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1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

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Page 1: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

1CONFIDENTIAL

Consumer Logistics:

“movement and handling of goods and people that is performed by consumers to facilitate consumption.”

Granzin (1990)

Page 2: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

2CONFIDENTIAL

The Downstream Supply Chain

M W R C

M = manufacturer R = retailer

W = wholesaler C = consumer

Page 3: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

3CONFIDENTIAL

Consumer (Logistics) Behavior

Need Recognition

Transportation

Shopping/Search

Exchange

Transportation & Storage

Production/Consumption

Page 4: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

4CONFIDENTIAL

Consumer Behavior--Two Views

MARKETING LOGISTICS

Problem Recognition Need Arises

Search Transportation

Evaluation of Options Shopping, Checkout

Purchase Decision Transportation

Purchase Act Storage

Postpurchase Evaluation Consumption

Page 5: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

5CONFIDENTIAL

Time & Money

Where does the money go?(Kelley 1958)•commodity costs•convenience costs

Where does the time go?(Downs 1961)•travel time•shopping time•checkout time

Page 6: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

6CONFIDENTIAL

Crowell & Bowers (1977)

TC = price + transportation + time

Add cost of time to the equation and consumers visit fewer stores.

Page 7: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

7CONFIDENTIAL

“ Prisoner of Time,” Ms., Oct. 1988

“ during her or his lifetime, the average American squanders five months waiting for traffic lights to change, eight months opening unsolicited mail, a year looking for misplaced objects, two years in futile attempts to return phone calls, four years doing basic housework, and five years waiting in line--a total of 13 years gone up in smoke.”

Pogrebin (1988)

Page 8: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

8CONFIDENTIAL

The Alberta Phone Survey

Random-digit dialing10 call backsCATI: computer-assisted telephone interviews30-minute confidential interviewUrban vs. RuralTopic: grocery shoppingR = 67.1%

Page 9: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

9CONFIDENTIAL

Shopping List?

YES ------- 66%

NO -------- 34%

Page 10: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

10CONFIDENTIAL

Transportation Mode

CAR --------- 91%

FOOT --------- 7%

Page 11: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

11CONFIDENTIAL

Stockout Response

Stockoutof item xat Store A

Go to Store B

Buy item y

Backorder (defer purchase)

Page 12: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

12CONFIDENTIAL

Response to Stock-out of Item x at Store A

Item x at Store B ------- 47%

Item y at Store A ------- 15%

Defer purchase ---------- 32%

Page 13: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

13CONFIDENTIAL

Time and Availability

Average Travel Time = 13.8 minutes

Average Shopping Time = 41.2 minutes

Average Checkout Time = 12.5 minutes

Average Stock-out = 1.4 items

Page 14: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

14CONFIDENTIAL

Predictors of Consumer Satisfaction

Stock Availability ------------- YES

Check-out Time --------------- YES

Shopping Time ----------------- NO

Travel Time --------------------- NO

Page 15: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

15CONFIDENTIAL

How to: Please the Consumer

reduce product prices

save consumers time (Bender 1964)

give TLC!•Tender Loving Care•Total Logistics Costs

Page 16: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

16CONFIDENTIAL

TC = pQ + c(I - A) + a(2D) + wT

p = purchase priceQ = quantity purchasedc = compromise costI = ideal item; A = actual itema = cost of travel ($/mile)D = distance to storew = cost of time ($/hour)T = time (travel + shopping + checkout)

Page 17: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

17CONFIDENTIAL

TC = pQ + c(I - A) + a(2D) + wT

p = purchase priceQ = quantity purchased

FOB origin vs. destination

Sales tax

Q = f{family size; vehicle capacity; location (urban vs. rural); p}

Page 18: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

18CONFIDENTIAL

TC = pQ + c(I - A) + a(2D) + wT

c = compromise costI = ideal item; A = actual item

stock-outs?

consumer risk perceptions

reverse logistics implications

Page 19: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

19CONFIDENTIAL

TC = pQ + c(I - A) + a(2D) + wT

a = cost of travel ($/mile)D = distance to store

consumer perceptions of travel costs

retail (car, gas) vs. e-tail (computer, AOL)

reverse logistics implications

Page 20: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

20CONFIDENTIAL

TC = pQ + c(I - A) + a(2D) + wT

w = cost of time ($/hour)T = time (travel + shopping + checkout)

consumer perceptions of time

retail vs. e-tail

retailer impacts checkout, but not travel

Page 21: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

21CONFIDENTIAL

“ Home online mantra is ‘logistics’”

“If the key to real-world retailing is location, location, location, then for e-commerce it’s logistics, logistics, logistics.”

Carroll (2000)

Page 22: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

22CONFIDENTIAL

“ E-Commerce Success . . Order Fulfillment Chaos”

“Companies are figuring out how to sell goods over the Internet, but getting the goods to the customer is another story. As online orders from consumers and businesses soar past the 2 billion per year mark, Net sellers will be faced with logistics chaos.”

Anonymous (1999)

Page 23: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

23CONFIDENTIAL

B2C e-commerce Markets

National markets

Local markets XXX

Hour delivery markets

Copacino (2000)

Page 24: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

24CONFIDENTIAL

Aspinwall’s (1958) Types of Goods

Characteristic Red Orange Yellow

Replacement Rate HIGH MED. LOW

Gross Margin LOW MED. HIGH

Adjustment LOW MED. HIGH

Consumption Time LOW MED. HIGH

Searching Time LOW MED. HIGH

Page 25: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

25CONFIDENTIAL

Caltagirone (2000)

“ the online grocery business will explode”

Page 26: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

26CONFIDENTIAL

Murphy (2000)

Online Grocery Sales

1998 $ 350,000,000

2002 $3,500,000,000

Page 27: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

27CONFIDENTIAL

e.g. e-grocers

Peapod.com IN BUSINESS

Webvan.com BANKRUPT

Groceryworks.com BOUGHT BY SAFEWAY

Page 28: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

28CONFIDENTIAL

Peapod.com

Top-quality products

Competitive prices

Convenience

First-rate customer service

Page 29: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

29CONFIDENTIAL

Webvan.com

Selection

Quality

Value

Convenience

Page 30: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

30CONFIDENTIAL

B2C Logistics Options

Consumer pick-up (drive through)

Home delivery

Drop-off/pick-up (mini-storage)

Office delivery

Page 31: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

31CONFIDENTIAL

Consumer pick-up (drive through)

home

warehouse

Page 32: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

32CONFIDENTIAL

Home delivery

home

warehouse

Page 33: 1 CONFIDENTIAL Consumer Logistics: “movement and handling of goods and people that is performed by consumers to facilitate consumption.” Granzin (1990)

33CONFIDENTIAL

Drop-off/pick-up (mini-storage)

home

warehouse

mini


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