold. As a result , they are in a better bargaining position. There are also other reasons which have contributed toward this shift in marketing expenditures.

There has been an erosion of consumer franchise for branded goods. As a result, consumers are more willing to accept private brands. Distributor or private brands (i.e., reseller or store brands) now account for over 25% of all Canadian food sales and about 20% in the US. Stated differently, many manufacturers' brands are now being displaced from store shelves by distributor brands (Steenkamp and Dekimpe 1997). Logistics management has enabled resellers to be more astute in the types of goods bought from their suppliers and the in-store merchandising such consumer goods need. Thus, logistics management has not only changed the way retail stores are managed but these changes have spilled over all the way down the supply chain as well.

Push or pull marketing programs for distributor brands are not as elaborate nor as costly as the ones used for manufacturers' brands. For one thing, they do not require slotting allowances or listing (or delisting ) fees which need to be paid to the retailer by a manufacturer or a supplier wishing to get shelf space in retail stores. This is especially true for new product introductions.

In brief, the reallocation of marketing budgets from consumer pull to trade push marketing efforts have coincided with logistics management's growing influence within the firm, especially with resellers (Felgner 1989). But more importantly, logistics has improved the operational efficiency of the supply chain by harmonizing promotional efforts of either type with more efficient product replenishment which reduces inventory and dampers the effects of forward buying.

Another example is with brand management, a near fixture of promotion-based marketing. Brand management has had to undergo significant changes in the last few years due to logistics (Dewar and Schultz 1989; Low and Fullerton 1994). Many firms no longer have brand managers as such, but category managers.

Briefly, category managers are not only responsible for demand stimulation but they have expanded their responsibilities to include the supply side as well. That is, such managers are involved in the buying function as well (Benzie 1995). They no longer focus their attention on specific brands, but on product categories, including entire product lines (such as soaps and detergents, hair-care, or pet-care products). Such product categories can be managed as business units within the firm, similar to the management of SBUs (strategic business units). Category management follows the entrepreneurial model in which managers have complete responsibility for various product categories under their supervision (Lonsdale and Struse 1992).

Consumer packaged-goods companies have had to restructure their brand management marketing approach to correspond more to the way large retailers and wholesalers are now buying and merchandising such product lines in-store. Retailers' own category management systems focus both on buying and selling, and not for individual brands but for product categories as a whole. After all, retailers are more concerned with the marketing of product categories than with individual brands supplied by just one firm. As a result, they are now requiring that their suppliers help them sell more quickly within a product category with high stock turnover rates and profitable margins.

Category managers, by definition, need to work more closely with retailers and other resellers in the supply chain. They need to form closer alliances with them in order to assure better coordination between promotional activities and the logistics work (i.e., resellers' work) required to move and store products on store shelves.

Under the traditional brand management system, brand managers would add more brand sizes, more flavors, and more brand variety (i.e., brand line extensions) in order to make the brand more competitive, to keep up with competitors' attempts at product differentiation, or to rejuvenate it. For example, hundreds of laundry detergent products are on the market, with each of the leading brands available in a multitude of SKUs (i.e., stock keeping units), such as cold wash, low temperature, bleach or bleach-free, odorless, lemon-scented or natural, powder, liquid, low suds, and all available in a bewildering assortment of package sizes and refills.

Marketing practices under brand management did not seem to question the need to have a brand available in such a confusing and extensive array of choices. But such promotion-based marketing efforts resulted in a tremendous rise in the number of brand-related SKUs. Their logistics costs were either unknown or their cost responsibilities lied elsewhere than with brand managers.

Under logistics management, product or brand assortment as well as new product introductions are now more carefully scrutinize. Category managers, either at the retail or manufacturer level, are now more knowledgeable of the logistics costs of having too many SKUs. They are also better able to assess costs using an activity-based cost accounting procedure, called ABC (activity based accounting).

This software-based costing procedure examines the various costs associated with supplying and selling SKUs in the store (Cooper and Kaplan 1988; Ernst & Young 1994). ABC requires a cost estimate of the activities associated with moving and storing the SKUs from supplier, to distribution center, to store shelf by including both the promotional and logistics costs (such as shipping and delivery, packing and unpacking, packaging, billing, inventory carrying costs, as well as shelving). The promotional costs also have to be added, that is those associated with selling the SKUs, such as coupons, media and nonmedia advertising, and trade-related incentives (such as slotting allowances, listing fees, display allowances, price promotions, promotional co-op allowances, and so forth).

With the use of ABC and direct product profit, referred to DPP, category managers working for large retailers can develop better and even optimal planograms for specific product categories or even floor plans for individual stores. A planogram is a useful managerial tool which helps the category manager decide how many linear facings product categories or individual brands should have on store shelves to achieve stated turnover rates and profitability objectives.

AC Nielsen, among others, offers category managers a number of computerized space management allocation software models. For example, AC Nielsen 's 1998 version of Spaceman Merchandiser allows store buyers and category managers to view shelf and store floor space options electronically. Space management enables retailers to develop numerous planograms, and to select the ones which best meet the store's or the product category's stated objectives.

There are numerous other retail-oriented information decision tools available (e.g., QuickMax for pricing, Enterprise for floor management). Such information decision tools have tremendous implications for suppliers who can see their number of shelf facings reduced or even have certain of their brands eliminated because of nonperforming SKUs. It also has strategic implications for new product introductions and marketing budget allocation (push vs. pull marketing).

The analysis of both demand and supply costs has led to a rather dramatic change in the number of SKUs for many brands. For example, Procter and Gamble has managed to reduce its number of SKUs by 34% and the company hopes to reduce the number by an additional 20% by the year 2000. Another example is with Lever Pond's Vaseline products. In 1995, a total of 29 SKUs were associated with the Vaseline brand. This number has now been reduced to 15. Similarly, Scott Paper has managed to pare down its number of SKUs by 20% since 1995 (Lahey 1997).

Rationalization efforts to cut down the number of SKUs are also part of a much broader attempt on the part of grocery food distributors to cut costs. This logistics-initiated cost reduction program, called ECR, for Efficient Consumer Response, is an attempt on the part of the food distribution industry to work together in order to reduce logistical inefficiencies and improve distribution productivity (Kurt Salmon Associates 1993). The grocery food distribution industry is but another area where logistics management and information technologies are changing the very way this business is managed.

ECR originated in the US in 1993 as a result of the grocery industry's growing concern over the new category killers entering into their markets (e.g., Wal-Mart's Sam's Club, Price Club/CostCo). These new competitors had a major competitive advantage over the more traditional-oriented supermarket business because of their superior logistics management skills aided by their sophisticated logistical information systems. In other words, electronic commerce was more a reality inside these organizations than within the supermarket industry.

ECR is really a new business partnering philosophy involving manufacturers, wholesalers, and retailers. ECR reasons that logistical partnerships along the distribution supply chain can be formed with today's information technology. With a continual replenishment of inventory throughout the supply chain in line with consumer demand, the industry hopes to save billions of dollars by eliminating excess inventory as well as redundant and duplicated logistical service activities. The actual savings for the US have been estimated to be $130 billion. ECR also enhances retailers' merchandising effectiveness which leads to better inventory management.

ECR is nothing short than an attempt to reengineer the whole food distribution network from plant to store shelves. It is recommending fundamental changes in the food distribution chain for all members. For example, it may be more economical to establish a DSD logistical channel (direct store delivery) for certain food items flowing from plants direct to retail stores. ECR illustrates a very important fact about logistics: attempts to modify or to reorganize the supply chain infrastructure rest more with logistics management than with mainstream marketing.

The ECR name is really a misnomer because it involves more the members of the distribution supply network than the final consumers per se. The French translation of ECR does not refer to the consumer at all (l'efficience continuellement renouvelée). However, it does not mean that consumers are not part of ECR.

Consumer data are recorded at the checkout counters. Such POS scanner data enable category managers to track sales of individual brands. For example, AC Nielsen' s HomeScan consumer panel with over 9600 families provides much needed consumer data to retailers or other members of the distribution value chain. Each panel member has its own identification number and all family purchases are recorded under it.

All purchases made by each household are recorded at home using a Telxon-Nielsen hand-held computer/scanner device which is provided free of charge. The data available are varied and include measures of brand loyalty, number of items purchased per visit, prices paid, package size bought, the amount spent per visit, and store type, among others. Analysis of the data can inform the manager of the sales impact of specific sales promotion programs over time. However, the use of such information for specific merchandising strategies applied at individual store is not the norm at the present time.

Family households under the HomeScan panel represent a single source data system. As such, AC Nielsen already knows much about them, including their demographics, ethnic origin, language spoken, their media habits in terms of what they read, listen to, or watch. They also know the consumption usage status of each panel member, by brand or across a large variety of product or service categories, even store type. In other words, the panel data reveal who are the heavy, light or nonusers across numerous products, brands, and services. When combined with other available information (e.g., geo-demographics and psychographic data), a more complete profile of such family buyers can emerge enabling managers to know even more about the psychological and lifestyle makeup of panel members.

The blending of these various databanks can help category managers develop more astute store-level merchandising plans to go along with improved buying practices. With the aid of shelf space management, a more scientifically selected set of SKUs per product category can be realized. The ECR management philosophy thus promises higher store sales and a reduction in distribution inefficiencies for those willing to adopt it. Category management and ABC are thus an integral part of the ECR philosophy of making the food distribution industry more cost efficient and more competitive.

Sound logistics management principles can make this industry more responsive, flexible and competitive provided, of course, that its members adhere to the same business views as espoused by ECR proponents. The use of CAO (computer-assisted ordering), EDI, UPC, electronic POS (point of sales), uniform vendor code (UVC), and so forth can help rejuvenate this industry and revolutionized its ways of doing business.

It is hard enough for a single firm to attempt to coordinate its logistical activities among its various exchange partners. It is much harder for a whole industry as complex as the grocery food business to do so. This is especially true for this industry given that it accounts for one of the largest share of all consumer expenditures.

The interorganizational requirements needed to establish, coordinate, and standardize all the logistical information procedures (i.e., EDI, UPC, JIT delivery, bar or case code technology, etc.) among so many and varied exchange members are simply awesome. Customer service standards and performance evaluations will need to be set according to members' expectations, requirements, and financial resources. No doubt, many supply chain members will need to be convinced on the benefits they will gain by changing and standardizing their logistical operations in relation to the expenditures needed to obtain those gains.

The various committees which have been established on both sides of the border show how committed the industry is in doing more with less, and in saving billions of dollars due to increased logistical efficiencies. Such cost savings are bound to result in lower food prices for consumers.

Up to 30 Canadian companies and seven industry associations are involved in implementing the ECR food distribution philosophy. The numbers in the US are equivalent. These include the National Grocers Co., the Oshawa Group, the Great Atlantic and Pacific Company of Canada, Nestlé Canada, Procter and Gamble and Kraft Canada, among others, and the Canadian Association of Drug Stores, the Food and Consumer Products Manufacturers of Canada, and the Canadian Council of Grocery Distributors (Lahey 1997).

ECR is not without its critics. There can be broader social implications of ECR. When one link in the logistical network breaks down, product availability may be seriously compromised. For example, a major strike by truckers in France in the Fall of 1997, showed just how interdependent logistical activities are under ECR. Consumers in certain markets were left with dangerously low levels of food.

Others maintain that ECR is merely an attempt on the part of manufacturers to counterbalance the increasing dominance of certain retailers who demand too much from them at the expense of the manufacturers' efforts to build individual brand equity and brand loyalty programs. Some retailers are demanding more short term price promotion incentives to the point that list prices have lost their relevance. And, let us not forget the growing importance of private or distributors' brands which have forced many manufacturers to change their marketing and brand management practices.

Procter and Gamble was one of the first manufacturers to initiate a less volatile pricing practice by eliminating some consumer coupons programs and establishing the EDLP policy (every day low price ). Also, for some, slotting allowances for new products and listing fees have gotten out of hand. Manufacturers do not like to see retailers acting like landlords selling retail shelf space to the highest bidders. Some suppliers complain that they can no longer afford paying them, and product distribution is getting more concentrated among those few manufacturers who can.

Whatever the rationale behind ECR, this new coordinated logistics-led management approach to grocery food distribution is bound to change the way the industry operates. Logistics management will continue to be a major player in revolutionizing this business. Logistics management is not just for the food industry but for any firm looking for cost savings, improved distribution performance, and seeking a means to obtain and sustain a competitive advantage.

The title of the paper asked a rather important question. It should be obvious by now what the answer is. Yes, logistics is more important today than mainstream marketing because information technologies has made it possible to manage both the supply and demand side of the distribution chain. But that does not mean that mainstream marketing is unimportant. The two halves of marketing need to work in tandem rather that work independently of one another. We have seen the extent to which logistics management is changing the way firms manage their business in order to gain and sustain a competitive advantage. The growing importance of electronic commerce and information technologies will continue to impact on logistics decision making.

However, one question we have yet to address so far is what is the implication of all of this to marketing education at both the undergraduate and MBA levels? Similar to what Kastiel (1986) stated over ten years ago, the main teaching orientation today is on consumer marketing. Consumer marketing gives the impression that selling to consumers is what marketing is all about. No wonder most marketing curricula emphasize selling, i.e., demand stimulation marketing. Business-to-business marketing is either neglected or taught only at a handful of schools. Yet the majority of students do not obtain jobs in consumer marketing.

The field of logistics forces a student to broaden his/her knowledge of what makes a business run and be successful. It forces students to be concerned about costs, efficiency, intra and interorganizational links, and offering real value added benefits to channel members and buyers in the distribution chain.

Logistics reinvented itself in the 60s and beyond by redefining its role as being more than performing simple unrelated distribution tasks. Now as a major corporate player, it is actually restructuring how distribution system are managed not only internally but externally as well, and not only for individual firms, but for whole industries. The end result has been nothing short of a phenomenal managerial revolution.

Perhaps mainstream marketing will also need to change drastically by reintegrating itself more with logistics and the firm, but with the distribution chain as well. Industry reports cited in the paper have alerted mainstream marketing practitioners of their need to adapt to the new corporate realities brought on by logistics and the omnipresence of information technologies. But where are the pedagogical reports which are alerting mainstream marketing academics to be cognizant of the changing role of logistics in organizations? The road toward integration with logistics and the internal workings of the firm will be harder to achieve for mainstream marketing academics. Notwithstanding the valuable competitive tool of promotion-based marketing, Schultz, Tannenbaum and Lauterborn (1994) feel that logistics' contribution to the firm is now passé and the golden age of promotion-based marketing is around the corner. They believe that

...there is a limit to logistics just as there are limits to the laws of nature. Once the logistics are mastered, fewer advantages can accrue to the organization. Logistical excellence is a one-time victory although it may be a continuing advantage. So while we believe logistics will be the marketing battleground of the early 1990s, it is communications that will be the real opportunity for the mid-1990s and onward. We believe integrated marketing communication can provide a truly sustainable competitive advantage for the marketing organization. We believe it is an advantage that can be found nowhere else (page 44).

They view logistics as a supply-only function while being oblivious to the tremendous role logistics plays on demand stimulation and its integrating force both inside the firm and outside with channel members and customers. Paradigms have an uncanny resistance toward change, and they are even harder to abandon. Until the 4 P paradigm loses its grip on marketing thought, it will be hard for mainstream marketing to respond to the educational needs brought on by the logistics revolution.

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Date article published: 31/07/2000