ewuzie, cajetan obinna last cajetan obinna...ii physical distribution and customer satisfaction in...
TRANSCRIPT
Ogbonna Nkiru
i
EWUZIE, CAJETAN OBINNA
PG/M.Sc./09/53941
Ogbonna Nkiru
Digitally Signed by: Content manager’sDN : CN = Webmaster’s nameO= University of Nigeri
OU = Innovation Centre
FACULTY OF BUSINESS ADMINISTRATION
DEPARTMENT OF MARKETING
PHYSICAL DISTRIBUTION AND CUSTOMER
SATISFACTION IN NIGERIAN BOTTLING COMPANY
EWUZIE, CAJETAN OBINNA
: Content manager’s Name Webmaster’s name
O= University of Nigeria, Nsukka
OU = Innovation Centre
FACULTY OF BUSINESS ADMINISTRATION
MARKETING
PHYSICAL DISTRIBUTION AND CUSTOMER
BOTTLING COMPANY
ii
PHYSICAL DISTRIBUTION AND CUSTOMER SATISFACTION IN
NIGERIAN BOTTLING COMPANY PLC, ENUGU STATE
BY
EWUZIE, CAJETAN OBINNA
PG/M.Sc./09/53941
BEING A DISSERTATION PRESENTED TO THE DEPARTMENT OF MARKETING,
FACULTY OF BUSINESS ADMINISTRATION, UNIVERSITY OF NIGERIA, ENUGU
CAMPUS IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
AWARD OF MASTER OF SCIENCE (M.Sc.) DEGREE IN MARKETING
SUPERVISOR: PROF. G.E. UGWUONAH
DECEMBER, 2014
iii
DECLARATION
I hereby declare that this M.Sc dissertation titled “Physical Distribution and Customer
Satisfaction in Nigeria Bottling Company Plc, Enugu State”, written by me, Ewuzie,
Cajetan Obinna, Reg. No. PG/M.Sc./09/53941 of Department of Marketing, Faculty of
Business Administration, University of Nigeria, Enugu Campus is original and has not
been submitted in part or wholly to this University or any other higher institution in this
country.
Ewuzie, Cajetan Obinna
PG/M.Sc/09/53941
iv
APPROVAL
We hereby approve the topic titled “physical Distribution and Customer Satisfaction in
Nigeria Bottling Company Plc, Enugu State”, by Ewuzie, Cajetan Obinna with Reg.
No. PG/M.Sc/09/53941 of Department of Marketing, University of Nigeria, Enugu
Campus as meeting the standard for M.Sc. degree in Marketing Department of this
University.
Prof. G. E. Ugwuonah Supervisor
Prof. G. E. Ugwuonah Head of Department
v
DEDICATION
To my wife, Patience and children, Obinna (Jnr.), Adaobi and Chukwuemeka.
vi
ACKNWOLEDGMENTS
I am highly grateful to my supervisor, Prof. (Mrs.) G.E. Ugwuonah for her constructive
criticisms and untiring efforts at ensuring that the study meets set standard.
I sincerely appreciate the priceless contributions of my other lecturers at the University
of Nigeria, Enugu Campus who generously impacted knowledge and wisdom on me.
Among them are Professor Julius O. Onah, Professor (Mrs.) J. O. Nnabuko, Professor
L. C. Nwaizugbo, Dr. A.E. Ehikwe, Dr. S.C. Moguluwa and Mr. C. Obeta.
To my academic mentors, I remain grateful also. Among them are Professor Aham A.
Anyanwu of Imo State University, Professor S. E. Kalu of University of Port Harcourt
and Professor Nkamnebe of Nnamdi Azikiwe University.
Finally, I am highly indebted to my postgraduate colleagues; Paul, Nonso, Chioma and
Peter for the team spirit we worked with during the programme. I also acknowledge
the inputs of staff and customers of Nigerian Bottling Company Plc, Enugu State. You
were all helpful, cooperative and supportive.
To God be the glory.
Ewuzie (PG/M.Sc./2009/53941)
vii
TABLE OF CONTENTS
Title page - - - - - - i
Certification - - - - - - ii
Approval - - - - - - iii
Dedication - - - - - - iv
Acknowledgment - - - - - - v
Table of Contents - - - - - - vi
List of Tables - - - - - - ix
List of Figures - - - - - - xii
Abstract - - - - - - xiv
CHAPTER ONE: INTRODUCTION
1.1 Background of the study - - - - - - 1
1.2 Statement of the problem - - - - - - 4
1.3 Objectives of the study - - - - - - 5
1.4 Research questions - - - - - - 5
1.5 Research hypotheses - - - - - - - 6
1.6 Significance of the study - - - - - - 6
1.7 Scope of the study - - - - - - 7
1.8 Limitations of the study - - - - - - 7
1.9 Operational Definition of key terms - - - - 7
References
CHAPTER TWO: REVIEW OF RELATED LITERATURE
2.0 Introduction - - - - - - 11
2.1 Conceptual Framework - - - - - - 11
2.1.1 Physical Distribution Concept - - - - - 12
2.1.2 Physical Distribution Systems Concept - - - - 12
2.1.3 Physical Distribution Service (Customer Service) Concept - - 14
2.1.4 Customer Satisfaction Concept - - - - - 16
2.1.5 Overall customer satisfaction Concept - - - - 17
2.2 Empirical Studies - - - - - - 18
2.3 Theoretical Discourse - - - - - - 21
2.3.1 Definition and Scope of Physical Distribution - - - 21
2.3.2 Role and Importance of Physical Distribution in Marketing Strategy 25
2.3.3 Physical Distribution Management Activities and their Interrelationship 28
viii
2.3.4 Objectives of Physical Distribution Management - - - 32
2.3.4.1 Total Cost Analysis and Cost Trade-offs Concepts - - - 33
2.3.5 Customer Service - - - - - - 34
2.3.6 Determining customer service requirements - - - - 35
2.3.7 The Importance and Measurement of Customer Service - - 38
2.3.8 Customer Satisfaction - - - - - - 40
2.3.8.1 Drivers of Customer Satisfaction - - - - - 41
2.3.8.2 Factors that Influence Customer’s Expectations - - - 42
2.3.8.3 Customer Satisfaction Index (CSI). - - - - 43
2.3.9 Physical Distribution Decisions - - - - - 45
2.3.9.1 Inventory Control - - - - - 47
2.3.9.1.1 Material Requirement Planning and Distribution Requirement Planning 49
2.3.9.1.2 Just-in-Time (JIT) and Stockless Distribution - - - 50
2.3.9.2 Transportation - - - - - 51
2.3.9.2.1 Third Party Logistics - - - - - 53
2.3.9.2.2 Selecting a Third Party Logistics (3pl) - - - - 54
2.3.9.3 Inventory Location & Warehousing - - - - - 55
2.3.9.3.1 The Distribution Centre (DC) Concept - - - - 55
2.3.9.4 Order Processing - - - - - 56
2.3.9.5 Materials Handling - - - - - 57
2.3.10 Designing and Managing Physical Distribution System - - 58
2.3.10.1 Cost-Benefits Trade Off of Services - - - - 61
2.3.11 Organizational Responsibility for PDM - - - - 61
2.3.12 Barriers to Effective Physical Distribution - - - - 62
2.3.13 Physical Distribution and Channels of Distribution Interface - 64
2.3.14 Distribution Channel Major Decision Areas - - - - 65
2.3.15 Channel Power and Control - - - - - - 65
2.3.16 Reverse Logistics and its Impact on Customer Service and Customer
Satisfaction - - - - - - 68
2.3.17 Analysis and Critique of Some Existing Literature. - - - 68
2.4 Summary - - - - - - 69
2.5 A Brief Profile of Nigerian Bottling Company Plc - - - 70
References
ix
CHAPTER THREE: RESEARCH METHODOLOGY
3.0 Introduction - - - - - - 77
3.1 Research Designs - - - - - - 77
3.2 Area of Study - - - - - - 77
3.3 Sources of Data - - - - - - 77
3.4 Population of Study - - - - - - 77
3.5 Pilot Study - - - - - - 78
3.6 Determination of Sample Size - - - - - 78
3.7 Sampling Techniques - - - - - - - 79
3.8 Validity of Instrument - - - - - - - 80
3.9 Reliability of Instrument - - - - - - 80
3.10 Method of Data Presentation and Analysis - - - - 81
References
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
4.1 Introduction - - - - - - 83
4.2 Questionnaire Analysis - - - - - - 83
4.2.1 Questionnaire Administration - - - - - 83
4.3 Test of Hypotheses - - - - - - 113
4.4 Discussions of findings - - - - - - 121
4.5 Summary - - - - - - 124
CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSIONS AND
RECOMMENDATIONS
5.1 Introduction - - - - - - 125
5.2 Summary of findings - - - - - - - 125
5.3 Conclusions - - - - - - 126
5.4 Recommendations - - - - - - 127
Bibliographies
Appendices
x
LIST OF TABLES
Table 3.1 Commercial staff, distributors and retailers of NBC - - 77
Table 3.2 Sample proportion of NBC staff and bulk customers - - 80
Table 4.1 Questionnaire Administration - - - 83
Table 4.2 Sex Distribution of Respondents - - - 84
Table 4.3 Age Distribution of Respondents - - - 84
Table 4.4 Educational Qualification of Respondents - - 84
Table 4.5 Staff number of years with the company - - 85
Table 4.6 Staff Positions in the Company - - - 85
Table 4.7 Occupation of Respondents - - - - 86
Table 4.8 Business Categories of Customers - - - 86
Table 4.9 Frequency of products Supply to Customers - - 86
Table 4.10 Need to be supplied with NBC Products more frequently - 87
Table 4.11 Stock out Experienced by Customer - - - 88
Table 4.12 Frequency of Stock outs Experienced by Customers - 88
Table 4.13 Factors Responsible for Stock outs Experienced by Customers - - - 89
Table 4.14 Stock outs Experienced by NBC - - - 89
Table 4.15 Frequency of Stock outs Experienced by NBC - - 90
Table 4.16 Factors Responsible for Stock outs Experienced by NBC - 91
Table 4.17 Adequacy, Functionality and Coordination of NBC Distribution Trucks/Vans - - - 92
Table 4.18 Adequacy/Location of NBC Warehouses - - - 92
Table 4.19 Adequacy of NBC Inventory Size/Mix` - - - 93
Table 4.20 Reliability/Timeliness of NBC order Processing System - 94
Table 4.21 Availability of NBC different Product mix - - - 95
Table 4.22 Availability of Ordered Units - - - 95
Table 4.23 Percent Availability of all Orders - - - 96
xi
Table 4.24 Order Cycle Time Acceptability - - - 97
Table 4.25 Average Delivery Time Reliability - - - 98
Table 4.26 Order Cycle Time Consistency - - - 98
Table 4.27 In-transit Damage - - - 99
Table 4.28 Accuracy of Units Supplied - - - 100
Table 4.29 Accuracy of Quantity Delivered - - - 101
Table 4.30 Flexibility of NBC Order Policies - - - 102
Table 4.31 Expedite/Substitute Capacity of NBC - - - 103
Table 4.32 NBC Response to Special Request/ Unexpected Needs of Customers - - - 104
Table 4.33 Product Availability of NBC - - - 105
Table 4.34 Timeliness of NBC PDS - - - 105
Table 4.35 PDS Quality of NBC - - - 106
Table 4.36 PDS Flexibility of NBC - - - 107
Table 4.37 Physical Distribution Service of NBC (Consolidated Table) - 107
Table 4.38 PDS Activities of NBC (Consolidated Table) - - 108
Table 4.39 Customer Satisfaction with NBC Overall PDS - - 108
Table 4.40 Customers Comparison of NBC with Other Suppliers - - 109
Table 4.41 Customers Expression of Pleasure in Dealing with NBC - 109
Table 4.42 Customers Satisfaction (Consolidated Table) - - 109
Table 4.43 Importance Ranking of PDS Elements by the Staff - - 110
Table 4.44 Importance Ranking of PDS Elements by the Customers - 111
Table 4.45 Response on whether NBC Customers112 buy from NBC major Competitor - - - 112
Table 4.46 Performance Rating of NBC and its major Competitor - - 112
Table 4.47 Descriptive Statistics for PD Activities and PD Services - 114
Table 4.48 Pearson Correlations test result for hypothesis one - - 114
xii
Table 4.49 Descriptive Statistics for Product Availability & Customer
Satisfaction - - - 116
Table 4.50 Pearson Correlations Test Result for Hypothesis Two - 116
Table 4.51 Descriptive Statistics for Timeliness and Customer Satisfaction - 117
Table 4.52 Person Correlations Test Results for Hypothesis Three - 117
Table 4.53 Descriptive Statistics for PDS Quality and Customer Satisfaction - 119
Table 4.54 Pearson Correlations Test Result for Hypothesis Four - 119
Table 4.55 Descriptive Statistics for PDS Flexibility and Customer
Satisfaction - - - - - - - 120
Table 4.56 Pearson Correlations Test Result for Hypothesis Five - 120
xiii
LIST OF FIGURES
Figure 2.1 Conceptual Customer Service/Satisfaction model - - 13
Figure 2.2 Conceptual Physical Distribution Activities model - - 15
Figure 2.3 Conceptual Physical Distribution Service/Customer Satisfaction model - - - - - 16
Figure 2.4 Physical Distributions or Logistics Configuration of an FMCG Company - - - - - 23
Figure 2.5 Elements of customer service - - - - - 35
Figure 2.6 A customer service model - - - - - 36
Figure 2.7 Conceptual model of service quality - - - - 37
Figure 2.8 Elements and measurement of Customer service - - 39
Figure 2.9 Inventory cost curves - - - - - 48
Figure2.10 Relationship Between service level and costs - - - 59
Figure 2.11 Setting customer service level - - - - - 60
Figure 2.12 Cost-Benefit trade-off of customer service - - - 61
Figure 2.13 Logistical and marketing channels interface - - - 64
Figure 4.1 Frequency of NBC products supply to customers - - 87
Figure 4.2 Need to be supplied with NBC products more frequently - 87
Figure 4.3 Stock outs experienced by customers - - - - 88
Figure 4.4 Factors responsible for stock outs experienced by customers- 89
Figure 4.5 Stock outs experienced by NBC - - - - 90
Figure 4.6 Factors responsible for Stock-out experienced by NBC - 91
Figure 4.7 Adequacy, functionality and coordination of NBC trucks/vans - - - - - 92
Figure 4.8 Adequacy/location of NBC warehouses - - - 93
Figure 4.9 Adequacy of NBC inventory size/mix - - - 93
Figure 4.10 Reliability/timeliness of NBC order processing system - 94
Figure 4.11 Availability of NBC different product mix - - - 95
xiv
Figure 4.12 Availability of ordered units - - - - - 96
Figure 4.13 Percent availability of all orders - - - - 97
Figure 4.14 Order cycle time acceptability- - - - - 97
Figure 4.15 Reliability of average delivery time - - - - 98
Figure 4.16 Order cycle time consistency - - - - 99
Figure 4.17 In-Transit Damage - - - - - 99
Figure 4.18 Accuracy of units supplied - - - - - 100
Figure 4.19 Accuracy of quantity delivered - - - - 101
Figure 4.20 Flexibility of NBC order policies - - - - 102
Figure 4.21 Expedite/substitute capacity of NBC - - - - 103
Figure 4.22 NBC Response to special request/unexpected Needs of customers - - - - - 104
Figure 4.23 Competitive bench-marking of performance of NBC against its Major Competitor - - - - - 113
Figure 5.1 Conceptual market-driven customer service standard model (The Customer Service Mirror) - - - - 130
xv
ABSTRACT
The study investigated physical distribution and customer satisfaction in Nigerian Bottling Company (NBC) Plc in Enugu State. Companies in the Fast Moving Consumer Goods (FMCGs) sector, especially those in soft drink industry are facing increasingly fierce competition. As it becomes more difficult for the companies to compete on pure product level, creative ones are intensifying their physical distribution service activities to gain a competitive edge. Previous studies commonly focused on the activities of physical distribution service (PDS) without effectively integrating them into the marketing mix. This study offers an integrative framework for presenting PDS activities as a means of achieving higher levels of customer service (PD service) and ultimately customer satisfaction using conceptual customer service/satisfaction model. The main objective of the study is to evaluate the relationship between performance of physical distribution activities and PD service and ultimately evaluate the relationship between PD service and customer satisfaction. Understanding the relationships among the physical distribution variables and the relative importance of each of these variables to overall customer satisfaction will enhance marketer’s ability to develop strategies that are more effective and improve performance goals. The study adopted the survey research design. Two hundred (200) persons comprising of commercial staff, distributors and major retailers randomly selected from a sampling frame of four hundred (400) participated in the study. The instrument used for data collection was structured questionnaire in a 5-point Likert scale. Cronbach alpha was used to determine the reliability of the two sets of questionnaire for the staff and customers of the company which gave values of 0.76 and 0.82 for staff and customers respectively. Frequency, percentage, means, standard deviation and Pearson correlation were used for data analysis. The study found out among others that there is a significant relationship between performance of physical distribution service activities (transportation, warehousing, inventory control and order processing) and physical distribution service (product availability, PDS timeliness, PDS quality, PDS flexibility). And it was also found out that Physical distribution service has significant relationship with overall customer satisfaction. The study then concludes that as performance of physical distribution service activities becomes more effective and efficient in the industry, it would lead to improvement of physical distribution service which will in turn transcend to overall customer satisfaction. It was recommended among others that companies should ensure effective and efficient performance of physical distribution service activities as it will lead to better physical distribution service which will finally lead to customer satisfaction and translate into competitive advantage for the company, perhaps using the “conceptual market-driven customer service standards model (The Customer Service Mirror)” developed in this study to set service standards.
1
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
The growth of competition, the raising of customers’ expectations and the similarity of
basic products that are offered make physical distribution so important in determining
the final demand for a product. As it becomes more difficult for companies in fast
moving consumer goods (FMCG) sector, especially in soft drink industry, to compete
on pure product level, creative ones are looking elsewhere for a competitive edge. An
effective physical distribution system can give a company a significant competitive
advantage (Schewe and Hiam 1998: 366).
The physical distribution (or logistics) system is responsible for actual movement of
products in such a way as to accomplish the goal of providing time and place utility.
Physical distribution according to Armstrong and Kotler (2009: 343) involves planning,
implementing and controlling of the physical flow of materials, final goods and related
information from points of origin to points of consumption to meet customer
requirements at a profit. Logistics management is the planning, implementation and
control of the processes involved in the flow and storage of materials from the point of
origin (as raw materials) through the various value added stages to the point of
consumption (as finished goods) [The Council of Supply Chain Management
Professionals (CSCMP) (2011:2)]
Logistics and physical distribution are used interchangeably. In short, they involve
getting the right product in the right quantity to the right customer in the right place at
the right time in the right condition and at the right cost. These seven (7) rights of
customer service are indispensable in any physical distribution system. This calls for a
system approach to physical distribution management (PDM) – managing upstream,
and downstream value-added flows of materials, final goods and related information
among suppliers, the company, resellers, and final consumers.
The prestigious National Council of Physical Distribution Management (NCPDM)
USA in Coyle and Bardi (2000: 5) noted that physical distribution activities may
include, but are not limited to the following:
2
� Transportation
� Warehousing and storage
� Inventory control
� Order processing
� Customer service levels
� Plant and warehouse site location
These activities are on their own of no importance to customers. However, the services
they provide- product availability, PDS timeliness, PDS quality and PDS flexibility- are
of utmost importance to customers. According to Wagner (2011: 15) it has been
estimated that logistics costs account for 30% of the cost of doing business. However,
the management challenge is to consider the two major objectives of PDM namely; (1)
achieving a high level of customer service and (2) keeping the total cost of physical
distribution as low as possible for a given customer service level. These objectives are
achieved through the application of Physical Distribution (PD) system concept.
The physical distribution (PD) system concept says that all transporting, storing and
product-handling activities of a business and a whole channel system should be
coordinated as one system that seeks to minimize the total cost of distribution for a
given customer service level, Perreault et al (2010:275). Both lower costs and better
service help to increase customer value and customer satisfaction.
Customer attraction and satisfaction is highly influenced by the seller’s physical-
distribution capabilities and decisions (Kotler 2006: 591). Effective logistics requires
proper management of the supply chain (Boone and Kurtz 2004: 450). Uncoordinated
PD is expensive. Effective logistics management can lower costs, provide better
customer service and customer satisfaction which translate into competitive advantage
and profit for the company.
Customer satisfaction is a fundamental marketing construct. Marketing scholars and
practitioners agree that customer satisfaction serves as a strong predictor of variables
such as repurchase intention, positive word-of-mouth and customer loyalty.
Gustatson and Johnson (2000:50) said that customer satisfaction is customer’s overall
evaluation of purchase and consumption experience with a product, service or provider.
Customer satisfaction represents a measure of company’s performance according to
customer’s needs (Hill et al 2003) in Ode et al 2011:26). According to Kotler et al
3
(2007:144) customer satisfaction depends on a product’s or service’s perceived
performance in delivering value relative to the buyer’s expectations. They say a highly
satisfied customer generally stays loyal, buys more of the company’s products,
upgrades existing products, talks favourably about the company and its products, pays
less attention to competing brands and is less sensitive to price, offers product or
service ideas to the company and costs less to serve than new customers because
transactions are routine.
Measuring customer satisfaction with physical distribution service is a strategic activity
by organization seeking to ensure its existence in the competitive environment because
one key to customer repeat purchase is customer satisfaction with overall purchase and
consumption experience.
Procter and Gamble (P&G) is a good case in point. According to Berkowitz et al (2000:
444) beginning in the early 1990s, the company set out to meet the needs of consumers
more effectively by collaborating and partnering with its suppliers and retailers to
ensure that the right products reach store shelves at the right time and at a lower cost.
The effort was judged a success when, during an 18-month period in the late 1990s, P
& G’s retail customers recorded a $65 million (N10.27 Billion) savings in logistics
costs while customer service increased.
According to Organization for Economic Co-operation and Development (OECD)
Publication (2002:8) new strategic uses of logistics will continually alter the nature and
culture of operations in companies. The strategic advantage of logistics is likely to be
most pronounced in terms of improvements in coordination and planning resulting in
transport efficiency gains.
Physical distribution is not only a cost, it is also a potent tool in demand creation.
Companies can attract additional customers by offering better services or lower prices
through physical distribution. Companies lose customers when they fail to supply
goods on time.
The starting point for designing physical distribution is to study what the customers
want and what the competitors are offering in terms of physical distribution or
logistical customer service. Physical distribution objectives can then be set to guide the
planning. For example, coco-cola has the distribution objective that is summarized as
4
follows “to put coke within an arm’s length of desire” (Robert Woodruff, late President
of Coco-cola in Schewe and Hiam 1998: 366).
From the above physical distribution objective, it can be seen that the strategic role of
physical distribution is well recognized by Nigerian Bottling Company (NBC). It
believes that an effective physical distribution can give a company a significant
competitive advantage. NBC needs a physical distribution system that provides
adequate level of customer service which will help deliver customer satisfaction better
than the competitors. It needs a physical distribution system that puts its products
within an arm’s length of desire. The achievement of the above feat is not without
challenges. How far has NBC achieved its PD objective?
It is against this background that this study seeks to examine the physical distribution
challenges and customer satisfaction and its implication in aiding NBC in Enugu state
gain competitive advantage over others in the industry.
1.2 Statement of the Problem
One major challenge facing companies is that of attracting and retaining customers in a
competitive environment. Companies can attract customers by offering better customer
service through physical distribution (PD) system that is sufficiently sensitive and
flexible to permit timely response to customer requirements and cost effective to ensure
profit. A company’s failure to provide desired level of customer service leads to
customer dissatisfaction and loss of customers. The strategic importance of an effective
and efficient PD system cannot be over-emphasized, especially in soft drink industry
where brand loyalty is not strong but availability and price play major roles in
determining the final demand for the products.
NBC is part of a globally operating manufacturing company (the Coca-Cola Company)
in the food and beverage processing industry that maintains production plants and sales
depot outlets nationwide, using at first 100% owned haulage trailers. In 2006 NBC
engaged third party logistics (3PL) providers (haulers) following review of its supply
chain activities in order to meet daily customer requirements to enable it succeed
against the many market challengers, followers and nichers who have price advantage
(Meritem Research 2008). In spite of the engagement of 3PL providers there are still
instances of stock outs and where NBC could not deliver on schedules due to break
down of delivery trucks. There is doubt on whether these challenges have not
significantly affected physical distribution service and customers’ level of satisfaction.
5
Consequently, a holistic approach is required to physical distribution management of
NBC. It is necessary to know the level of importance customers attach to the different
elements of customer service and the performance of key competitor on these elements.
It is also vital to ascertain the effects of transportation, warehousing, order processing,
and inventory control on PD service and customer satisfaction.
This is what gave rise to the study which is to appraise the PD of NBC in the face of
stiff competitive environment that now characterizes the soft drink industry.
1.3 Objective of the Study
The main objective of the study is to evaluate the impact of performance of physical
distribution activities on PD service and indirectly on customer satisfaction.
The subjectives are:
1. To evaluate the relationship between performance of physical distribution
activities and perceived physical distribution service.
2. To ascertain the relationship between product availability and overall customer
satisfaction.
3. To determine the relationship between PDS timeliness and overall customer
satisfaction
4. To examine the relationship between PDS quality and overall customer
satisfaction
5. To identify the relationship between PDS flexibility and overall customer
satisfaction.
6. To ascertain the relative importance of each physical distribution service
variable to customers and compare the performance level of NBC with that of
its major competitor on the service variables.
1.4 Research Questions:
1. What is the relationship between performance of physical distribution activities
and perceived physical distribution service?
2. Is there any significant relationship between product availability and overall
customer satisfaction?
3. What is the relationship between PDS timeliness and overall customer
satisfaction?
4. Is there any relationship between PDS quality and overall customer satisfaction?
5. Is PDS flexibility related to overall customer satisfaction?
6
6. How important are the various physical distribution service elements to
customers and how does NBC performance on the service elements compare to
that of its major competitor?
1.5 Research Hypotheses
H01 There is no significant relationship between performance of physical
distribution activities and perceived physical distribution service.
H02 There is no significant relationship between product availability and
overall customer satisfaction,
H03 There is no significant relationship between PDS timeliness and overall
customer satisfaction
H04 There is no significant relationship between PDS quality and overall
customer satisfaction
H05: There is no significant relationship between PDS flexibility and overall
customer satisfaction
1.6 Significance of the Study
The management team will appreciate the need for effective and efficient physical
distribution management. This will enable them to formulate effective PD policies in
line with the findings of this research which will invariably lead to effective and
efficient PD system that will reduce the operational costs and thus improve profit.
Higher profit will translate to improved product quality or reduced product price for
customers. This will lead to more profit or higher customer value for resellers and
consumers respectively.
The Nigerian economy and society at large will benefit from effective and efficient PD
system. Companies that adapt the findings will experience growth that will create
employment opportunities. Then more youths will be engaged and social crimes will be
reduced.
The study will serve as a guide for organizations who wish to improve their logistics. It
will remind both public and private organizations that logistics starts with materials
suppliers, goes through the organization then to the end users.
Students and future researchers in related studies will find the study a very useful
guide. Besides, the research findings can provide the basis for further studies.
7
1.7 Scope of the Study
The study examines performance of physical distribution service activities (or logistics
activities) and its relationship to customer service and customer satisfaction. It looks at
the role and purpose of physical distribution service activities in terms of the
achievement of the customer service and customer satisfaction objectives.
In looking at the relationship between physical distribution service (PDS) activities and
the achievement of customer service objectives, the study concentrated on PDS
activities and physical distribution service components (product availability, PDS
timeliness, PDS quality and PDS flexibility) of the overall marketing customer services
in the entire supply chain.
1.8 Limitation of the Study
Some factors affected the execution of this study which included the following;
The nonchalant attitude of principal respondents to supply the necessary information,
probably due to company policy, hampered the carrying out of this study to some
extent. The use of internet for gathering some relevant information from the company
website became the last resort.
The area of coverage is Enugu State in the South East of Nigeria and generalization of
the findings in areas with different value system in terms of product availability, PDS
timeliness, PDS quality and PDS flexibility of service would be inaccurate.
1.9 Operational Definition of Key Terms
The following terms have been used as defined below.
Commercial Staff: They are those staff that have interface with the customers such as
driver-salesmen, staff in warehousing, order processing, inventory control and materials
handling sections.
Competitive Benchmarking: Is a process of determining how each competitor
performs on key service components and company’s own performance and then
comparing company’s performances to that of the competitor’s on the most important
service elements. It shows opportunities for improving services.
Customers: Buyers of products and services (Berkowitz, Kerin, Harlley and Rudelius
2000). Operationally, the customers are the distributors and retailers that buy directly
from NBC.
8
Customer Satisfaction: Is giving customers what they need when they need it.
(Wilson and Gilligan, 1997). Operationally, it is when perceived performance in service
delivery meets customer’s expectations.
Customer Service: The ability of a logistics system to satisfy users in terms of time,
dependability, communications and conveniences (Berkowitz, Kerin, Harlley and
Rudelius 2000). Operationally, it is the physical distribution service (PDS) components
(namely: product availability, PDS timeliness, PDS quality and PDS flexibility) of the
overall marketing customer service.
Customer Service Level: Refers specifically to a firm’s standards for performance in
speed, and reliability in making products available to customers. (Wilson and Gilligan,
1997)
Customers Service Offering: What organization offers in terms of customer service
(Wilson and Gilligan, 1997). Operationally, the level of importance a company attaches
to the different elements of customer service. (Morden, 1993)
Customer Service Requirement: What the customers expect in terms of customer
service. Operationally, the level of importance customers attach to the different
elements of customer service. (Morden, 1993)
PDS Flexibility: Is the ability of the physical distribution system to respond to special
order and/or unexpected needs of customers (Coyle et al 2003: 101). Operationally,
PDS flexibility is the response time to special request/unexpected needs of customers.
PDS Quality of the physical distribution service depends on the incidence of in-transit
damage, shipment of incorrect items and incorrect shipment quantity. Quality
dimensions include accuracy in filling orders, physical conditions of goods and
consistency (Mentzer et al 2009: 53).
Physical Distribution Challenges: These are the tasks of effective and efficient
management of PD activities – transportation, inventory, warehousing, order
processing, materials handling, customer service etc in the supply chain to ensure
customer satisfaction. (Cravens and Woodruff, 2001)
Product Availability: Is the proportion of units, order line, or orders completely filled
(Mentzer et al 2009: 53).
Supply Chain: Is the complete set of firms, facilities and logistics activities that are
involved in procuring materials, transforming them into intermediate or finished
products and distributing them to customers. (Coyle, Bardi, and Langley, 2003).
Operationally, supply chain comprises vendors that supply raw materials, producers
9
who convert the materials into products, warehouses that store, distribution centres that
deliver to the retailers and retailers who bring the product to the ultimate users.
PDS Timelines: Is the Order cycle performance of the entire distribution system
linking buyers and sellers. Operationally, it is the time elapsed between placing and
receiving an order. Timeliness encompasses the duration of one order cycle for a single
customer as well as central tendency and variability across multiple order cycles for
one or more customers (Mentzer et al 2009: 53).
10
REFERENCES
Armstrong, G. and Kotler, P. (2009), Marketing: An Introduction, 9th ed., New Jersy:
Pearson Prentice Hall.
Bertowitz, EN, Kerim, R.A., Hartley, S.W. and Rudelins, W. (2000), Marketing, 6th
Ed., USA: The McGraw Hill Companies Inc.
Boone, L.E. and Kurtz, D.L. (2004), Contemporary Marketing, 11th ed., USA:
Thomson, South Western.
Cravens, D.W. and Woodruff, R.B. (2001), Marketing, USA: Addison – Wesley
Publishing Company, Inc.
Coyle, J.J. and Bardi, E.J. (2000), The Management of Business Logistics, 2nd Ed.,
Minnesota: West Publishing Co.
Coyle J.J. Bardi, J.E., and Largely C.J. (2003), The Management of Business Logistics: A
Supply Chain Perspective, 7th Ed., Canada: South Western: Thomas Learning.
Mentzer, J.T, Games, R. and Krapfel, R.E. (2009), “Physical Distribution Service: A
Fundamental Marketing concept?”, Journal of the Academy of Marketing
Science, Volume 17, Number 1, Winter, 53-62.
Meritem Research (2008), www.securities.com/.../company-profile/...Nigeria Bottling
Company, Accessed 16 March, 2011 by 9.45pm, 8-10.
Morden, A.R. (1993), Elements of Marketing, 3rd Ed., London: DP Publishers Ltd.
OECD (2000), “Transport Logistics; shared solutions to common challenges, Journal
of Business Logistics, Volume 22, Number 1, Winter, 10-15.
Kotler P. (2006), Marketing Management: Analysis, Planning and Control, 5th Ed.,
New Jersey: Prentice Hall
Perreault, W.D., Cannon, J.P. and McCarthy E.J. (2010), Essentials of Marketing: A
Marketing Strategy Planning Approach, 12th Ed., New York: McGraw-
Hill/Irwin.
Rushton, A. Croucher, P. and Baker, P. (2006), The Handbook of Logistics and
Distribution Management, 3rd Ed., Great Britain: Kogan Page Limited.
Shewe, C.D and Hiam, A. (1998), The Portable MBA in Marketing, 2nd Ed., New
York: John Wiley & Sons Inc.
Wilson, R.M.S. and Gilligan, C. (1997), Strategic Marketing Management: Planning,
Implementation and Control, 2nd Ed., Oxford: Butterworth – Heinemann.
Wagner, S.M. (2011), “Supply Chain Risk Management” Journal of Business Logistics,
Volume 22, Number 1, May, 15-20.
11
CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.0 Introduction
Distribution is one of the longest standing subjects of study in Marketing. Physical
distribution is one of the two arms of distribution while the other is channel of
distribution. Ironically, the concept of physical distribution as a component of overall
customer service remains ambiguous. One aspect of the more generic concept of
marketing customer service is the ability to provide time and place utility, termed
“physical distribution”. The importance of physical distribution in marketing as stated
earlier cannot be over emphasized. Generally speaking, all marketing effort which has
been put behind the product fails if the potential buyers do not find it on hand when
they are buying.
Unprecedented competition as a result of trends and changes in market structures,
technology and innovations, on one hand and the changes in customer needs and
expectations on the other hand, has created renewed interest in physical distribution
management.
This literature review seeks to re-establish the physical distribution construct and its
dimensions/indicators by integrating the existing knowledge of physical distribution
activities and its dimensions, customer service and customer satisfaction. The plan of
this review is to provide a detailed physical distribution management structure for
implementation within a company. In order to clarify the concept of physical
distribution, the review started with conceptual framework, and the definitions of
physical distribution. It proceeded to the role and importance, the management of
physical distribution activities, customer service and customer satisfaction and so forth.
2.1 Conceptual Framework
A conceptual framework is defined by Miles and Huberman (1994:18) as something
that explains either graphically or in narrative form, the main things to be studied-the
key factors, constructs or variables – and the presumed relationships among them. The
conceptual framework draws on theories, models and concepts of physical distribution,
firstly to show that physical distribution is a fundamental marketing concept and
secondly to give guide to the present study.
12
2.1.1 Physical Distribution Concept
Physical distribution is responsible for actual movement of products in such a way as to
accomplish the goal of providing place and time utility.
Physical distribution provides place utility by moving goods from points of surplus to
points where demand exists and time utility by making goods available when they are
demanded. Place utility is primarily created through transportation and time utility is
created through proper inventory maintenance and the strategic location of goods and
services. Transportation may also play a role in time utility creation by quicker
movement of goods to a point of demand. Thus, quicker transportation can be a
substitute for warehousing. Therefore, physical distribution involves the integration of
two or more activities for the purpose of planning, implementing and controlling the
efficient flow of raw materials, in-process inventory and finished goods from point-of-
origin to point-of-consumption. These activities may include, but are not limited to;
transportation, warehousing and storage, inventory control, order processing, material
handling, distribution communication etc [National Council of physical Distribution
Management (NCPDM)].
2.1.2 Physical Distribution Systems Concept
The physical distribution (PD) systems concept says that all transporting, storing and
product handling activities of a business and a whole channel system should be
coordinated as one system that seeks to minimize the total cost of distribution for a
given customer service level, Perreault to et al (2010:275). This systems approach to
physical distribution management results in lower costs and better customer service
which help to increase customer value and customer satisfaction.
The study made use of the conceptual models of physical distribution activities and
customer service/ satisfaction which are shown below in figure 2.1 and 2.2. The
conceptual PDS/customer satisfaction model, figure 2.3 was developed for this study
based on the two models.
13
FIGURE 2.1
Conceptual Customer Service/Satisfaction Model
Adopted from Mentzer et al (2009) pp. 59
Rakowski (1982) in Mentzer et al (2009) suggested three approaches to organizing the
area of customer service (physical distribution being considered a part of overall
customer service). These approaches were based on (1) time-phasing (2) operational
attributes and (3) functional areas. In the operational attributes approach, Rakowski
separated the more objective performance measures (speed, availability, accuracy,
consistency and product performance) from the more subjective customer expectation
and perception measures (convenience, flexibility, personalized attention, and
information). While the performance measures may be easily measured by a selling
firm, the customer’s expectations and perceptions are of critical importance.
Conceptually, in the Vendor Activity Domain, physical distribution service is a family
of activities with associated performance measures (figure 2.1).
In the customer Response Domain, physical distribution service is a multidimensional
construct with perceptual performance indicator(s) for each dimension.
14
Figure 2.1: Shows physical distribution service with dimensions and indicators of each
dimension. The dimensions are:
1. Product availability: It is measured by its indicators, namely: (a) Percent units
filled, (b) percent order lines 100 percent filled, and (c) percent order 100
percent filled.
2. PDS timeliness: It is measured by its indicators, namely: (a) mean order cycle
time, (b) standard deviation of order cycle time, and (c) percent units received
in specified time period.
3. PDS quality: It is measured by its indicators, namely: (a) Percent units received
in acceptable conditions, (b) Percent units are correct units, and (c) percent units
are in correct quantity:
4. PDS flexibility: It is measured by its indicators, namely: (a) flexible order
policies (b) expedite and substitute capacity, and (c) timely response to
unexpected needs of customers. This fourth dimension is not shown in the
figure but it is being considered as critically important in modern physical
distribution service.
This involves a management culture which recognizes that customer will have special
needs and service breakdown will occur and that fast resolution can, in the final
analysis, cement customers’ loyalty (Zemke 2001).
2.1.3 Physical Distribution Service (Customer Service) Concept
The objective of physical distribution management (PDM) is the minimization of total
cost with the maximization of time and place utility in goods (Coyle and Bardi
2000:338).
Early work in the field was concerned with the realization of cost savings. But this cost
savings was unconstrained while physical distribution service levels provided an
inherent constraint upon physical distribution system. Physical distribution costs, i.e.,
transportation, warehousing, inventory, order processing, etc., are directly related to the
level of service provided. No reasonable cost reduction decision can be implemented
without consideration being given to the level of physical distribution service necessary
for a company to retain its competitive position in the market place. As the physical
distribution service matures, physical distribution service level is being viewed as a
variable that can differentiate the product in the market place and thereby improve upon
the product’s competitiveness. The physical distribution management teams are now
15
being called upon to develop physical distribution service levels in light of its sales
effect and corresponding cost. Physical distribution service variable is made up of
dimensions viz: product availability, PDS timeliness, PDS quality and PDS flexibility.
Each of these dimensions, individually affects customer satisfaction.
Figure 2.2: Conceptual Model of Physical distribution Activities
Adopted from Rushton, Croucher, and Baker (2006) pp. 7
Rushton et al (2006:7) showed key components of physical distribution indicating the
activities and decisions. Customers, however, are barely interested in these underlying
activities and decisions. They are interested in the results. Specifically, customers are
concerned with the duration of the order cycle and its consistency, the efforts required
to place an order, and the time and psychic energy wasted in seeking order progress
reports when order cycle time is uncertain (Perreault and Russ 2004). These activities
such as transportation, warehousing, inventory control, order processing are, on their
own, of no relevance to the buyer. However, the quality and timeliness of their
performance is. The component indicators of physical distribution are, therefore only
those elements which measure how the product was supplied in terms of the customers’
time, place and indirectly form utility (Mentzer et al (2009).
Location of warehouses Number and size of distribution depots Type of storage Materials handling equipment
Storage, warehousing and
Design of system Control
Information and control
Packaging and
unitization
Unit load Protective packaging
Transport Inventory
Mode of transport type of delivery operation load planning route
What to stock Where to stock How much to stock
16
The synthesis of the two conceptual models-customer service/satisfaction model and
physical distribution activities model into physical distribution service/overall customer
satisfaction model is depicted in figure 2.3 below.
Model Developed for the study
The model served as guides in our hypothesis formulation and subsequent data
collection. The model as structured in the figure above shows the relationships
hypothesized among three sets of variables-physical distribution activities, physical
distribution service and overall customer satisfaction.
The independent variable, physical distribution activities is expected to have significant
positive relationship with the dependent variable, physical distribution service as a
whole. The independent variables, physical distribution service variables – product
availability, PDS timeliness, PDS quality and PDS flexibility are individually expected
to have positive significant relationship with dependent variable overall customer
satisfaction.
2.1.4 Customer Satisfaction Concept
Customer satisfaction is an abstract concept and the actual manifestation of the state of
satisfaction will vary from person to person and products/service to product/service
because the state of satisfaction depends on a number of both psychological and
physiological variables which correlate with satisfaction behaviours such as customer
loyalty and product repurchase. (Chu, 2002:285).
Figure 2.3: Conceptual PDS / Overall Customer Satisfaction Model
+
+ + +
+
Product Availability
PDS Timeliness
PDS Flexibility
PDS Quality
Overall Customer Satisfaction
Perceived PDSPDSActivities
Transportation
Warehousing
Inventory Control
Order Processing
17
Customer satisfaction is a person’s feelings of pleasure or disappointment resulting
from comparing a product’s perceived performance in relation to his or her expectation
(Rotler 2003:61). He pointed out that customers always estimate which offer will
deliver the most value because customers are value-maximizers within the bounds of
search costs, and limited knowledge, mobility and income. They form an expectation of
value and act on it. Whether or not the offer lives up to the value expectation affect
both satisfaction and repurchase probability. In accord with the above, Nadube
(2010:192), opined that costumer satisfaction can be defined as a measure of how
products and services supplied by a company meet or surpass expectations. Customer
satisfaction results from the realization of high levels of value from a company’s
products and services compared to those of the competitors (Lovelock and Wirtz,
2010:300). Kotler et al (2007:144) say that customer satisfaction depends on a
product’s or service’s perceived performance in delivering value relative to buyer’s
expectations. Thus, expectation and perception underpin the concept of customer
satisfaction (Kotler, 2003:61). Patterson, John and Spreng (1997) argue that satisfied
customers are perceived as indispensable means of creating sustainable advantages in a
competitive environment.
2.1.5 Overall customer satisfaction Concept
Alasiri and Cole (2001:88), say that customer satisfaction comprises a number of
different facts of the relationship with a customer. For example, it can refer to any or all
of the following:
- Satisfaction with the quality of a particular product or service
- Satisfaction with an ongoing business relationship
- Satisfaction with the price-performance ratio of a product or service
- Satisfaction because a product/service met or exceeded the customer’s
expectation
- Etc.
The achievement of customer satisfaction in all of the above areas leads to overall
customer satisfaction. Thus, overall customer satisfaction is a measure of customer
satisfaction in all aspects of the company business.
18
2.2 Empirical Studies
The role of physical distribution service in the marketing mix has been the focus of
several studies over past years. Early in the twentieth century, Shaw (1915) in Mentzer
et al (2009:1) classified business activities into three great divisions. (1) The activities
of production which change the form of materials (2) The activities of distribution
which change the place and ownership of the commodities thus produced and (3) the
facilitating activities, which aid and supplement the operations of production and
distribution. According to Mentzer et al (2000:54) from 1960s to date, four distinct
categories of PDS research have emerged: (1) identification of elements of PDS (2)
determination of the cost effects of providing PDS (3) normative discussion of how
PDS should be measured and managed, and (4) empirical investigation of the impact of
various PDS packages on demand. Most of the works contained in these categories
have sensitized management to the cost implications of PDS and partially explored the
contribution PDS makes to the overall marketing mix. However, the indicators that best
measure its multiple dimensions, have not been developed. For this reason, this study
which falls under category three is an attempt in this direction. This study gives a brief
synopsis of some empirical studies of the relationship between elements of PDS and
attitudes, behavioral intent, sales and profits undertaken by several researchers.
A.C. Nelson Inc (Progressive Grocer 2000) found out that nearly half of all customers
faced with a stock out would prefer switching brands to shopping elsewhere or
returning at a later time.
Schary and Becker (2002) reported the effects of a regional beer strike in which stock
outs occurred in selected brands using brand share as the dependent variable. Stock outs
effects were judged to be more short-run than long run.
Walter and Grabner (2005) developed a model of consumer reaction to retail stock outs
and tested it with 1, 433 shoppers. Average stock out revenue losses and consumer
reactions were identified for single and multiple stock outs. In a follow-up study,
Walter and Lalonde (2005) found that upon first stock out 14% of consumers switched
stores and after a second stock out 40% switched stores. Correspondingly, 64%
switched brands after one stock out while only 25% did so following a second stock
out.
19
Heskett et al (2003) found out that suppliers do not have accurate perceptions of the
PDS they and their competitors provide but customers do have accurate perceptions of
PDS received. Order cycle time variation is more important to customer satisfaction
than average order cycle time and improved PDS resulted in increased sales and profits
for certain companies.
Gilmour (1997) examined the service provided by the major suppliers in the scientific
instrument and supplies in Australia. Each respondent was shown a list of 17 customer
service elements and asked to rank order the five most important for this industry. The
average importance of each of the nine most mentioned elements was noted for all
customers, for all suppliers and for each of the five types of customer organizations.
The five most important customer service element for all customers were availability,
after sales service, delivery reliability, delivery time and technical competence of the
representatives. It was observed that there were some differences of ranking by
segments which indicate a possible benefit for applying different customer service
policies in different segments. There were also enormous differences between supplier
responses and customer responses to support need for this type of research.
Of ten (10) studies considered to establish the relative importance of physical
distribution (customer service) elements, six ranked various elements which affect the
purchase decision (PDS being one), three ranked just the elements of PDS and one
study ranked both (Mentzer, et al 2009:57).
All of the elements considered in the studies were listed and points were given each
based on where it was ranked in each study (each first place occurrence five points,
each second place four points and so on). The sum of these points provided the total
ranking of PDS elements within customer service in table 2.1 and the ranking of only
the PDS elements in Table 2.2
20
TABLE 2.1
Importance of physical Distribution Service in Supplier
Evaluation and Purchase Decisions
Total Points
11 Delivery Reliability
10 General Physical Distribution Service
6 Delivery Time
5 Product Availability
32 Total Physical Distribution Service
31 Quality and Price
10 Sales Services and Policy
7 Technical Ability
4 Warranties
4 Facilities
Source: Mentzer et al (2009) pp. 57
TABLE 2.2
Importance of Individual Physical Distribution Elements
Total Points
13 Percent Lines Filled
12 Order Cycle Time
11 Order Cycle Variability
5 Accuracy in filling Orders
Source: Mentzer et al (2009) pp. 57
The results of table 2.1 suggest that across multiple products and industries, physical
distribution remains an important element in supplier evaluation, customer perception
and satisfaction, and the resulting purchase decision.
The results of table 2.2 suggest that the major dimensions of PDS are availability,
timeliness, and quality. Mentzer et al (2009) say that these dimensions can be
represented by the following indicators in-stock rate and percent orders, units and lines
filled for the availability dimension, consistent delivery, lead time, average time, order
cycle time reliability and maximum order cycle time for the timeliness dimension, and
maximum damage in transit and order-filling accuracy for the quality dimension. An
21
equivalent vendor activity domain indicators for each dimension can be developed for
availability, percent unit filled, percent order lines 100% filled, and percent order 100%
filled, for timeliness; mean order cycle time, standard deviation of order cycle time and
percent units delivered in specified time period and for quality; percent items delivered
in acceptable condition, percent of units which are correct items and percent items are
in correct quantity.
The result of this review indicates that these PDS dimensions and indicators are some
what numerous across products and firms. The result also indicates that the conceptual
model may be reduced to reflect only the three major dimensions which have been
derived from the customer’s perceptive and which also have quantifiable performance
indicators (figure 2.1). Mentzer et al (2009) advise that in the interest of more accurate
measures and in the exploratory nature of the research, the items given above could be
used for both the physical and perceptual domains.
The academic significance of these studies to this research is as a support for the
overall importance of PDS in marketing mix and an excellent ranking of PDS factors.
There is also practical significance to these findings as well. The basic theme of the
PDS literature is that companies must manage their PDS performance by managing
their PDS activities. And this is the major thrust of this research and the remaining part
of the review will be devoted to physical distribution management.
2.3. Theoretical Discourse
The theories and concepts underlying the conceptual models are discussed throughout
the remaining part of this chapter. The discourse dwell majorly on theories and
concepts on performance of PD activities because it determines the level of PDS and
customer satisfaction. It starts off with definition of PD, goes on to role and importance
of PD in marketing strategy, PD management activities and their interrelationships.
2.3.1 Definition and Scope of Physical Distribution
The growth in the importance of physical distribution has witnessed a corresponding
growth in the number of associated names and definitions that are used. According to
Rushton et al (2009: 4) some of the different names that have been applied include:
22
Physical distribution management
Logistics Management
Business Logistics Management
Marketing Logistics
Procurement and Supply
Supply Chain Management;
Distribution and Materials Management and there are several others.
There is no general name or definitive definition offered, because physical distribution
can and do differ dramatically from one industry, company or product to another. So
these many terms are used interchangeably in literature and in the business world.
According to Rushton et al (2006:4) Physical distribution or logistics is concerned with
physical and information flows and storage from raw material through to the final
distribution of the finished product. They explained that supply and materials
management represent the storage and flows into and through the production process,
while distribution represents the storage and flow from the final production point
through to the customer or end user. They noted that a major emphasis is now placed
on the importance of information as well as physical flows and storage, and an
additional and very relevant factor is that of reverse logistics – the flow of used
products and returnable packaging back through the system. Figure 2.4 illustrates these
different elements and flows.
23
Figure 2.4: A Physical distribution or logistics configuration of an FMCG Company
showing the key Components, the major flows and some of the different logistics
terminologies.
Adopted from Rushton, Crouncher and Baker (2006) p. 5.
The question of the most appropriate definition of physical distribution or logistics is
always an interesting one. There are a multitude of definitions to be found in the
textbooks and on the internet. There is still confusion about the definition of physical
distribution or logistics. Some of the confusion can be traced to the fact that there are a
number of terms that are used by individuals or organizations when they refer to
logistics or PD as earlier mentioned.
Logistics management is the most widely accepted term and encompasses logistics not
only in the private business sector but also in the public/government and non-profit
sectors. In addition, service companies including banks, hospitals, restaurants, hotels
and so on have logistics challenges and issues and logistics management is an
appropriate form for the service industry.
Some of the definitions are:
Physical distribution or logistics is the term describing the integration of two or more
activities for the purpose of planning, implementing and controlling the efficient flow
of raw materials, in process inventory and finished goods from the point of origin to the
point of consumption. These activities may include, but are not limited to, customer
Key Transport Information Raw material
Components
Packaging items
Product sourcing
Imported
material
Production process Sub-assembly work-in-
Packaging Utilization
Finished goods inventory
warehouse
Depots Distribution
End
use
rs
Supply Materials management Distribution
Suppliers Logistics Customers
Supply side
Upstream
Inbound
Demand side
Down stream
Outbound
24
service, demand forecasting, distribution communications, inventory control, material
handling, order processing, parts and service support, plant and warehouse site
selection, procurement, packaging, return goods handling, salvage and scrap disposal,
traffic and transportation and warehousing and storage (National Council of Physical
Distribution Management 2001:105).
Logistics is the management of all activities which facilitate movement and the
coordination of supply and demand in the creation of time and place utility”. (Hesket,
Glaskowskeyadlvie, 2000)
“Logistics is the art and science of managing and controlling the flow of goods, energy,
information and other resources”. (Wikipedia, 2006)
“Logistics management is the planning, implementation and control of the efficient,
effective, forward and reverse flow and storage of goods, services and related
information between the point of origin and point of consumption in order to meet
customer requirements” (Council of Logistics Management USA).
Logistics is the positioning of resource at the right time, in the right place, at the right
cost, at the right quality. (Chartered Institute of Logistics and Transport (UK) 2005).
Logistics involves the integration of information, transportation, inventory,
warehousing, materials handling and packaging (wikipedia.org). According to the
Council of Supply Chain Management Professionals (CSCMP 2009) logistics contains
the integrated planning, control, realization and monitoring of all internal and network
wide materials.
It is important to recognize that logistics owes its origin to the military who have long
recognized the importance of logistical activities for national defence. The logistics
concept began to appear in the business related literature in the 1960s under the label of
physical distribution which had a focus on the out bound side of the logistics system.
The business or commercial approach to logistics developed into inbound logistics
(materials management to support manufacturing or operations) and outbound logistics
(physical distribution of finished goods to support marketing during the 1970s and
1980s. In the 1990s the process was developed even further to encompass not only the
key functions within an organisation’s own boundaries, but also those functions outside
that also contribute to the provision of a product to a final customer. This is known as
supply or demand chain management. The supply chain concept recognizes that there
25
may be several different organisations involved in getting a product to the market place.
Thus manufacturers and intermediaries within the supply chain should act together in
partnership to help create a logistics pipeline that enables an efficient and effective flow
of the right products through to the final customer.
According to Rushton et al (2006), a supply chain consists of three types of entities,
customers, a producer, and the producer’s suppliers. The extended supply chain
includes customers’ customers and suppliers’ suppliers. Supply chain management
oversees and optimizes the processes of acquiring inputs from suppliers (purchasing)
converting those inputs into a finished product (production), and delivering those
products – or outputs to customers (fulfillments). Coyle, Bardi and Langley (2003)
noted that supply chain management requires a collaborative, coordinated flow of
materials and goods through the logistics system of all the organisations in the network.
This study adopted the functional management perspective of PD or logistics as
contained in NCPDM definition. It highlights the scope of PD and enabled the
researcher examine how the various activities are managed for optimal performance of
the PD system. Optimal performance implies being cost effective while providing
adequate level of customer service.
2.3.2 Role and Importance of Physical Distribution in Marketing Strategy
Physical Distribution (PD) primarily is moving goods from origin to destination.
Marketing strategy planning is based on meeting customers’ needs better than the
competitors. It seeks to create a differential advantage within target segments by which
a distinct competitive position relative to other companies can be established and from
which profit flows. Delivering the right goods to the buyers at the right time and at the
lowest possible cost is an important aspect of every good marketing program.
According to Onah and Thomas (2004:381) the functions of physical distribution can
be classified into four major areas.
1. Location of distribution centres: these may be company owned centres, public
warehouses or centralized distribution centres where products are stored for a
longer periods.
2. Development and maintenance of an inventory control system.
3. Development and maintenance of an order-processing system and a customer
service department.
4. Determination of the best transportation method.
26
Wilson and Gillingan (1997:5) said that the way in which a differential advantage
might be achieved and sustained is via the manipulation of the elements of the
marketing mix: product, price, promotion and place. Final price of products are affected
to a large extent by the PD activities. Companies selling products provide a discount
schedule for larger purchase quantities. Also transportation companies provide a price
discount schedule for shipping larger volumes. Efficient warehousing and
transportation systems can exploit these discounts and lower their operations costs and
final product price for their customers.
Product size, shape, weight, packaging and other physical dimensions affect the ability
of the logistics system to move and store products. These affect the transportation
company or modes that a company can use, equipment needed, damage rates, storage
ability and many other logistics aspects. These factors determine logistics costs and
affect the final price of the product.
Promotional effort to stimulate sales should consider logistics so that sufficient
inventory quantities will be available for distribution to the customers.
Physical distribution or logistics provides the means by which the product can reach the
customer or end user timely, in the appropriate condition and required location. Moving
and storing materials and goods throughout the distribution network require that PD
managers make decisions about facilities, inventory, transportation, communications
and materials handling and packaging. The PDM concepts recognize that these
activities must be integrated and coordinated to perform effectively and efficiently the
distribution function because their costs are interrelated. A company can achieve cost
or service differential advantage or both by emphasizing PD in the marketing strategy
planning.
Coyle et al (2003: 33) explain
Good logistics is business power …. because it helps build competitive
advantage. At the end of the day if you cannot get your products to your
customers, you will not stay in business very long. This is not to say that you do
not need quality products and effective marketing. Both are obviously very
important, but they must be combined with effective and efficient logistics
systems for long run success and financial viability.
27
It can be inferred from the above explanation that poor logistics systems can destroy an
otherwise good product. Though logistics provides place and time utility, it is also a
prerequisite for possession utility to be realized.
According to Srinivasa and Saurabh (2009:5) over the last few decades the role of
logistics management has undergone a paradigm shift. It is widely recognized as an
extremely important aspect of the overall business strategy.
PD or logistics activities are very expensive. But PDM seeks to minimize the costs of
distribution while providing adequate level of customer service. PDM ensures that costs
and customer satisfaction are optimized. There is no point in making large savings in
the cost of distribution if, in the long run, sales are lost because of customer
dissatisfaction. Similarly, it does not make economic sense to provide a level of service
that is not really required by the customer and leads to erosion of profits. The
cost/service balance is a basic challenge that faces PD managers.
It is therefore possible for companies to compete on the basis of providing a product
either at the lowest possible cost so that the customer will buy it because it is the least
expensive or at the highest possible value to the customer, if it is exactly where and
how the customer wants it. Some companies may try to use both strategies because
there are many products that are not sold on the basis of their brand name alone but also
on the basis of availability or price, like soft drinks. A company may compete as a
service leader where it is trying to gain an advantage over its competitors by providing
a number of key service elements to differentiate itself for a value advantage, this might
include the provision of specially tailored service or the use of several different
channels of distribution so that the product is available in the market place in a number
of different ways. Or a company may compete as a cost leader where it is trying to
utilize its resources so that it offers the product at the lowest possible cost, thus gaining
a cost advantage. For a cost advantage, this will include a number of different means of
cost minimization, such as maintaining very low levels of inventory and ensuring that
all manufacturing and distribution assets are kept at a high utilization. A company may
also compete as cost and service leader where it develops differently configured
logistics structures to cater for the variety of service offerings that it needs to provide
for its different segments.
As noted in European Logistics Association (ELA) Survey (2004): “One-size-fits-all
policies will rarely work when applied to modern, diverse service offerings …. Leading
28
companies are segmenting their supply chains according to service and cost needs of
the customer”.
How PD functions are performed affects the other three Ps especially price. This can
also make or break the marketing strategy.
2.3.3 Physical Distribution Management Activities and their Interrelationship
Business logistics management covers the planning, organizing, and controlling of such
activities as transportation, inventory maintenance, facility location, order processing,
purchasing, warehousing, materials handling, packaging, customers service standards
and product scheduling. It provides the basic decision making tools and concepts used
for finding cost reduction and strategic opportunities.
Moving and storing materials throughout the supply chain require that managers make
decisions about facilities, inventory, transportation, order processing, communications,
and materials handling and packaging. Physical distribution management concept
recognizes that these activities must be integrated and coordinated as a system to
perform properly the distribution function because they are interrelated and
interdependent. Instead of each activity operating independently, the group of activities
should be managed as a system because their costs are interrelated. Attempting to hold
individual costs down may cause the total cost to skyrocket.
The activities are interrelated in the following ways:
1. Transportation: It is responsible for the physical movement or flow of
materials and goods in the supply chain. The logistics or PD manger is
responsible for selecting the modes of transportation used in moving the raw
materials and finished goods or for developing private transportation as an
alternative. We shall see how these decisions are made in relation to other
activities.
2. Warehousing: Warehousing involves storage and inventory management. A
relationship exists between transportation and level of inventory and the number
of warehousing required. If a company uses a relatively slow means of
transport, it will usually have to keep higher inventory levels and will usually
have more warehousing space for this inventory.
3. Packaging: The packaging of a product is broadly determined for product
promotion and product protection. The protection function is particularly
29
pertinent to physical distribution. In addition to protection, when designing
packaging for logistics purposes, packages should be easy to handle, convenient
to store, readily identifiable, secure and of a shape that makes best use of space.
The type of transportation selected affects packaging requirements both for
moving the finished products to the market and for the inbound materials. For
example, rail or water transportation requires additional packaging expenditures
because of greater possibility of damage. In analyzing trade-offs for proposed
changes in transportation modes, PD manager must examine how the change
will influence packaging costs.
4. Materials Handling: Materials handling is concerned with the movement of
goods into a warehouse, the placement of goods in a warehouse and the
movement of goods from storage to order picking areas and eventually to dock
areas for transportation out of the warehouse. Materials handling is usually
concerned with mechanical equipment for short distance movement. Such
equipment includes conveyors, forklifts trucks, overhead cranes and containers.
Packaging or container must be compatible with materials handling designs and
materials handling designs must be coordinated so that the company may find it
economical to use the same forklift trucks in the plants and in the warehouse.
5. Order Processing: Order processing consists of activities involved with
completing customer orders. A company might examine improvement
obtainable by using telephone calls and more computer equipment for
processing to reduce order cycle time. This might allow the firm to use much
cheaper transportation and still gets the goods to the customer within the
stipulated time (Coyle et al 2003:50).
6. Forecasting: Demand forecasting is used to estimate what the future
requirements for a product might be so that it is possible to meet customer
demand as closely as possible. Forecasting thus helps the inventory holding
decision process to find answers to questions about what to stock, how much to
stock and what facilities are required (Rushton et al 2006:213). They said all
mistakes in forecasting end up as an inventory problem – whether too much or
too little.
7. Production Scheduling: Production schedule involves the determination of
units necessary to ensure adequate market coverage. Once a forecast is
developed, and the current inventory on hand and usage rate are assessed, the
30
production manager can determine his production schedule; the number of units
necessary to ensure adequate market coverage and plan his inventory and
transportations.
8. Customer Service Level: Customer service level refers specifically to a firm’s
standards for performance in speed and reliability in making products available
to customers. Coyle et al (2003: 24) noted that customer service has three
recognized levels from a supply chain and logistics perspective viz the
minimum level is reliable, on time delivery, and accurately filled orders. They
explained that the basic level of service is necessary to retain customers and in
order to increase sales with customers it is necessary to be responsive to their
specified needs and requests. Hence the second level which may entail
scheduled deliveries, advanced shipment notices and so on. To sustain and grow
market share, they said the third and highest level of customer service is
required, namely adding value to important customers which may include
services like vendor – managed inventory, collaborative planning, forecasting
and decision making. Informed decisions about inventory, transportation and
warehousing ensure product availability and enhance customer service.
9. Inventory Management: Inventory consists of raw materials and parts, work-
in-progress, and finished goods located at production site and at various points
in the distribution channel. Many problems can occur with inventories including
stock-outs, incorrect inventory mix and excess inventory.
Inventory problems usually involve too much or not enough items in stock. Too
much stock leads to excess expenses in carrying inventory and too little stock
reduces customer service and creates customer dissatisfaction. Adequate levels
of inventory are carried to reduce delays in producing and distributing products,
provide flexibility in production scheduling and ordering materials, parts and
finished goods. Inventory is also carried to have available products when and
where buyers want to purchase them and also to take advantage of economies of
scale in purchasing bulk quantities.
10. Communication: Communication plays a critical role in the physical
distribution system considering the many organisations, individuals and
functions involved in moving raw materials and finished goods from suppliers
to producers and from producers to end-users respectively. Information
processing equipment such as telecommunication and computers are being used
31
to speed up information flow through the distribution network and to monitor
various aspects of physical distribution flows such as inventory levels, shipping
status, scheduling and so on. A critical function of the communication flows in
the channel of distribution is order processing, whereby the customer’s purchase
order is transmitted by paper or electronically. Technology has made electronic
order entry possible. Electronic order entry uses an electronic device to record
and transmit a customer’s order to the distribution location where the order will
be filled faster and more accurately than paper. Recently, internet facilitated
resources such as extranets and e-mail are being used for on-line, real time
transmission and processing. Also the old systems - paper, electronic data
interchange (EDI), phone and fax are being used for order processing. Order
processing function usually involves checking customer’s credit, transferring
information to sales records, shipping areas, and preparing shipping documents.
Many of these functions occur simultaneously through the effective use of
available information technologies and lead to considerable reductions in the
times needed to accomplish these activities and consequently increase customer
service level and customer satisfaction. Information can sometimes improve
service levels and lower costs at the same time because better information flows
make it easier to coordinate activities, improve efficiency and add value for the
customer (Perreault, Cannon and McCarthy 2010: 275)
11. Plant and Warehouse Site Location: Plant and warehouse site location is
very vital to physical distribution. Transportation cost is usually a very
important factor in deciding on a location. Coyle et al (2003:52) pointed out that
a location change could alter place and time relationships between plants and
markets. They explained that such changes could affect transportation rates and
services, customer service, inventory requirements and possibly other areas.
Consequently, the PD manager is quite concerned about location decisions.
12. Procurement: Procurement also known as purchasing and supply, is among the
key links in the supply chain and as such can have a significant influence on the
overall success of an organization. The rationale for this influence is that
transportation cost relates directly to the geographic location or distance of raw
materials purchased for a company’s production needs.
Rushton et al (2006: 236) pointed out that ensuring that there are sufficient
supplies of raw materials at the right price, of the required quantity, in the right
32
place and at the right time is obviously crucial to any manufacturing plant. The
quantities purchased would affect the logistics costs in terms of transportation
and inventory costs.
13. Other Activities: Other activities such as parts and services support, return
goods handling, salvage support and scrape disposal are integrated in the
logistics system and managed to ensure high customer service. These areas are
affected by transportation and storage decisions.
2.3.4 Objectives of Physical Distribution Management
The two major objectives of physical distribution management are:
1. Achieving a high level of customer service and
2. Keeping the total cost of physical distribution as low as possible given customer
service objectives (Cravens and Woodruff 2002: 926).
For most companies, the main objectives of physical distribution are to decrease costs
while increasing customer service. In the real world, however, few distribution systems
manage to achieve these goals. This is because the large inventories and rapid
transportations essential to high levels of customer service drive up costs, and reduced
inventories and slower, cheaper transportation methods that will decrease costs result in
low levels of customer services and cause customer dissatisfaction. According to
Armstrong and Kotler (2009:344) the goal of marketing logistics should be to provide a
targeted level of customer service at the least cost.
The level of service is important because it ensures that channel members, including the
ultimate consumer will be satisfied. But as the service level is improved, the cost of
distribution increases. Thus, physical distribution decisions involve a trade-off between
minimizing total distribution costs and maintaining a satisfactory level of service
(Schewe and Hiam 1998: 371). Costs of providing service are minimized most
effectively through the total cost approach, which evaluates the costs of the system as a
whole rather than as a collection of separate activities (Pride and Ferrelll 2001:419).
They explained that cost trade-offs must often be used to offset higher costs in one area
of distribution with lower costs in another area. Cost trade-offs are strategic decisions
to combine and recombine resources for greatest cost effectiveness.
A company’s failure to provide the desired level of service may mean the loss of
customers. The starting point for setting physical distribution objectives is to study
33
what the customers want and what competitors are offering. Customers require a
variety of services. At the most basic level, they need fair prices, acceptable product
quality, and dependable deliveries (Guelzo 2001:32). He said further that customers
seeking a higher level of customer service may also want sizeable inventories, efficient
order processing, availability of emergency shipments, progress reports, postsales
services, prompt replacement of defective items and warranties.
A company has to research on the relative importance of these services to customers. It
must also look at competitors’ service standards in setting its own. It must match those
standards at least when the costs of providing the services can be balanced by the sales
generated. But going a step further can provide a competitive advantage (Schewe and
Hiams 1998:371). The higher costs of providing more services must be studied
carefully because the overall objective is to maximize profits not sales, he concluded.
Finally, the company has to establish the physical distribution objectives to guide its
planning. For instance, Coco-cola wants to “put coke within an arm’s length of desire”.
The company should go further and define standards for each service factor. Services
are provided most effectively when service standards are developed and stated in terms
that are specific, measurable and appropriate for the product e.g. 98 percent of all
orders filled within forty eight hours (Pride and Ferrell 2001: 399). Standards should be
communicated clearly to both customers and employees and rigorously enforced.
2.3.4.1 Total Cost Analysis and Cost Trade-offs Concepts
The concept of total cost analysis is that a firm should identify and evaluate all costs
that will be impacted by any logistics system design.
Two important and related concepts to systems approach of physical distribution
concept are total cost analysis and cost trade-offs concepts.
The effect of a change in PD system is usually measured by some criterion such as cost
and the emphasis is upon the total cost of the system. We maximize product by
reducing the total cost of the system through cost-to-cost trade offs. When a change is
made in one part of the system it usually affects other variables. If the initial change
represents an increased cost then we may be trading-off against decreased costs in other
variables or vice versa so that overall costs are reduced.
Profit maximization is a vital concern and is usually the most important objective for
overall efficiency of any company. Physical distribution has to contribute to the overall
34
profitability of the company without undermining the customer service standards. This
is achieved by cost minimization through total cost analysis and costs trade-offs for a
given or improved level of customer service.
Logistics costs can be grouped into two categories:
1. Transportation based, and (2) inventory based (Bowerson et al 2001). These costs
interact, creating opportunity for cost-to-cost trade-offs. Thus, selected increased
expenditure for transportation services may significantly reduce inventory
expenditures. A trade-off is positive if inventory associated costs are reduced by a
greater amount than transportation cost was increased. For instance, with the use of air
transportation, the total cost of transportation is greater, but all costs associated with
inventory and warehousing are significantly reduced.
The overall objective of any service policy should be to improve customer service just
to the point at which increased sales will be negated by increased distribution costs
(Pride and Ferrell 2001: 399).
2.3.5 Customer Service
Customer service is generally seen as a product component hence forms part of the total
offer to the customer. Kotler (2000: 374) defines service as any activity that has value
to a buyer. Services are intangible, perishable and often have to be consumed at the
point of production, hence are more often seen as a component of the physical
distribution element in marketing because these services are delivered at the point of
exchange transaction with the customer or consumer. The constituents of what forms
service elements are numerous but companies determine which elements are relevant to
their own businesses. There is a general agreement on the following customer service
elements as most highly rated among companies.
Product availability
Order cycle time/reliability
Order/delivery frequency
Back order procedures
Return goods policy
Extension or adjustment could be made on the list to suit the unique customer service
requirements of companies by determining which elements are relevant to their own
business environment.
35
In order to facilitate a comprehensive overview of customer service, the National
Council of logistics management categorized customer service elements into three
levels namely;
1. Pre-transaction elements
2. Transaction elements
3. Post-transaction elements
Pre-transaction elements are the services the customers expect to benefit from even
before the actual transaction while the post-transaction elements are those the
customers also expect to benefit from after the transaction as shown in figure 2.5
Figure 2.5: Elements of Customer Service
Source: Rushton et al (2006)
2.3.6 Determining customer service requirements
A starting point is to know what happens in that industry. However, Ward (1989:413)
in Nwaizugbo and Nnabuko (2010: 95.96), advised that differentiating one’s service
level to the customer away from the normal level supplied by the industry can affect the
financial return achieved by the business. He says the change may be relatively small or
it can be quite dramatic and has very far reaching implications for the competitors.
This shows that it is not the industry practice, but the customers themselves that should
be the basis for determining the service requirement.
CUSTOMER SERVICE
Pre-Transaction elements 1. Written customer service
policy. 2. Single order contact point 3. Method of ordering 4. Order size constraints 5. Organizational structure 6. System flexibility
7. Technical services.
Transaction element s 1. Stock out level 2. Ability to back order 3. Order Cycle time 4. Delivery time 5. Delivery reliability 6. Delivery of complete
order 7. System Accuracy 8. Transshipment 9. Order conveniences 10. Product substitution.
Post-transaction elements 1. Installation warranty,
alterations, repairs part 2. Product tracking 3. Customer claims
complaints 4. Product packaging 5. Temporary replacement of
product during repairs.
36
El-Ansary and Stern (1990) suggest that the determination of customer needs and
requirements should be the starting point for formulation of channel strategy.
La- Londe (1985) in Nwaizugbo and Nnabuko (2010:96) provides a six-step customer
service model that will help to operate a customer-driven distribution system as shown
in figure 2.6.
Figure 2.6: A Customer Service Model
1. Customer Service Audit
2. Establish Customer Service Standard
3. Test Cost Sensitivity of Standard
4. Implement Standard
5. Development Reporting System
6. performance Evaluation
Source: Nwaizugbo and Nnabuko (2010)
The figure shows that any meaningful customer service oriented physical distribution
system must start with identifying the customer needs through a customer service audit.
The service standard is established based on the customer needs followed by the
analysis of its cost implication. At the implementation stage the aim is to achieve the
highest service standard at the minimum cost. Then performance evaluation and
periodic review of standards and programmes are made with a view to updating the
system.
However, it is not easy to assess and determine accurately the desired level of customer
service. According to Parasuraman, et al (1995: 46) there could be a gap between
various levels of consumer services perception, management perception of customer
expectation and also customer expected service.
Therefore, they suggested that a gap analysis was necessary in order to identify the
causes of service quality short fall. They designed a conceptual model of service quality
that highlights the various areas of possible shortfalls.
Periodic Review of Standards and Programmes
37
The model shows five possible areas a gap can occur. The areas are
Gap 1: Management perception of customer expectations and customers
expected service.
Gap 2: Management perception of customer expectations and service quality
specifications.
Gap 3: Service quality specifications and service delivery.
Gap 4: service delivery and external communications to customers.
Gap 5: Consumers perceived service and the consumers expected service.
Parasuraman et al went on to suggest that these gaps are interrelated to the extent that it
may not be possible to close one if others are not closed. The model provides a good
approach to the analyses and identification of the customer’s expected service level as
shown in figure 2.7.
Figure 2.7: Conceptual Model of Service Quality.
Gap 3
Source: Parasuraman, A. Zeithaml, V. A. and Berry L. L. A. (1985) “Conceptual
Model of Service quality and its implications for future research”, Journal of
Marketing. 1,149:44
Work-of mouth communication Personal needs Past Experience
Expected Service
Perceived Service
Service Delivery
External communications
to customers
Service Quality Specifications
Management perceptions of
customer Expectation
CUSTOMER
PROVIDER
Gap 4
Gap 3
Gap 1
Gap 2
Gap 5
38
According to Anyanwu and Nwokah (2008:49) perceptions are always considered
relative to expectations because expectations are dynamic evaluations which may also
shift over time from person to person and from culture to culture. They stated that what
is considered as quality service or what satisfies customers today may be different
tomorrow. Hence, discussion on quality and satisfaction is based on customers
perceptions of the service not predetermined objective criteria of what is or should be.
2.3.7 The Importance and Measurement of Customer Service
The importance of customer service is very often affected by substitutability of
products. If a product is one that is similar to other products, then consumers may be
willing to substitute a competitive product if a stock out occurs. Therefore, customer
service is more important for highly substitutable products than situations where
customers may be willing to wait or back order a particular product. This means that
the more substitutable a product is, the higher the level of customer service that is
required. Products in soft drink industry are highly substitutable that higher level of
customer service is required.
The growth of competition, the raising of customers’ expectations and the similarity of
basic products that are offered make customer service so important in determining the
final demand for a product. Customer service only represents a small percentage of the
cost of a product. Thus, true to pareto 80/20 rule, it is estimated that product surround
(augmented product) or logistics elements represent about 80 percent of the impact of
the product but only represent 20 percent of the cost (Coyle et al 2003:34).
No matter how attractive the product may be, it is essential that the customer service
elements are satisfactory. And logistics plays a crucial role in providing good customer
service which is captured in the definition of PD or logistics as positioning of resources
in the right place, at the right time, at the right quality, at the right cost. The definition
is explained into what is called the seven “rights” of customer service. These are the
right product in the right quantity to the right customer in the right place at the right
time in right condition and at the right cost. All of these different aspects are key
requisites of a good customer service offering. Each of them is essential to ensure a
product achieves its expected sales in the various markets where it is made available.
All of these elements are affected by the standard and quality of the logistics operations
that are integral part of getting a product to market. Hence, these elements can provide
39
the basis for identifying the different aspects of logistics that should form part of any
customer service offering. Also, these elements should become the basis of the key
measurements that are used to monitor operational success or failure of logistics.
According to Coyle et al (2003: 101) the four traditional dimensions of customer
service from a logistics perspective, time, dependability, convenience, and
communication, are essential considerations in developing a sound and effective
customer service program.
Time is usually order fulfillment cycle time.
Dependability involves guaranteed fixed delivery times of accurate, undamaged orders.
Communication entails ease of order taking, and queries response while convenience or
flexibility involves the ability to recognize and respond to a customer’s changing needs.
They recommended these dimensions of customer service to be used as the underlying
basis for establishing standards of performance for customer service in the logistics
areas. They expanded the four elements in a format that are used by companies in
developing customer service policy and performance measurement standards. The
format is shown in figure 2.8 below.
Figure 2.8: Elements and measurement of customer service
Element Brief Description Typical
Measurement
(Units)
Product
availability
The most common measure of customer
service. Usually defined as percent in stock
(target performance level) in some base unit
(i.e order, product, dollars).
% availability in base
units
Order cycle
time
Elapsed time from order placement to order
receipt. Usually measured in time units and
variation from standard or target order cycle.
Note: frequently, product availability and order
cycle time are combined into one standard. For
example, “95 percent of orders delivered
within 10 days”
Speed and
consistency
40
Distribution
system
flexibility
Ability of system to respond to special and/or
unexpected needs of customer. Includes
expedite and substitute capability
Response time to
special requests
Distribution
system
information
Ability of firm’s information system to
respond in timely and accurate manner to
customers’ requests for information
Speed, accuracy and
message detail of
response
Distribution
system
malfunction
Efficiency of procedures and time required to
recover from distribution system malfunction
(i.e., errors in billing, shipping, damage,
claims)
Response and
recovery time
requirements
Postsale
product
support
Efficiency in providing product support after
delivery, including technical information,
spare parts, or equipment modification, as
appropriate
Response time,
quality of response
Adopted from Coyle, Bardi and Langley (2003)
Though service is hard to measure, it is readily apparent to everyone. The
empowerment of front line employees to use their best judgement to make on-the-spot
decisions greatly facilitates high quality performance.
Service breakdown will occur occasionally in spite of the established standards and
empowerments. Customer service leaders when confronted with breakdowns or
unexpected situations, typically exhibit what has been referred to as an ability to make
brilliant recoveries (Hart, Heskett and Sasser 1990: 148-156). A brilliant recovery is a
resolution to a service breakdown in which the service provider takes extraordinary
efforts to meet customers’ requirements. A brilliant or “immaculate” recovery involves
a management culture which recognizes that service breakdowns will occur and that
fast resolution can, in the final analysis cement customer’s loyalty (Zemke 2001).
2.3.8 Customer Satisfaction
Customer satisfaction construct occupies a significant position in marketing literature.
Marketing scholars and practitioners agree that customer satisfaction serves as a strong
predictor of variables such as repurchase intention, positive word-of mouth and
customer loyalty.
41
Customer’s satisfaction research is mainly influenced by the “disconfirmation
paradigm” This paradigm explains the concept of customer satisfaction. It states that
a customer’s feeling of satisfaction is a result of comparison process between
perceived performance and expectation .A customer will be satisfied when the
outcome of the service or product meets his or her expectations(confirming).If the
product or service performance is more than his expectations, the customer is very
satisfied and delighted (positively disconfirming). Contrarily, when the perceived or
expected service or product performance is below or less than his expectations, we can
strongly say that the customer will be dissatisfied (negatively disconfirming).
Although most scholars agree on the disconfirmation paradigm , the nature of
satisfaction remains ambiguous .On one hand , satisfaction clearly arises from a
cognitive process comparing perceived performance against some comparison
standard while on the other hand , the feeling of satisfaction essentially represents an
affective state of the mind .Consequently , some satisfaction scales tap the cognitive
dimension of satisfaction, while others capture its affective dimension (Andreas and
Wolfgang 2002:107-118).The above mentioned facts lead to the broad definition of
customer satisfaction which incorporates both the cognitive and affective process and
few other definitions.
Customer satisfaction is defined as “An emotional response to the use of a product or a
service: and it is also a complex human process, which involves cognitive and affective
process, as well as other psychological and physiological influences” (Chu, 2002:285).
Kotler et al (2007:144) say that customer satisfaction depends on a product’s or a
service’s perceived performance in delivering value relative to the buyer’s
expectations. If the performance of the product or service does not correspond to the
customer’s expectations, the buyer is dissatisfied. If performance matches expectations,
the buyer is satisfied. If the performance exceeds expectations, the buyer is highly
satisfied or delighted. “Customer satisfaction is customers’ overall evaluation of the
purchase and consumption experience with a product, service or provider” (Johnsson
and Gustafson, 2000: 50).
2.3.8.1 Drivers of Customer Satisfaction
Many scholars have come up with many factors as to what should be the major drivers
of customer satisfaction. Drivers of customer satisfaction are those factors which
42
influence people’s level of satisfaction. Some of the key drivers to customer
satisfaction are:
� Perceived value (Pv)
� Quality
� Customer’s Expectation.
Perceived Value: This is the perceived level of product quality relative to the price
paid by the customers. PV is the rating of the price paid for the quality perceived and a
rating of the quality perceived for the price paid. PV structure provides an opportunity
for comparison of the firms according to their Price –Value ratio. It means the measure
of quality relative to the price paid .Although price (value for money ) is often very
important to the customers first purchase, it usually have a smaller impact on
satisfaction for repeat purchases.
Quality: Customer satisfaction is a measure of the quality of a product or service.
Quality may be defined as customers satisfaction with the quality of the goods or
services purchased and used. Quality can also be defined as “The totality of features
and characteristics of a product or service that bears on its ability to satisfy stated or
implied needs. (Kotler et al 2007: 146). The perceived quality should have a direct
effect on satisfaction. As a psychological phenomenon, satisfaction is a function of a
customers quality experience with a product or service .. This quality experience
consists of two primary components :i) the degree to which a product or service
provides key customer requirements, (customisation) ii) how reliable these
requirements are delivered (reliability). The greater the perceived quality is the greater
the customer satisfaction.
Customers Expectation: Customers expectation is a measure of the customer’s
anticipation of the quality of a company’s products or services. Expectation represents
both prior consumption experience, which includes some non-experiential information
like advertising, word-of-mouth, and a forecast of the company’s ability to deliver
quality in the future.
2.3.8.2 Factors that Influence Customer’s Expectations
Recognition of the factors that influence customer’s expectations will help
products/service providers to provide services or products that meet customer’s
expectations. When consuming a product or service, consumers are likely to be
satisfied according to the levels of their needs fulfillment. Based on the Maslows
43
hierarchy of needs, some researchers have classified the needs into satisfiers and
dissatisfiers (Herzberg 1970) or lower-order and higher-order needs (Wolf, 1970) cited
in pignier (2005:35). Depending on the classification of the needs , many theories of
needs satisfaction arose , such as Wolfs needs gratification theory that assumes that
satisfaction /dissatisfaction will ensue from lower-order needs if theses are not
fulfilled and that once they are unconditionally fulfilled, satisfaction/dissatisfaction
will ensue from higher-order needs fulfillment. In addition, Parasuranman et al
(1995:25) outlined four key factors that shape customers expectations
1. Word-Of-Mouth: The first factor which potentially determines customer’s
expectation is the word of mouth he or she has heard from other customers.
2. Personal needs: The second factor that influences customer’s expectation is the
customer’s personal needs. These are customers’ physical, moral and mental
situations or state.
3. Prior experience: The customer’s prior experience towards the use or
consumption of a particular product or services often influences his
expectations.
4. Advertisement/external communication: Customers expectations are also
influenced by external communications. This communications contain all direct
and indirect messages sent from supplying organisations to the customer.
2.3.8.3 Customer Satisfaction Index (CSI).
Measuring customer satisfaction is a positive step by organisations seeking to ensure
its existence in the competitive environment .This is because one key to customer
retention is customer satisfaction. According to Kotler et al (2007:145), a highly
satisfied customer generally stays loyal longer, buys more of the company’s products,
upgrades existing products, talks favourably about the company and its products ,
pays less attention to competing brands and is less sensitive to price, offers product
or service ideas to the company, and costs less to serve than new customers because
transactions are routine.
Customer satisfaction represents a measure of company’s performance according to
customers needs (Hill et al 2003 as cited by Ode et al 2011:26). Therefore, the measure
of customer’s satisfaction provides a service quality measurement done by the use of an
economic indicator called the Customer Satisfaction Index (CSI).
44
Customer satisfaction index is all about the measurement of the different attributes that
are believed to contribute to customer’s satisfaction. It is a more direct measure for
service quality evaluation on the basis of the user/consumer perceptions on service
aspects expressed in terms of importance rates, compared with the user/consumer
expectations expressed in terms of satisfaction rates. Since different attributes can
contribute differently to the overall customer satisfaction, the individual attributes are
weighted to reflect this reality. The concept of customer satisfaction was introduced in
the field of market research as a measure of perceived service quality. In this field
many customer satisfaction techniques have been developed among these include the
best known and widely applied technique the SERVQUAL method proposed by
Parasuraman et al (1988). The SERVQUAL method introduced the concept of
customer satisfaction as a function of customer expectation (what the customers expect
from the service or product) and perceptions (what the customer receives).The method
was developed to assess customer’s perceptions of service quality in retail and service
organisations. In the method, five service quality determinants and twenty two items for
measuring service quality are defined.
The Service Quality Determinants are:
Reliability: Ability to perform the promised service accurately and dependably
Responsiveness: Willingness to help customers and provide prompt services
Assurance: Knowledge and courtesy of employees as well as their ability to convey
trust and confidence.
Empathy. Individual care and attention which a company provides to its customers.
Tangibles: Physical facilities, equipment and appearance of personnel-communication
materials
22 SERVQUAL Attributes (Service Quality Attributes)
Reliability
Providing service as promised
Dependability in handling customer’s service problems
Performing service right the first time
Providing service at the promised time
Maintaining error free record
45
Responsiveness
Keeping customers informed as to when services will be performed
Prompt services to customers
Willingness to help customers
Readiness to respond to customer’s requests.
Assurance
Employees who instil confidence in customers
Making customers feel safe in their transactions
Employees who are consistently courteous
Employees who have the knowledge to answer customers questions
Empathy
Giving Customers individual attention
Employees who deal with customers in a caring fashion
Having the customers best interest at heart
Employees who understand the needs of their customers.
Convenient business hour
Tangibles
Modern equipments
Visually appealing facilities
Employees who have a neat , professional appearance
Visually appealing materials associated with the service.
Source: Kotler et al 2007.413-414
SERVQUAL provides an index that is calculated through the difference between
perceptions and expectation rates expressed for the items, weighted as a function of the
five service quality dimensions embedding the items. Studies have shown that
reliability is the most important dimensions followed by the process factors
(responsiveness, assurance and empathy) and tangibles the least. All these factors are
distinguished by their influences on meeting expectations.
2.3.9 Physical Distribution Decisions
According to Onah and Thomas (2004:381) a PD-system is composed of three major
components.
i. A set of fixed facilities at which goods are produced or inventories are stored
ii. A set of inventories of goods
46
iii. A transportation network connecting the fixed facilities to one another as well as
to the customer receiving points.
Kotler (2001: 555), stated that the four major decisions to be made with regard to
market logistics are:
1. How should orders be handled? (order processing);
2. Where should stocks be located? (Warehousing);
3. How much stock should be held? (Inventory); and
4. How should goods be shipped (Transportation).
Stanton (2000:356), stated that an effective physical distribution system is built around
five parts or subsystems and there is much interaction and interdependence among
them. Consequently, each part must be carefully coordinated with the others to ensure
higher customer service level.
These subsystems are:
1. Inventory control
2. Transportation
3. Inventory locations and warehousing
4. Order processing and
5. Materials handling
These subsystems correspond to Kotler’s four major decision areas except that
materials handling is added which is justified by emphasizing the special role of
packaging in making transportation decisions.
The major decision areas or PD subsystems constitute the total PD costs. According to
Kotler (2000:591) the main elements of total physical distribution costs are:
1. Transportation (46 percent), warehousing (26 percent), inventory carrying (10
percent), receiving and shipping (6 percent), administration (4 percent) and order
processing (3 percent). Management has become concerned about the total cost of
physical distribution which amounts to 13.6 percent of sales for manufacturing and
25.6% for reseller companies (Lalonde and Zinser 1990). Marketing practitioners and
theorists believe that substantial savings can be effected in the physical distribution area
which has been described as “the last frontier for cost economies” (Parker 1962: 15-
21).
The need for coordination of PD decisions is based on high costs involved and the
substantial cost saving potentials they have and their tremendous effects on customer
47
service and customer satisfaction. Physical distribution decisions, when uncoordinated
result in high costs and customer dissatisfaction. Hence, the need to use modern
decision tools such as inventory control models, transportation models etc for
coordinating inventory levels, transportation, plant, warehouse and store locations.
Besides, there should be policies guiding physical distribution decisions. Ehikwe
(2002:77) observes that the formulation and implementation of policies facilitate the
accomplishment of the goals and objectives of an organization. The PD decision areas
are examined as follows:
2.3.9.1 Inventory Control
A key activity in any PD system is maintaining control over the size and composition
of the inventories. Inventory represents a sizeable investment for many organisations.
The goal of inventory control is to minimize both the investment and the fluctuations in
inventories which militate against filling customer’s orders promptly and accurately.
According to Morden (1993: 181), inventory is held for three main reasons, the first is
the achievement of marketing objectives for customer service; the second aim is the
protection of production processes from variations in demand, so that production levels
may be stabilized despite demand fluctuations around the planning norm or forecast.
The third aim is to permit the manufacture or supply of items in economic quantities.
Inventory size is determined by balancing market demand and costs. Market demands
on inventory are anticipated through sales forecasts. Inventory costs include:
a. acquisition costs; that is the cost of making or buying the products to put in
inventory and
b. Carrying or holding costs – warehousing, interest on investment, losses due to
spoilage and pilferage, inventory taxes and so on. Inventory size is also determined
to a large extent by the desired level of customer service. That is, what percentage
of orders does the company expect to fill promptly from inventory on hand?
Inadequate inventory causes stock-out. Stock-out conditions result in lost sales, loss
of customer goodwill and often loss of customers. Nevertheless, to be able to fill
100 percent of the orders promptly may require an excessively large and costly
inventory. Related to the size question (how much stock to be held?) is the need to
establish the optimum quantity to re-order (make or buy), when it is time to
replenish inventory stocks. The size of replenishment orders affects inventory level
to be maintained at various stocking points (Sharma 2007: 606). He says large order
48
quantities may reduce the frequency of orders to be placed to procure inventory
items and reduce the total ordering cost but this decision will increase the cycle
stock inventories and cost of carrying inventories. Any decision on replenishment
order size, he advised, should provide economical trade-off between relevant
inventory costs, viz ordering, carrying and shortage costs. This is stated in terms of
economic order quantity (EOQ).
EOQ is the optimal replenishment order size of inventory item or items which achieve
the optimum total inventory cost during the given period of time.
This is determined by the equation
Q * (EOQ) = 2DCo = 2 x Annual demand x ordering cost
Cc Carrying cost
EOQ is also determined graphically as shown in figure 2.9. Inventory Cost Curves.
Figure 2.9 shows inventory carrying cost curve rising, the larger the size of order and it
also shows the cost of ordering falling, the larger the order size. If the two costs are
summed into a total inventory curve, the optimum order size is given by this curve’s
lowest point, the answer to the question how much to order is given by the point Q*
Figure 2.9: Inventory Cost Curve
Adopted from Wilson and Gilligan (1997)
N
Co
st p
er u
nit
0
Ordering costs per unit
Total inventory cost per unit
Inventory carrying costs per unit
Q* Order quantity (units)
49
The EOQ minimizes the supplier’s stock holding and order processing costs as shown
in figure 2.9
The reorder point is given by rate of usage per day multiplied by lead time ie
The reorder point (in units)
= rate of usage (units per day) x lead time (days) + safety stocks (in units)
Besides EOQ model, there are other inventory control models such as Materials
Requirement Planning (MRP), Distribution Requirement Planning (DRP) and Just-in-
Time (JIT) inventory Models. The JIT inventory model may be stockless. The
operations of these models are discussed below.
2.3.9.1.1 Material Requirement Planning and Distribution Requirement Planning
MRP and DRP systems are developed as sophisticated computerized planning tools that
aim to make the necessary materials or inventory available when needed. Materials
requirement planning is an inventory control technique for determining dependent
demand for manufacturing supply (Coyle et al 2003: 26). It is a computerized system
for forecasting materials requirement based on a company’s master production schedule
and bill of material for each product. MRP is a principle of production scheduling
which is based on the premise that if one knows what product needs to be produced,
then one should also know how many constituent parts are required in order to make
the product. If we need more than one, which is usually the case, then we would simply
multiply the various requirements for one product by the number required. This
represents our bill of requirements and orders could be placed with suppliers for the
required quantities and delivery times agreed. The master production schedule is a list
of all the products or services to be supplied within a specific period of time. The
schedule is made up of forecast demand and actual known demand i.e. customers’
orders. The schedule also lists the required output from the system and when the goods
and services are required through the use of a “due dates”. Hence the content of the
schedule will dictate the contents of the bill of requirements.
DRP systems operate by breaking down the flow of material from the source of supply
through the distribution network of depots and transportation modes. DRP uses
forecasts demand from master production schedule as inputs for the planning. It is done
on a time-phased basis to ensure that the required goods “flow” through the system and
are available as and when required at the right time, place and condition.
50
2.3.9.1.2 Just-in-Time (JIT) and Stockless Distribution
Just-in-time is an inventory supply system that operates with very low inventories and
requires fast, on-time delivery. Physical distribution is increasingly carried out now on
a just-in-time (JIT) basis. Just-in-time model is based on the concept of carrying out
operational and supply activities only as and when required, according to the pull of
demand from the customer. With JIT system, activities are scheduled so that each stage
in the value generating process delivers exactly the quantity and quality required to
allow the next stage to proceed to the eventual satisfaction of the current level of
customer demand. Consequently, there should be minimal stocks and work-in-progress
held throughout the production, supply and physical distribution system.
Morden (1993:185) opines that JIT requires the precise scheduling of raw materials and
subassembly purchasing, production or supply planning, manufacturing, physical
distribution and delivery to the customer. He explains that orders will only be
manufactured or supplied once they have been received. And the only finished goods
stocks will be those in transit to the customer or the minimum safety stock required by
distributors to avoid short term stock-out. He says the basic philosophy underlying JIT
is that:
a. Materials or components should be delivered to the factory just in time to be
used;
b. production or processing should be completed just in time for the goods to be
sold or delivered to the customer;
c. Physical distribution systems should be sufficiently sensitive and flexible to
permit a just in time response to meeting customer demand, minimizing
inventory levels held throughout the channel of distribution but avoiding the
incidence of stock-out.
The implementation of JIT philosophy ensures that inventory levels and the working
capital they represent are significantly reduced. Stock outs are avoided by organizing
suppliers, manufacturers and distributors on a teamwork or partnership basis to make
deliveries as and when required to meet the current level of customer demand while
keeping minimal or even zero stock in the process. Suppliers, manufacturers and
distributors will have to guarantee the quality they are required to deliver through
systems of Total Quality Management (TQM) because there is no room for faulty
products or ineffective physical distribution through late delivery, damaged goods or
51
loss of freshness since there may be no buffer or safety stock to prevent a stock-out
occurring.
2.3.9.2 Transportation
The transportation system is the physical link connecting a company’s customers, raw
materials suppliers, plants, warehouses and channel members, all of which represent the
fixed points in a logistics supply chain. The fixed points in the logistics system are
where some activities temporarily halt the flow of goods in the logistics pipeline.
Consequently, the transportation carriers used to connect these facilities affect not only
the transportation cost but also the operating costs of the facilities and the prices paid
by the ultimate users of the products.
The transportation carrier a company utilizes to perform the link service is a decisive
factor in determining the efficiency of operating the supply chain facility and partially
determines the company’s competitive edge and product demand in a given market area
(Coyle et al 2003: 338). They also posited that the transport methods dependability and
the degree of safe delivery also affect the inventory levels held at a facility, the
utilization of materials handling equipment and labour, and the time and cost of
communicating with the carrier to determine shipment status or to seek reparation for
goods damaged in transit. Hence, as with any logistics activity decision, vendor price
(carrier rate) is not the only selection criterion the company considers. Thus
management must decide on both the particular carriers and the form of transportation
to use.
Morden (1993: 186) states that the choice of transportation modes is a function of some
variables which include the following:
- customer service objectives for place and frequency of availability
- volume and distance
- product life
- containment type
There are various transportation modes available and each has specific advantages
within the context of the contribution of the PD system to meeting customer service
objectives. Kotler (2006) identified six transportation modes which are:
52
• Air
• Rail
• Road
• Water
• Pipeline
• Multiple mode
He also stated that every mode has unique advantages and disadvantages.
Air is cost effective over long distances for low volume, high unit value items requiring
rapid delivery. Rail is cost effective over intermediate to long distances for high volume
loads of low or high unit value. Road is cost effective over short to intermediate
distances for a wide variety of unit load type and has the critical advantage of flexibility
and reliability because it is not dependent on fixed routes like rail or air. Water is cost
effective for low unit value, high volume loads not requiring rapid delivery like coal,
iron ore, steel and so on. Pipeline transportation is not suitable for general commodity
transportation. Its use is restricted to the movement of liquid petroleum products and it
is best suited for them.
The choice or usage of any mode varies according to company’s needs and factors to be
considered. For example, if a company wants quick delivery to customer, it has to put
many things into consideration – the destination, the volume or weight of the product,
availability of air port, time factors and carrier costs. The company chooses air if these
considerations meet set criteria otherwise it chooses road. In some cases, a combination
of different modes is used. For example, petroleum is transportated to the depot through
pipeline and from there trucks (road) pick up the loads to the various filling stations.
Also products can be loaded on trucks at the seller’s warehouse and driven to rail road
where the truck’s trailers are carried on rail road flat cars (piggyback). The product
need not be handled again until they are unloaded at the buyer’s receiving stations. This
combination of services provides more flexibility than rail road alone can offer, results
in lower freight costs than trucks alone and less handling of the goods. The loaded
trailers can as well be carried on barges or ships (fishyback). Then at the other end of
the water trip, the trailers are trucked to the receiving station. A company may
outsource part or all the transportation activities to third party logistics providers.
53
2.3.9.2.1 Third Party Logistics
Third party logistics is an arrangement in which a firm with long and varied supply
chains outsources its logistical operations to one or more specialist firms, the third party
logistics providers.
Third party logistics provider (3PL or TPL) is a firm that provides service to its
customers of outsourced (or “third party”) logistics services for part or all of their
supply chain management functions.
They specialize in integrated operation, warehousing and transportation services that
can be selected and customized to customer’s needs based on market conditions and the
demands and delivery service requirements for their products and materials.
In business, third party logistics has a wide meaning which can be applied to any
service contract that involves storing or shipping things. A 3PL services may be a
single service such as transportation or ware house storage or it can be a system-wide
bundle of services capable of managing the entire supply chain. Then the provider is
called third party supply chain management provider (3PSCM) or supply chain
management service provider (SCMSP)
Hertz and Alfreds (2003) described four categories of 3PL providers:
1. Standard 3pl provider: This is the most basic form of a 3pl provider. They
perform activities such as pick and pack ware housing and distribution- the most
basic functions of logistics.
2. Service developer: This type of 3pl provider offers their customers advanced
value-added services such as; tracking and tracing, cross docking, specific
packaging, or providing a unique security system. Hertz and Alfredsson pointed
out that a solid IT foundation and a focus on economies of scale and scope will
enable this type of 3pl provider to perform this type of task.
3. The customer adapter: This type of 3pl provider comes in at the request of the
customers and takes over complete control of the company’s logistics activities.
The 3pl provider improves the logistics dramatically, but does not develop a
new one. The customer base is usually small.
4. The customer developer: This is the highest level that a 3pl provider can attain
with respect to its processes and activities. This occurs when the 3pl provider
integrates itself with the customers and takes over their entire logistics
functions. The provider usually has few customers but perform extensive and
detailed tasks for them.
54
However, Murray (2011) identifies three types of Third Party Logistics Company that
operate today.
Viz:-
1. Asset Based
2. Management Based
3. Integrated Providers.
Asset based third party logistics companies make use of their own trucks, ware houses
and personnel to operate their business.
Management based companies provide the technological and managerial functions to
operate the logistics functions of their clients but do so using the assets of other
companies and do not necessarily own any assets.
Integrated providers can either be asset based or management based companies that
supplement their services with whatever services are needed by their clients.
2.3.9.2.2 Selecting a Third Party Logistics (3pl)
Decision to use a third party logistics depends on different factors and varies from
business to business. The decision to outsource certain business functions will depend
on the company’s plans, future objectives, product lines, expansion, acquisitions and so
forth.
Once a decision has been made to outsource certain functions, then a company will
begin a search for the right 3pl that fits all their requirements at the best possible price.
The company should send out the request for information (RFI) or request for quotation
(RFQ). The RFI must include a thorough description of the areas to be outsourced.
Murray (2011) pointed out that this should usually include;
• The scope of the contract, including locations, facilities, departments.
• Information on volumes involved; number of deliveries, warehouse sizes, number
of items, etc.
• The logistics tasks that are to be performed, e.g. warehousing, transportation, etc.
• The level of performance required.
After the bids have been received by a company from the prospective 3PL, an
evaluation would take place where a multi-discipline team will review each bid based
on the pre-defined set of criteria. Usually top two or three companies are selected. The
3pl that is finally selected after site visits; face to face interview should be able to fulfill
all the logistics requirements.
55
3. Inventory Location & Warehousing
Warehouses provide the physical space for storing inventories. According to Craven
and Woodruff (2001: 419) warehousing does the following:
- Achieves production and transportation economies
- Enables quantity purchase discounts
- Maintains a source of supply
- Supports customer service policies
- Hedges against changing market conditions
- Overcomes time and space differentials that exist between producers and
consumers.
According to Lambert and Stock (2000:182), warehousing helps accomplish the
development of an effective physical distribution system.
Warehousing and inventories are closely interrelated because one requires the other. A
company must make decisions regarding the size, location, handling and transportation
of inventories. Decision making in these four areas are interrelated. For example,
decisions on the number and locations of inventory sites influence decisions on
inventory size and transportation methods.
Effective PD system requires sound warehouse management. Warehouse management
involves a number of important decisions, including ownership, number, size, stocking
and location. That is what type, organisation, how many, what size, what products and
where. These basic warehouse decisions are made in a trade-off framework. According
to Boone and Kurtz (2004: 458) two categories of costs influence warehouse decisions:
1. Warehousing and material handling costs and
2. Delivery cost from warehouses to customers.
The total cost, including the service impact on lost sales, is the criterion used to make
the decisions. For example, having many warehouses increases services provided to the
customer because the product is located closer to the customer. However, the trade-off
is higher warehousing, inventory and transportation costs. The total cost will be the
determining factor. Another important decision is on whether the company should own
private (or lease) warehouses or use public warehouses. Many companies combine
public and private warehouses because of market conditions. The company will also
decide on whether to centralize or decentralize warehousing. This implies deciding on
56
how many warehouses to use. A centralized inventory can be smaller in total size, can
be better controlled and is more responsive to unusual requests. That means efficiency
is increased. On the other hand, centralizing the stock often means higher total
transportation charges and slower delivery to some segments of the markets.
Decentralizing the inventory presents the other side of the coin on each of these points.
Surprisingly, according to Coyle et al (2003: 288) modern practice – decreasing a
system’s number of warehouses is becoming the preferred way to meet the same needs.
They pointed out that warehouse building and operating costs are great and that in
reducing the number of warehouses, a company can eliminate those unproductive
facilities that incur wasteful costs. Combining the utilization of fewer warehouses with
a reliable transportation system can improve customer service and lower transportation
costs through consolidation opportunities.
Closely related to how many warehouses should be in the network is the question of
where or location of the warehouses. A company must examine location in a trade off
perspective such as high service facilities near markets or raw materials mixing close to
suppliers. The company must choose the one that must achieve desired level of
customer service at the least possible logistics costs.
2.3.9.3.1 The Distribution Centre (DC) Concept
The establishment of one or more distribution centres may be an effective inventory
location strategy. Such centres are planned around markets rather than transportation
facilities. This will usually consist of a number of DCs on a regional or area basis and
the use of large primary (hire haul) vehicles to service these, with smaller vehicles
delivering the orders to customers (Rushton et al 2006: 137).
These depots or DCs might be Central, Regional (RDC), National (NDC) or local DCs
which will hold stock to a great extent from factories to help provide good customer
service. The basic idea is to develop under one roof an efficient, fully integrated system
for the flow of products – taking orders, filling them, and delivering them to customers.
The use of distribution centres has lowered distribution costs by reducing the number of
warehouses, cutting excessive inventories and eliminating stock-out conditions. Storage
and delivering time have been cut as a result thus buttressing the adage that companies
are in business to sell goods, not to store them.
57
2.3.9.4 Order Processing
Order Processing is a set of procedures for handling and filling orders. Decisions on
order processing should specify
- the minimum size of order;
- conditions of sales and purchase;
- the system to be used to process orders;
Decisions on these areas are interdependent since the time taken to process an order
will depend on the order processing system in use, which then determines the costs of
order processing, which in turn, dictates the minimum size of order which an be
economically handled.
Stanton (2000: 360) stated that the decisions should include provisions for billing,
granting credits, preparing invoices and collecting of past-due accounts. “Consumer ill-
will can result if a company makes mistakes or is slow in filling orders”, he warned.
Order processing subsystem is an extremely important part of the PD system and is also
one of the most important components of the company’s overall management
information system. There is the need to coordinate order processing activities and
decisions in a way that both present and potential customers will have a positive view
of consistent and predictable order cycle length and acceptable response time. By
starting the process with an understanding of customer needs, companies can design
order-management systems that will be viewed as superior to those of competitors. A
company’s order-management capabilities will contribute toward producing a
competitive advantage (Coyle et al 2003: 87).
One of the modern methods used for order processing is the Electronic Point-of-Sales
Systems (EPOS) which link ordering systems with automatic stock control and stock
re-ordering systems. A further development is Electronic Funds Transfer at the Point-
of-sales (EFTPOS) which simultaneously debits the buyer’s bank account.
2.3.9.5 Materials Handling
This function is concerned with various aspects of handling products and materials
throughout the distribution system. The physical handling of goods involves inventory,
warehousing and transportation activities throughout the distribution network. For
instance, consider the number of times a crate of coke is handled as it is moved from
point of production to a refrigerator in a restaurant. From the production line it is placed
in a crate of several bottles of coke. The crate is fastened with other crates on a pallet,
58
loaded by a forklift on to a trailer and trucked to a distributor’s warehousing, unloaded
and packed. After remaining in the distributor’s inventory for some time, it is picked
for loading and transport to the restaurant where the crate is unloaded and several
bottles put in the refrigerator. These simple tasks highlight the many handling tasks
involved in the physical distribution of goods.
Two important developments are making substantial contributions to materials
handling–unitization and containerization. Unitization is a cargo handling system in
which as many packages as possible are stacked onto one load or pallet and held in
place by straps or plastic sheeting. Containerization is a cargo handling system in which
several unitized loads are combined in a container specially designed for efficient
handling. The containers are then transported unopened from the time they leave the
shipper until they reach their destination. Therefore, decisions must be made about
warehouse building, equipment and packaging. The warehouse should accommodate
the use of forklift trucks, cranes, conveyor belts and other mechanized equipment to
move merchandise.
Proper equipment and package can minimize losses from breakage, spoilage and theft.
Efficient equipment and effective package can reduce handling costs as well as the time
required for handling thus increasing customer service and customer satisfaction.
2.3.10 Designing and Managing Physical Distribution System
Physical distribution system design begins with the objectives and levels of customer
service a company determines as appropriate for the market. Then to implement the PD
systems, PD manager coordinates and integrates its various components.
A company has to determine which aspects of customer service are important to
patronage and the levels of service to establish. Often these decisions are based on
considerations of several factors including past experiences, customer feedback,
competition and costs (Craven and Woodruff 2001: 427). They advised that
management must balance both the costs and benefits of customer service.
Quantifying the benefit side of customer service is more difficult. For instance, how
much is one percent improvement in the distribution system likely to increase future
sales is hard to determine. Thus, a typical approach to setting standards is to rely
majorly on judgment, experience and competition. For example, management of coca-
cola may decide that accurate order taking and undamaged delivery are far more
59
important than convenience of ordering system. Once this is established, over time, a
company may adjust service levels based on experience, customer feedback,
competition and costs. The various components of PD system that must be integrated
are interrelated and have some trade-off relationships.
A major approach to balancing the costs side is to identify two or three of the major
contributors to distribution costs and then attempt to design a system that minimizes the
total of these costs for specified customer service objectives (Cravens and Woodruff,
2001: 429). This is illustrated in figure 2.10.
Figure 2.10: Relationship between Service Level and Costs
Adopted from Wilson and Gilligan (1997)
If we define level of customer service as being dependent on costs of quicker
transportation and faster order processing as well as inventory carrying cost, this will be
seen to increase as the level of customer service increases. But the loss of profit due to
lost sales (whether due to stock-outs, slow transportation, inefficient order processing
etc) reduces as the level of customer service increases. A total cost curve was derived to
identify the optimal level of customer service to offer; that is at the lowest point of the
total cost curve.
Cravens and Woodruff acknowledged that this approach is not a perfect solution but it
lowers distribution costs. They suggested that using this approach as a base over time
that further refinements could be made. According to Wilson and Gilligan (1997:506),
N
Co
st
100%
Transportation, order processing and inventory carrying costs.
Total cost
Cost of lost sales
0 Level of customer service
60
the approach is helpful to a point but it risks being introspective in linking service level
purely to costs rather than to customers’ requirements. A better approach to distribution
planning is given by Doyle (1994: 330) involving the following sequence of steps:
1. Identifying the dimensions of service which customers value.
2. Weigh the service dimensions by their relative importance
3. Obtain customers’ evaluations of the enterprise and its competitors along the
dimensions specified in 2.
4. Estimate the effect on revenue of changes in the level of service.
5. Estimate the costs of providing different service levels
If one pursues this approach it is possible to derive the graph shown in figure 2.11.
Figure 2.11: Setting Customer Service Levels
Adopted from Wilson and Gilligan (1997)
Figure 2.11 shows that it is more profitable to offer a level of service (defined in terms
of ordered items being in stock) of 93 percent rather than 99 percent which is currently
being offered. However, Wilson and Gilligan (1997:507) noted that in planning the
level of service, it is important to recognize that different market segments may warrant
different levels of service, that some customers may be willing to pay high prices in
order to receive premium service; while others will accord a high priority to low price
and be willing to accept lower levels of service as a consequence.
2.3.10.1 Cost-Benefits Trade Off of Services
There is a consensus in the literature that optimum services are achieved at a point
where maximum satisfaction from services is achieved at lowest cost, and theoretically,
this is achieved where the marginal cost of providing services is equal to marginal
Maximum profit
contribution
Distribution costs
Profit curve
Revenue from service
In
crea
se i
n
cost
N
0 Service level 93 99 %
61
satisfaction gained through improved service which can be measured in terms of
increase in total sales as shown in figure 2.12.
Figure 2.12: Cost-Benefits Trade-off of Customer Service
a
b
Cost for improvedservices
Sales gainedfrom improvedServices.
Present
ServicesProvided
ServicesOptimum
Overall serviceperformance
20
22
24
26
28
30
32
34
36
38
Figure 10: Cost Benefit Trade-off of Providing Service.
60% 70% 80% 90%
Source: Nwaizugbo and Nnabuko (2010)
Figure 2.12 shows the level of increase in sales gained through improved services and
also the cost of providing services. It can be seen that before point YX, a gap existed
between line ‘a’ and line ‘b’ which shows marginal gains. It can also be seen that
improving services has also improved the overall service performance from 75% to
85%. The graph shows how responsive sales can be to improved service level. It
becomes an evaluation criterion for managers as to the total amount to spend on
services and the expected satisfaction of the customers. It provides the cost benefit
implications of customer service delivery.
2.3.11 Organizational Responsibility for PDM
Different business functions participate in physical distribution. Most heavily involved
are manufacturing, transportation, purchasing and marketing. Who is or should be
responsible for physical distribution management becomes an issue. In some companies
the responsibility is assigned to a single department such as transportation, marketing
or manufacturing and in others coordinating committees are formed to manage physical
distribution.
Y
X
b
Optimum Services
62
Some of the considerations for assigning responsibility for PDM include management
priorities, functions most heavily involved, needs for integration and coordination, and
step-by-step approach. That is to say that management may emphasize marketing and
assign PDM responsibility to it. And there is also some logic in assigning the
responsibility to the business function that accounts for the largest portion of
distribution costs or selecting the organizational approach that promises the greatest
opportunity for integration and coordination. Some experts recommend starting by
integrating traffic and warehousing followed in the next stage by integrating order
processing and finished goods inventory. The goal of the third stage according to
Lalonde (1990:21) should be to integrate all physical distribution activities. A
company’s choice of what to include in each stage depends on its physical distribution
situation.
Kotler (2006: 599) said that decisions on warehousing, inventory, and transportation
require the greatest coordination and a growing number of companies have set up a
permanent committee composed of managers responsible for different physical
distribution activities who meet periodically to develop policies for improving overall
distribution efficiency.
Experts agree that location of the physical distribution department within the company
is a secondary concern but the most important thing is that the company coordinates its
physical distribution and marketing activities in order to create high customer
satisfaction at a reasonable cost.
2.3.12 Barriers to Effective Physical Distribution
Many problems may be responsible for the physical distribution not functioning
effectively. The major problems fall into the categories of customer service levels,
order processing, inventory management, warehousing operations and transportation
and delivery operations (Lambert and Stock 1990: 470).
If products are not available when and where customers want them, their complaints
often indicate distribution malfunctions. Errors such as filling customer’s orders
incorrectly are costly to both the company and its customers. Errors, delays and
incomplete information on orders cause distribution problems. Many problems can
occur with inventories including stock-outs, incorrect inventory mix and excess
inventory. Inventory problems involve too much or not enough items in stock. Too
63
much stock lead to excess expenses in carrying inventory and too little creates customer
dissatisfaction. Warehousing operations problems include damaging products when
stocking and loading, incorrectly filling customer’s orders, theft and incurring
excessive costs in performing warehouse functions. Transportation and delivery
operations problems may occur when goods are transported from producer to ultimate
consumer. Problem may occur because of delay, damage, theft and high transport cost.
Legal provisions such as those made on dual distribution, restricted sales territories,
exclusive dealing, and tying contracts can be a barrier to effective physical distribution
system. What the laws permit can affect the products and the choice of channel
members to be used. Laws also limit the choice of the distribution structure, whether it
will be intensive, selective or exclusive.
The state of the economy can also pose a barrier. El-Ruphia (2000), in a paper titled
“Effective Distribution of Locally Produced Items in Nigeria” believes that the
achievement of effective and efficient physical distribution system is hampered by the
unfavourable economic conditions emanating from over dependence on foreign and
imported goods. Local industries are unable to procure raw materials to continue full
production. Thus the industries are pre-occupied with production problems and have
little or no time for organisation and management of physical distribution. Generally,
there is poor service to the customers in the attempt to maximize profits.
El-Ruphia (2000) also pointed out that the inefficiency in the physical distribution of
goods and services in Nigeria is as a result of lack of clear-cut policy on physical
distribution channels. He further noted that the majority of middlemen in our society
are untrained and consist mainly of men and women who because of their financial
position and or their connections are assigned distributorship of products. Consequent
upon this lack of marketing training, they, by all means, detest competition. They prefer
monopoly status and strive for sole distributorship of products in a large area, if
possible.
64
2.3.13 Physical Distribution and Channels of Distribution Interface
The aforementioned two arms of distribution are also known as the logistical channel
and the marketing channel. The two channels are highly related. The logistical channel
refers to the means by which products flow physically from where they are available to
where they are needed. The marketing channel refers to the means by which necessary
transactional elements are managed such as customer orders, billing, accounts
receivable and so on. These two channels are illustrated in figure 2.13.
Figure 2.13: Logistical and Marketing Channels
A marketing channel or channel of distribution consists of one or more companies or
individuals who participate in the flow of goods, services, information and finances
from the producer to the final user or consumer. It encompasses a variety of
intermediary firms, including those that are classified as wholesalers or retailers. This
makes coordination of channel activities inevitable. According to Boone and Johnson
(1990:226) channel coordination can be effected through the use of contractual
agreements. That is, independent firms at different levels can coordinate their activities
on a contractual basis to obtain systematic economies and market impact that could not
Logistical Channel Marketing channel
Supplier
Transportation
Manufacturer
Transportation
Distribution
center
Transportation
Retail
Store
E-Procurement
National account
sales
Wholesale/
Distributor
Retail customer
Consumer
Adopted from Coyle, Bardi and Langley (2003)
65
be achieved through individual action. These firms form vertical marketing systems
(VMS) to achieve the benefits of coordination. Uncoordinated marketing channel can
mar logistical channel performance. Hence, knowledge of distribution channel
operations and decisions are critical to the success of logistical channel achievement of
marketing strategy and overall marketing objectives.
2.3.14 Distribution Channel Major Decision Areas
The distribution channel major decision areas are:
1. Formulating channel strategy,
2. Designing the channel structure,
3. Selecting the channel members
4. Motivating the channel members
5. Coordinating channel strategy with marketing mix and
6. Evaluating channel member performance.
Channel strategy looks at set of rules that would help a company achieve its channel
objectives of finding the most appropriate way of making its products available. The
strategy employed must be such that enhances realization of the overall marketing
objectives of the company. As such the channel (or place) strategy must be integrated
or consistent with the company’s product, promotion and pricing strategies. The design
of effective and efficient channel structure that will meet the company’s distribution
objectives is determined by market, product and producer factors. And the product
factors in turn determine the level of distribution intensity – intensive, selective or
exclusive - to use. Channel members selection is based on set criteria in the company
policy. Motivation of channel members includes all actions taken by a company to
secure channel members’ cooperation in helping to achieve the distribution objectives.
Then the channel strategy is coordinated with the other marketing mix variables.
Finally, channel members’ performance is continually evaluated and some degree of
control exercised over them based on theory of channel power and control.
2.3.15 Channel Power and Control
Behavioural research in channels of distribution has brought significant insights into
the process of inter firm influence. The power of channel member A, defined as the
“ability of A to control the decision variables in the marketing strategy of another
member of a given channel at a different level of distribution’, has been said to be a
66
function of A’s bases of power and B’s dependence on A (El-Ansary and Stern
1990:47). This pioneering work of El-Ansary and Stern led to a model of channel
member power. Their model viewed power as a function of;
1. The extent to which the two members in a channel are dependent on each other
for satisfaction of their goals and
2. The relative bases (or sources) of each member’s powers.
Several researchers have found a significant relationship between the dependence of
channel member B on channel member A and perceptions of the power of channel
member A. They suggested that power is a type of relation in which one party A may
utilize some “force” to overcome the resistance of another party B in order to alter B’s
behaivour in accordance with the desire of A. The force that A applies on B is
suggested to accrue from the bases of power that A owns or controls. Gaski and Nevin
(2001) found that the exercise of power bases produced a more intense reaction than the
mere presence of power bases. Bases of power may be transformed into influence
strategies A uses to affect the behaviour and/or decisions of B. The use of influence
strategy by A to alter the behaviour of B does not guarantee that the desired
behavioural change would occur. Factors that affect B’s resistance may include B’s
dependence on A. The dependence of B on A is defined here as the extent to which B
relies on A for obtaining its goals and objectives. When B has a large stake in a
relationship (ie a significant proportion of sales and profits accrue from the
relationship), B is more dependent and is more likely to be tolerant of demands made
by A (Bucklin 1990).
Furthermore, when rewards achieved in a relationship are greater than those expected
in another relationship, or when few feasible alternative relationships offering
comparable rewards are available, B is more dependent on A and is more tolerant of the
demands of A (Anderson and Narus 2000). A channel member who is more tolerant of
demands made by a channel partner is less resistant to those demands and, hence, more
willing to respond to demands. As a result B is more motivated to maintain the
relationship (i.e is more dependent on A).
Channel control is accomplished by the exercise of power. Consequently, identifying
the determinants of power has been an important research objective and the outcome
has increased our understanding of vertical power relationship in distribution channel
67
as in Vertical Marketing System (VMS). Nigerian Bottling Company (NBC) channel
arrangement is a Vertical Marketing System
A VMS is a marketing channel in which a single channel member coordinates or
manages channel activities to achieve efficient, low-cost distribution aimed at
satisfying target market customers (Pride and Ferrell 2001: 305). They pointed out that
because efforts of individual channel members are combined in a VMS, marketing
activities can be coordinated for maximum effectiveness and economy without
duplication of services. Bonoma and Johnson (1990) also stated that in a unilateral
power system, the powerful member designs marketing strategies and operations in
such a way that it can reduce the costs of operations and maximize profits.
Participation in a VMS is a behavioural relationship because of acknowledged
dependence (Bowersox and Cooper 1992: 104). They explained that in order to
participate in a behavioural channel system, each channel member must be willing to
accept a role. For the channel to function as a VMS, typically one of the member firms
emerges and takes on the role as a leader and controls other firms in the channel
system. The leader usually has the greatest relative power and his primary roles are to
resolve conflicts, motivate channel members, plan, coordinate and implement channel
programmes. In a nutshell, he provides direction and stability for the channel system.
The goal of leadership is to contribute to a better level of performance for either the
leader or overall channel (Frazier and Sheth 2001). Leadership position is based on
power advantage and it also depends upon the tolerance of other channel members. A
firm’s tolerance for being controlled is based on its relative position and the expectation
of enjoying higher level performance. According to Bucklin (1990) tolerance is directly
related to the firm’s dependence upon other channel members and the degree to which
performance can be improved. VMS functions as integrated combination of two or
more independent enterprises and is classified as corporate, contractual and alliance.
They are also sometimes administered on the basis of formal cohesive devices over and
above acknowledged dependence (Bowersox and Cooper 1992: 105). With the VMS,
some degree of implicit or explicit relationship exists among the firms in the channel
and firms in the channel have considerable opportunity to coordinate their activities
(Coyle et al 2003: 107). They observed that as channel members begin to collaborate
effectively on matters relating to logistics, efficient, low-cost distribution and higher
68
customer service are achieved which result in customer satisfaction and profitability for
the company.
2.3.16 Reverse Logistics and its Impact on Customer Service and Customer
Satisfaction
Reverse logistics is a process of reclaiming recyclable and reusable materials, returns,
and reworks from point of consumption or use for repair, remanufacturing or disposal
(Berkowitz et al 2000: 460). The benefits of reverse logistics are the reduced amount of
waste in the physical environment and lower operating costs for the companies.
NBC emphasizes the benefits of reverse logistics and recycles over 90 percent of its
returned empty bottles and crates. By recycling over 90 percent of its returned empty
bottles from consumed drinks, NBC has kept the demand for silica and various silicates
(bottle raw materials) low, thereby holding down costs of production and costs to
consumers which increases customer service and customer satisfaction.
Also, solid waste management costs and the negative environmental impact of used
bottles in landfills are reduced.
2.3.17 Analysis and Critique of Some Existing Literature.
National council of physical distribution management (NCPDM) USA in Coyle and
Bardi (2000:5) included customer service as part of PDS activities. Clearly, the
objective of performance of PDS activities is to provide PDS- place and time utility
which is a part of overall generic marketing customer service. Therefore, customer
service is not one of the PDS activities but it is the reason for the performance of all
PDS activities. Hence the study makes a distinction between PDS activities and PDS as
depicted in the conceptual PDS/customer satisfaction model figure 2.3 developed for
the study.
Cravens and Woodruff (2001:429) and Doyle (1994: 330) provided different
approaches for setting customer service standards as shown in figures 2.10 and 2.11
respectively. Cravens and Woodruff advised us to identify two or three of the major
contributors to distribution costs and design a system that minimizes the total of these
costs to determine the customer service level. Doyle asked us to determine distribution
costs, revenue from service and profit to set the level of customer service. Both
approaches are helpful in minimizing costs of distribution. However, they are
introspective in linking service level purely to costs rather than customers’ service
requirements and competitors’ service offerings. Besides, profit is not the only
69
objective for customer service. Market share gain or sustainability is also one of the
objectives and it may be a major objective in some cases. These approaches cannot be
used to determine customer service standard as a competitive tool in a competitive
environment. Hence, a conceptual market-driven customer service standard model was
developed in this study.
2.4 Summary
The chapter examined physical distribution or logistics management and its relationship
to customer service and customer satisfaction. Related literatures to physical
distribution (PD) or logistics from text books, journals, periodicals and the internet
were reviewed. The various definitions which different authors, writers and
practitioners have given to PD or logistics and its importance in moving materials, final
goods and related information from point of origin to points of consumption were
thoroughly examined.
The study utilized conceptual model of customer service/satisfaction and a conceptual
model of PD activities which shows the key components of PD as transportation,
warehousing and storage, inventory control, order processing, plant and warehouse site
location, production scheduling, etc.
There is a general consensus that these activities should be integrated, coordinated,
managed effectively and efficiently as a system for high customer service level.
Furthermore, there is a general agreement among the scholars that the more we increase
these activities, the higher the customer service level which the activities aim at
achieving and the higher the cost incurred in providing the services and that is
conversely true.
Therefore, the challenge for a manager is to achieve a high customer service level and
at the same time keep the total cost of physical distribution as low as possible for a
given customer service objectives. Cost of providing service is minimized most
effectively through total cost approach which evaluates the cost of the system as a
whole rather than as a collection of separate activities. A company’s failure to provide
the desired level of service will lead to customer dissatisfaction and loss of customers.
Consequently, the models, concepts and theories such as PD configuration of FMCC,
key components of PD, inventory models, customer services level, PDM, total cost, JIT
concepts and PD and channel power theories governing the management of the various
70
PD activities in order to achieve the desired level of service and customer satisfaction at
least cost were identified and examined.
Unfortunately, all these studies treated physical distribution as mere routine activities
and in isolation of customer satisfaction. There is a compelling need to fill this gap and
the researcher hopes to do so by an integrative study which links PD and customer
satisfaction through customer service. This association with customer satisfaction will
help reposition PD as a very potent competitive tool for achieving organizational
objectives.
2.5 A Brief Profile of Nigerian Bottling Company Plc
An inquiry into the profile of NBC revealed the origin of its products. Dr. John Styth
Pemberton, a pharmacist first initiated the plans for the world’s best soft drink. He
successfully formulated Coke in the year 1886 in the town of Atlanta Georgia in the
United States of America (USA).
Dr. Pemberton’s Partner and book-keeper, Mr. Frank M. Robinson designed the
distinguishing trade mark and named it Coco-Cola. Following this remarkable feat
achieved by Dr. Pemberton and the advertising and other marketing activities by Mr.
Robinson, many countries in every part of the globe who have heard of this wonderful
drink began to have a vicious desire to taste coke.
Consequently, the Nigerian Bottling Company (NBC) Plc was incorporated in Nigeria.
Nigerian Bottling Company, the largest bottler of non-alcoholic beverage in Nigeria,
has its operations dated back to 22nd November, 1951 when it was incorporated as a
subsidiary of A.G Leventis Group and given the franchise to bottle and sell Coca-cola
products in Nigeria. (Meritern Research, 2008).
The company offers carbonated and non-carbonated soft drinks, fruit drinks and juices,
bottled water and energy drinks. It bottles various brand name products, including
Coca-cola, Fanta, Sprite, Schweppes, Eva water and Five-alive.
NBC currently operates 13 bottling plants with over 80 depots and over 250,000 sales
outlets and staff strength of over 6,000 employees across the country.
71
Major challenges facing NBC include unfair competition from smuggled cheaper
foreign products, product adulteration and dilapidating infrastructure with particular
reference to power and transport (Meritem Research, 2008)
The company was using its own logistics system until in 2006 when it included a third
party logistics provider in its distribution system. “Since production started, NBC has
remained the largest bottler of non-alcoholic beverages in the country in terms of sales
volume with about 1.8 billion bottles sold per year, making Nigeria its second largest
market in Africa” (Meritem Research Report 2008).
These challenges justify the need for this study on physical distribution challenges of
NBC in order to find ways of improving customer service and customer satisfaction at
least cost which will make NBC more competitive.
72
REFERENCES
Alasiri, W. A. and Cole, A. A. (2001), Service Marketing: Principles and Practice,
Lagos: Ade-Ola Printing press Ltd.
Alexa Research (2000), Web Intelligence and Traffic Measurement, USA
Anderson, J.C. and Narus, J.A. (2000), “A Model of the Distributor’s Perspective of
Distributor–Manufacturer Working Relationship”. Journal of Marketing, Volume 48,
Fall, 62-74.
Andreas, E and Wolfgang U. (2002), “Perceived value, The Core of Marketing”,
Journal of Business and Industrial Marketing, Volume 17, Number 2, 107-118.
Anyanwu, Aham and Nwokah, Gladson N. (2008), Contemporary Book on Services
Marketing, Owerri: Avan Global Publications.
Armstrong, G. and Kotler, P. (2009), Marketing: An Introduction, 9th Ed. New Jersey,
Pearson Education Inc.
Ballon, R.H. (2001), Basic Business Logistics: Transportation, Material Management,
Distribution, 2nd Ed., Englewood Cliff NJ Prentice-Hall.
Bertowitz, EN, Kerim, R.A., Hartley, S.W. and Rudelins, W. (2000), Marketing, 6th
Ed. USA: The McGraw Hill Companies Inc.
Bonoma, T. and Johnson, W.J. (1990), “The Social Psychology of Industrial Buying and
Selling”, Industrial Marketing Management, Volume 1, Number 17, 213-224.
Boone, L.E. and Johnson, J.C. (1990), Marketing Channels 2nd Ed. Oklahoma:
Petroleum Publishing Company.
Boone, L.E. and Kurtz, D.L. (2004), Contemporary Marketing, 11th Ed. Ohio, South-
West: Thomas Learning.
Bowersox, D.J. and Cooper, M.B. (1992), Strategic Marketing Channel Management,
Singapore: McGraw – Hill Book Company.
Bucklin, L.P. (1990) “A Theory of Channel Control” Journal of Marketing Volume 37,
Number 1, January 39-47.
Chu, R.,(2002). “Stated-importance versus Derived Importance: Customer Satisfaction
Measurement”, Journal of Service Marketing, Volume 16, Number 4, January,
285-301.
Converse P.D. (1945) ‘The Development of the Science of Marketing – An Exploratory
Survey’, Journal of Marketing Volume 10, July, 14-23, in D.G.B. Jones and E.H.
Shaw ‘A History of Schools of Marketing Thought http://ww.sagepublications.com
Accessed 16 March, 2011 by 10.30pm, 10-21.
73
Coyle, J.J., Bardi, J.E., and Largely, C.J. (2003), The Management of Business
Logistics: A Supply Chain Perspective 7th Ed. Canada, South Western: Thomas
Learning.
Cravens, D.W. and Woodruff, R.B. (2001), Marketing, USA: Addison – Wesley
Publishing Company, Inc.
Doyle, P. (1994), Marketing Management and Strategy, London: Prentice Hall.
Drucker, P. (1962), “The Economy’s Dark Continent”, Fortune, April, 103 in Kotler, P.
(2006: 591), Marketing Management, Analysis, Planning and Control, New
York: Prentice Hall.
Ehikwe, A.C (2002), Transportation and Distribution Management, Enugu: Precision
Publishers.
EL-Ansar, A. and Stern, L.W. (1990), “Power Measurement in the Distribution
Channel”, Journal of Marketing Research, Volume 9, February, 47-52.
EL-Ruphia, A. (2000) “Effective Distribution of Locally Produced Items in Nigeria”,
Business Digest Magazine, October, 24-25.
European Logistics Association (ELA) 2004) Logistics Survey. www.elalog.org
Accessed 16 March, 2011 by 9.45pm, 18-20.
Frazier, G.L. and Sheth, J.N. (2001) “An Attitude – Behaviour Framework for
Distribution Channel Management, Journal of Marketing, Volume 43, Number
3, Summer 38-48.
Gaski, J.F. and Nevin, J.R. (2001) “The Differential Effects of Exercised and
Unexercised Power Sources in a Marketing Channel”, Journal of Marketing
Research, Volume 22, May 130-142.
Gilmour, Peter (1997), “Customer Service: Differentiating by Marketing Concept?”,
Journal of the Academy of Marketing Science, Volume 17, Number 3, 141-148.
Guelzo, C.M. (2001), Introduction to Logistics Management, Englewood Cliffs, N.J:
Prentice Hall.
Hart, L.W.L.; Heskett, J.L. and Sasser, W.E. (1990), “The Profitable Art of Service
Recovery”, Harvard Business Review, Volume 90, Number 4, July, 148-156.
Hertz, A. and Alfreds, B. (2003), Logistical Management, New York: MacMillan
Publishing Company, Inc.
Heskett, J.L. Ivie, R.M. and Glaskowky N.A. (1990), Business Logistics: Management
of Physical Supply and Distribution, 2nd Ed., New York: The Ronald Press
Company. http://ww.download-it.org/learning-resources, Accessed 7 March, 2011
by 11pm, 2-5.
74
Johnson, D.M. and Gusafsson, A. (2000). Improving Customer Satisfaction, Loyalty,
and Profit: An Integrated Measurement and Management System, San
Francisco: Jossey-Bass Inc.
Jones, D.G.B. and Shaw, E.H. (2002), ‘A History of Schools of Marketing thought’,
htt://www.sagepublishcation.com Accessed 16 March, 2011 by 9.10pm, 6-8.
Kotler P. and Keller K. L. (2007), Marketing Management, New Delhi India: Practice
Hall.
Kotler, P. (2000), Marketing Management: Analysis, Planning and Control, 5th Ed.,
New Jersey: Prentice Hall Inc.
Kotler, P. (2001), Principles of Marketing: Physical Distribution & Logistics
Management, New York: Prentice Hall.
Kotler, P. (2003). Marketing Management, India: Pearson Education.
Lalonde, B. (1990), “Strategies for Organising Physical Distribution”, Transportation
and Distribution Management, Volume 10, Number 5, January, 21-25.
La-Londe, B. J. (2001), Customer Services in the Distribution, New York: The Free
Press.
Lalonde, B.J. and Zinszar, P.H. (1990) Customer Service; Meaning and Measurement
Chicago, National Council of Physical Distribution Management, Volume 9,
Number 4, January, 58-62.
Lambert, D.M. Stock, J.R. (2000), Strategic Physical Distribution Management,
Homewood: Irwin.
Mentzer, J.T, Games, R. and Krapfel, R.C (2009), “Physical Distribution Service: A
Fundamental Marketing concept?”, Journal of the Academy of Marketing
Science, Volume 17, Number 1, February 53-62.
Meritem Research (2008), www.securities.com/.../company-profile/...Nigerian Bottling
Company. Accessed 10 March, 2011 by 10pm, 10-13.
Miles, M. B. and Huberman, A. M. (1994), Qualitative Data Analysis: An Expanded
Source Book, 2nd Ed., Thousand Oak, CA: Sage.
Morden, A.R. (1993), Elements of Marketing, 3rd Ed., London: DP Publishers Ltd.
Murray, M. (2011), Business Logistics Management, Eaglewood Cliffs, New Jersey:
Prentice Hall, Inc.
Nadube, P. M. (2010), Marketing Communication: Theory and Practice, Port-Harcourt:
TND press.
75
Nielsen, A. C. (2000), “The Out-of-Stock Study Part II. Growing Problems of Stock-
outs Verified by Nielsen Research, Progressive Grocer,” Volume 47, Number 6,
November, 26-31
Nwaizugbo, L.C and Nnabuko, J.O. (2010) “Cost Benefit Implications of Customer
Service Delivery” Nigerian Journal of Marketing, Volume 5, Number 2,
(2009/2010), 92-100.
Ode .E, Iruka, H., Aduba, P and Okechukwu, C. (2011), "Customer Satisfaction Index",
A Seminar Paper Presented in Partial Fulfilment for the Requirement of the
Course: Analytical Techniques, Department of Marketing, University of
Nigeria, Enugu Campus.
Onah, J.O and Thomas M.J (2004), Marketing Management: Strategies and Cases, 2nd
Ed., Enugu, Nigeria: Institute for Development Studies, University of Nigeria,
Enugu Campus.
Onodugo, V.A. Ugwuonah, G.E. and Ebinne, E.S. (2010), Social Science Research:
Principles, Methods and Applications, Enugu: El’Demak Publishers.
Parasuraman, A. (1997), “Reflection: Gaining Competitive Advantage Through
Customer Value”, Journal of the Academy of Marketing Science, Volume 25,
Number 2, Spring, 154-161.
Parasuraman, A., Zeithaml, V. A. and Berry, L.L, (1995), "Refinement and
Reassessment of the V' SERVQUAL Scale'1, Journal of Retailing, Volume 67,
Number 2, March, 25-26.
Parker, D.D. (1962), “Improved Efficiency and Reduced Cost in Marketing”, Journal
of Marketing, April pp 15-21 in Kotler P. (2006: 591) Marketing Management,
Analysis, Planning and Control.
Patterson, P. G., Johnson, L. W. and Spreng, R. A. (19997), Modeling the determinants
of Customer Satisfaction for Business-to-Business Professional Service, Journal
of Academy of Marketing Science, Volume 25, Number 1, 4-17.
Perreault, W.D., Cannon, J.P. and McCarthy E.J. (2010), Essentials of Marketing: A
Marketing Strategy Planning Approach, 12th Ed., New York: McGraw-
Hill/Irwin.
Pignier, C. (2005), “Satisfaction Measurement", Journal of Services Marketing, Volume
16, Number 4, January, 285-301.
Pride, W.M. and Ferrell, O.C. (2001), Marketing, 6th Ed.; Boston: Houghton Mifflin
Company.
76
Rakowski, James P. (1992), “The Customer Service Concept”. Review of Business and
Economic Research Volume 17, Number 8, Winter, 55-66.
Rushton, A., Croucher, P. and Baker, P. (2006), The Handbook of Logistics and
Distribution Management, 3rd Ed., Great Britain: Kogan Page Limited.
Scahry, Philip B. and Becker, B. W. (2002), “The Impact of Stock-outs on Market
Share: Temporal Effects”, Journal of Business Logistics Volume 1, Number 1,
Spring, 31-43.
Schewe, C.D. and Hiam, A.W. (1998), The Portable MBA in Marketing, 2nd Ed., New
York: John Wiley & Sons, Inc.
Sharma, J.K. (2007), Operations Research; Theory and Applications, 3rd Ed., Delhi:
McMillan India Ltd.
Speh, T.W. (1990), Physical Distribution-Marketing Interfaces: Research and
Managerial Implications, NCPDM Proceedings, Los Angeles, October, 1977.
Srinivasa, E. and Sanrabh A. (2009), Strategies for Organising Transportation and
Distribution Management, New York: Prentice Hall.
Stanton, W.J. (2000), Fundamentals of Marketing, Japan: McGraw-Hill Book
Company.
Walter, C.K and Grabner, J. R. (2005), “Stock out Cost Models: Empirical Test in a
Retail Situation”, Journal of Marketing, Volume 39, Number 6, July, 56-68.
Wilson, R.M.S. and Gilligan C. (1997), Strategic Marketing Management; Planning,
Implementation and Control, Oxford: Butterworth – Heinemann.
Zemke, R. (2001), The Service Edge, New York; Penguin Books.
77
CHAPTER THREE
RESEARCH METHODOLOGY
3.0 Introduction
This chapter highlights the research methodology that was adopted for the study. It
forms the pillar of the study as it identifies the painstaking steps which were followed.
3.1 Research Design
Research design is a kind of blue print that guides the researcher in making
investigation and analysis (Onwumere 2005). The researcher adopted a descriptive
survey research design for this study. Osuala (2005) defined descriptive survey as the
in-depth description of a specific individual, group or company as it exists in its natural
setting.
3.2 Area of Study
The area selected for the study is Enugu State, Nigeria. Enugu State was chosen for
convenience and it was the capital of former Eastern Region of Nigeria and represents
the states in south east in many respects.
3.3 Sources of Data
The necessary data and information for this study were gathered from primary and
secondary sources.
Primary sources involved the generation of the primary data through structured
questions in the questionnaire administered to the respondents.
Secondary sources included textbooks, periodicals, internet and journals of marketing
where information that constituted the theoretical framework of the study were
obtained.
3.4 Population of Study
The study population was made up of commercial staff, distributors and retailers of
NBC products in Enugu State. Data regarding the various physical distribution
activities of NBC were obtained from samples drawn from a sampling frame made up
as indicated in the table below;
Table 3.1: commercial staff, distributors and retailers of NBC
Commercial Staff Bulk Customers
Total Senior Junior Distributors Retailers
14 32 101 253 400
Source: Field survey, 2012.
78
3.5 Pilot Study
A test-retest method was used in the pilot study to determine the reliability of the
questionnaire. Thirty (30) copies of questionnaire which contained ten (10) structured
questions were administered to a sample of the population which comprised fifteen (15)
staff and fifteen (15) customers of the company.
The respondents completed and returned the questionnaire. The analysis of the
responses indicated a positive response rate of 76% and negative response rate of 24%.
The positive response rate was derived by the summation of the “Strongly Agreed” and
“Agreed”, divided by the expected total responses; i.e
SA + A x 100 = 228 x 100 = 76%
300 1 300 1
The negative response rate was derived by the summation of “Undecided”, “Disagree”
and “Strongly Disagree” divided by the expected total response; ie
UD + D +SD x 100 = 72 x 100 = 24%.
300 1 300 1
Another thirty (30) copies of the same questionnaire were administered to the same
thirty (30) respondents for the second time. The positive response rate increased to 78%
and the negative response rate dropped to 22%.
The positive response rates of 76% and 78% for the test-retest results respectively
attested to the reliability to the research instrument.
3.6 Determination of Sample Size
The study recognizes that the size of the sample is an important factor that affects the
accuracy of the survey study. Onodugo et al (2010:69) noted that the larger the size of
the sample, the smaller the sample error and more representative the finding to the
entire population. However, if a larger sample than what is necessary is used, resources
are wasted and if it is too small the objective of the analysis may not be achieved.
Hence, the size of the sample according to Jarboe (1996: 87) will be based upon pre-
specified level of accuracy required to accomplish the research objectives.
The level of accuracy of the study was set at 95% confidence interval or maximum
allowable error of 5%. Then applying Taro Yamane’s formular for finite population in
Onodugo et al (2010: 69) thus:
79
n = N/[1 + N(e)2]
Where n = Sample size
N = the finite population
e = Level of significance (or limit of tolerable error)
I = Unity (is a constant)
With N = 400
e = 0.05
∴n = 400
1+400 (0.05)2
= 400
1+ 400(0.0025)
= 400
1 + 1
= 400
2
n = 200
Thus a total number of 200 respondents were given the questionnaire.
3.7 Sampling Techniques.
The population of study is made up of 400 NBC staff and bulk customers which was
stratified into senior staff, junior staff, distributors and retailers. The sample size for
each stratum or category was estimated using Bowley’s proportional allocation
statistical technique stated as follows:
nh = nNh
N
Where
nh = the number of units allocated to each stratum
Nh = the number of units in each stratum
n = the total sample size
N = the total population.
80
Thus
Proportion of senior staff to be sampled
nh = 200 x 14 = 7
400
Proportion of junior staff to be sampled
nh = 200 x 32 = 16
400
Proportion of distributors to be sampled
nh = 200 x 101 = 51
400
Proportion of retailers to be sampled
nh = 200 x 253 = 126
400
These sample proportions are shown in the table below
Table 3.2: Sample proportions of NBC Staff and Bulk Customers
Staff Bulk Customers
Total Senior Junior Distributors Retailers
7 16 51 126 200
Source: Field survey, 2012.
3.8 Validity of Instrument
Okwandu (2004; 99) stated that validity is concerned with whether a measuring
instrument measures the theoretical construct rather than reflecting some other
phenomenon.
Research supervisors and renowned marketing professionals approved the content of
the questionnaire. The instrument was constructed and sent to them for scrutiny with
regard to simplicity of language and relevance of purpose. Later, the necessary
corrections were effected and the instrument was approved.
3.9 Reliability of Instrument
Reliability concerns the extent to which a measure is accurate and consistent (Okwandu
2004:98). A reliability test was carried out to test the consistency of the questionnaire.
It is vital to do this because when scales are chosen in any study, the researcher needs
81
to ensure that they are reliable, and that they have internal consistency. Internal
consistency refers to how well the scales measure the underlying constructs.
The popular and commonly used method to assess consistency is Cronbach alpha. Hair
et al (2007) have provided rules of thumb for interpreting alpha values. They mentioned
an alpha value of .70 or higher as an appropriate range to measure the reliability. Alpha
Cronbach was used to assess the reliability of the questionnaire for this research. The
result from the analysis of the questionnaire reliability by using SPSS software for the
foremost 30 sampled questionnaire for both the staff and customers of the company
under study shows that the factor scales are internally consistent, with the Cronbach
alpha greater than .70. The alpha values show the probability that the same result would
be achieved given the same background if the questionnaire is re-administered (See
appendix 5 for the reliability table).
3.10 Method of Data Presentation and Analysis
Descriptive Statistics – frequencies and percentages, pie chart and bar charts were used
to present and analyse the data. Pearson correlation coefficient was used to test the
hypotheses. The statistical package for Social Sciences (SPSSWIN) Version 17.0 which
according to Ugwuonah (2005:51) has an SPSSWIN menu that gives summaries of data
blocks which provide useful information in report writing was used to generate the
descriptive and inferential statistics.
82
REFERENCES
Hair, J.F, Bush, R.P. and Ortinan, D.J. (2007), Marketing Research: In a Digital
Information Environment, New Jersey: Prentice Hall.
Jarboe, G.R. (1996), The Marketing Research Project Manual, USA: West Publishing
Company.
Okwandu, G .A. (2004), Research Methods in Business and Social Sciences, Owerri;
Civincs Publishers.
Onodugo, V.A, Ugwuonah, G.E. and Ebinne, E.S. (2010), Social Science Research:
Principles, Methods and Applications, 1st Ed., Uwani Nigeria: El’Demak
Osuala, O. C. (2005), Research Methods in Management Sciences, Owerri: Avan
Global Publications.
Ugwuonah, G.E (2005), Data Analysis and interpretation: A computer Based
Approach, Uwani-Enugu: Cheston Ltd.
83
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.1 Introduction
This chapter deals with the presentation, analysis, tests and interpretations of the
various data obtained from responses to questions in the questionnaire that was
administered to the respondents. It started off by showing the administration of the
questionnaire, and giving an overview of the demographic profiles of the respondents.
Finally, the core data on physical distribution activities and services were presented,
analyzed, tested and interpreted. The data presentation in the tables and figures are so
self-explanatory that only statistical inferences were often made from them.
4.2 Questionnaire Analysis
4.2.1 Questionnaire Administration
Table 4.1 below shows that two hundred (200) copies of the questionnaire were
distributed to staff and customers of NBC. The staff received (23) twenty three copies
which they completed and returned totally while the customers completed and returned
(170) copies out of (177) copies distributed to them. This gives a response rate of
96.5%.
Table 4.1: Questionnaire Administration
Respondents Administered Returned Not
returned
Valid
%
Cumulative
%
Staff: Junior 16 (100%) 16 (100%) - 8 8
Senior 7(100%) 7(100%) - 4 12
Customers: Retailers 126 (100%) 121 (96%) 5 (4%) 63 75
Distributors 51 (100%) 49 (96%) 2 (4%) 25 100
Total 200 (100%) 193(96.5%) 7 (3.5% 100
Source: Field Survey, 2014.
4.2.2 Sex Distribution
The table below shows that 106 (55%) of the respondents are male while 87 (45%) are
female.
84
Table 4.2: Sex Distribution of Respondent
Sex Frequency Percent Valid Percent Cumulative Percent
Male 106 55 55 55
Female 87 45 45 100
Total 193 100 100
Source: Field Survey, 2014.
4.2.3 Age Distribution of Respondents
Table 4.3 illustrates the age distribution of the respondents. From the table we can see
that we have more respondents within the ages of 41-50 years.
Table 4.3: Age Distribution of Respondent
Age Frequency Percent Valid Percent Cumulative Percent
30 years below 19 10 10 10
31-40 years 49 25 25 35
41-50 years 78 40 40 75
51years above 47 25 25 100
Total 193 100 100
Source: Field Survey, 2014.
4.2.4 Educational Qualification of Respondents
The educational qualification of respondents are presented in the table below. It shows
that 137 (71%) of the respondents have National Diploma and below while 56 (29%) of
the respondents have either HND/B.Sc, Masters Degree or Ph.D and above.
Table 4.4: Educational Qualification of Respondents
Qualification Frequency Percent Valid Percent Cumulative Percent
ND and below 137 71 71 71
HND/B.Sc 32 17 17 88
Masters 29 10 10 98
Ph.D and above 4 2 2 100
Total 193 100 100
Source: Field Survey, 2014.
85
4.2.5 Staff Number of Years with the Company
Table 4.5 below shows that 13 (56%) of the staff have spent from 0-10 years while 10
(44%) of the staff have spent more than 10 years with the company.
Table 4.5: Staff Number of Years with the Company
Years Frequency Percent Valid Percent Cumulative Percent
0 - 5 4 17 17 17
6 - 10 9 39 39 56
11 - 15 7 31 31 87
16 and above 3 13 13 100
Total 23 100 100
Source: Field Survey, 2014.
4.2.6: Staff Positions in the Company
The table below depicts the various positions occupied by the staff respondents. The
three distinct positions showed 16 (70%) of the staff respondents are below supervisory
level while the remaining 7 (30%) of the staff sampled are either supervisors or
managers in the company. With a higher percentage of staff respondents below
supervisory level, free flow of unbiased information due to their innocence was
achieved and this aided the achievement of the objectives of this study.
Table 4.6: Staff Positions in the Company
Positions Frequency Percent Valid Percent Cumulative Percent
Below Superior 16 70 70 70
Supervisor 4 17 17 87
Manager/above 3 13 13 100
Total 23 100 100
Source: Field Survey, 2014.
4.2.7 Occupation of Respondents
Table 4.7 below shows the occupation of the respondents. From the table we can infer
that 100 (52%) of the respondents are either employees or farmers while 93 (48%) of
the respondents are full business persons. The even distribution of respondents
facilitated the balance of opinions on the subject of study.
86
Table 4.7: Occupation of Respondents
Occupation Frequency Percent Valid Percent Cumulative Percent
Civil/Public Servant 25 13 13 13
Private Sector Employee 33 17 17 30
Farmer 42 22 22 52
Business Person 93 48 48 100
Total 193 100 100
Source: Field Survey, 2014.
4.2.8 Business Categories of Customers
Table 4.8 shows the two distinct categories of customers with 49(29%) as
distributors/wholesalers and 121 (71%) as retailers.
Table 4.8: Business Categories of Customers.
Business Categories Frequency Percent
Distributor/Wholesaler 49 29
Retailer 121 71
Total 170 100
Source: Field Survey, 2014.
4.2.9 Frequency of product Supply to Customers
Table 4.9 and figure 4.1 show the frequency of product supply to customers. We can
see from the table that 59 (34%) of the customers are supplied products twice or once
per week while the remaining 111 (66%) receive products twice or once a month.
Table 4.9: Frequency of Product Supply to Customers.
Frequency Percent Cumulative Percent
Twice a week 21 12 12
Weekly 38 22 34
Every two weeks 93 55 89
Monthly 18 11 100
Total 170 100
Source: Field Survey, 2014.
87
Figure 4.1: Frequency of Product Supply to Customer.
4.2.10 Need to be Supplied with NBC Products more Frequently
Table 4.10 and Figure 4.2 show that 51 (30%) customers want to be supplied with NBC
products more frequently than the case now while 119 (70%) customers are contented
with the number of times they are supplied with NBC products.
Table 4.10: Need to be supplied with NBC Products More Frequently.
Responses Frequency Percent
Yes 51 30
No 119 70
Total 170 100
Source: Field Survey, 2014.
Figure 4.2 Need to be supplied with NBC Products More Frequently.
21
38
93
18Twice a week
Weekly
Every two week
Monthly
51
119
Yes
No
88
4.2.11 Stock-out Experienced by Customers
Table 4.11 and figure 4.3 show that 61 (36%) customers indicated that they had
experienced stock-outs while 109 (64%) customers said they had not experienced any
stock-out.
Table 4.11: Stock-out Experienced by Customers.
Responses Frequency Percent
Yes 61 36
No 109 64
Total 170 100
Source: Field Survey, 2014.
Figure 4.3: Stock outs Experienced by Customers.
4.2.12 Frequency of Stock outs Experienced by Customers
Table 4.12 illustrates the frequency of stock-outs experienced by the customers. None
of the 61 customers that experienced stock-outs had them very often or often but 34
(56%) of the customers experienced it rarely and 27 (44%) of the customers that
experienced stock-outs admitted that they had it very rarely.
Table 4.12: Frequency of Stock outs Experienced by Customers.
Responses Frequency Percent Cumulative Percent
Very often 0 0 0
Often 0 0 0
Rarely 34 56 56
Very rarely 27 44 100
Total 61 100
Source: Field Survey, 2014.
61
109
Yes
No
4.2.13 Factors Responsible for Stock
Table 4.13 and figure 4.4 show that 40 (66%) customers out of the 61 customers that
experienced the stock outs accepted that the stock
remaining 21 (34%) customers blamed the company for the stock
Table 4.13: Factors Responsible for Stock
Responses
Company related factors
Customer related factors
Total
Source: Field Survey, 2014.
Figure 4.4: Factors Responsible for
4.2.14 Stock outs Experience
Table 4.14 and figure 4.5 indicate that 19 (83%) of the sampled staff admitted that the
company had experienced stock
occurrence.
Table 4.14: Stock outs Experienced
Responses
Yes
No
Total
Source: Field Survey, 2014.
40
89
Factors Responsible for Stock outs Experienced by Customers.
show that 40 (66%) customers out of the 61 customers that
outs accepted that the stock-outs were their own faults while the
21 (34%) customers blamed the company for the stock-outs.
Responsible for Stock outs Experienced by Customers.
Frequency Percent
21 34
40 66
61 100
Survey, 2014.
Factors Responsible for Stock outs Experienced by Customers.
Experienced by NBC
indicate that 19 (83%) of the sampled staff admitted that the
company had experienced stock-outs while 4 (17%) of them did not admit such
Stock outs Experienced by NBC.
Frequency Percent
19 83
4 17
23 100
Field Survey, 2014.
21
Company related factors
Customers related factors
show that 40 (66%) customers out of the 61 customers that
outs were their own faults while the
indicate that 19 (83%) of the sampled staff admitted that the
outs while 4 (17%) of them did not admit such
Percent
100
Company related factors
Customers related factors
90
Figure 4.5: Stock outs Experienced by NBC.
4.2.15 Frequency of Stock outs Experienced by NBC
Out of the 19 staff respondents that admitted stock outs experienced by the company 10
(53%) said it occurred rarely while the remaining 9 (47%) said it occurred very rarely
as indicated in table 4.15 and figure 4.15 below.
Table 4.15: Frequency of Stock outs Experienced by NBC.
Responses Frequency Percent Cumulative Percent
Very often 0 0 0
Often 0 0 0
rarely 10 53 53
Very rarely 9 47 100
Total 19 100
Source: Field Survey, 2014.
4.2.16 Factors Responsible for Stock outs Experienced by NBC
Each of the 19 staff who admitted stock outs indicated more than one factor as the
cause of the stock-out, 18 (95%) of them mentioned raw material, 14 (74 %) indicated
power supply, 15 (79%) blamed transportation and 2 (11%) also mentioned other
factors like strike and turn-around maintenance as shown in table 4.16 and Figure 4.6
below.
83
170
20
40
60
80
100
Yes No
Percent
91
Table 4.16: Factors Responsible for Stock outs Experienced by NBC.
Responses Frequency Percent
Raw Material 18 95
Power supply 14 74
Transportation 15 79
Others 2 11
Source: Field Survey, 2014.
Figure 4.6: Factors Responsible for Stock outs Experienced by NBC.
4.2.17. Analysis of Questions Related to Research Question # 1 (Section B)
Research Question #1: What is the relationship between physical distribution
activities and physical distribution service?
Analysis of questions #1-4 in the questionnaire yielded tables 4.17, 4.18, 4.19 and 4.20
on physical distribution activities, related to objective # 1 and hypothesis # 1
(Independent Variable). Analysis of questions #5-16 yielded tables 4.21 to 4.32 on
physical distribution service (Dependent Variable).
18
1415
2
Raw Material Power supply Transportation Others
Frequency
Frequency
Table 4.17: (Q.no1) NBC Distribution Trucks/Vans are Adequate, Functional and well
coordinated. (Transportation)
Responses Frequency
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
Total
Source: Field Survey, 2014.
Figure 4.7: Agreement/Disagreement that NBC Distribution Trucks/Vans are
Adequate, Functional and well Coordinated. (Transportation)
The table and figure show that out of 193 respondents, 14
agreed that NBC distribution trucks/vans are adequate, functional and well coordinated
while the remaining 48 (24%) were either undecided, disagreed or strongly disagreed.
Table 4.18: (Q.no2) NBC Warehouses are Adequate and Strategically Located.
(Warehousing)
Responses Frequency
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
Total
Source: Field Survey, 2014.
522
92
NBC Distribution Trucks/Vans are Adequate, Functional and well
. (Transportation)
Frequency Percent Cumulative percent
59 31 31
86 45 76
5 2 78
22 11 89
21 11 100
193 100
Field Survey, 2014.
Agreement/Disagreement that NBC Distribution Trucks/Vans are
Adequate, Functional and well Coordinated. (Transportation)
and figure show that out of 193 respondents, 145 (76%) strongly agreed or
agreed that NBC distribution trucks/vans are adequate, functional and well coordinated
%) were either undecided, disagreed or strongly disagreed.
NBC Warehouses are Adequate and Strategically Located.
Frequency Percent Cumulative percent
87 45 45
71 37 82
6 3 85
18 9 94
11 6 100
193 100
Field Survey, 2014.
59
86
21 0
Strong agrer
Agree
Undecided
Disagree
Strong disagree
NBC Distribution Trucks/Vans are Adequate, Functional and well
Cumulative percent
Agreement/Disagreement that NBC Distribution Trucks/Vans are
%) strongly agreed or
agreed that NBC distribution trucks/vans are adequate, functional and well coordinated
%) were either undecided, disagreed or strongly disagreed.
NBC Warehouses are Adequate and Strategically Located.
Cumulative percent
Strong disagree
Figure 4.8: Agreement/disagreement that NBC Warehouses are Adequate and
Strategically Located. (Warehousing)
158 (82%) out of 193 (100%) of the respondents gave favourable response that NBC
warehouses are adequate, and
undecided disagreed or strongly disagreed.
Table 4.19: (Q.no.3) NBC Maintains Adequate Inventory Size and mix. (Inventory
Control)
Responses Frequency
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
Total
Source: Field Survey, 2014.
Figure 4.9: Agreement/disagreement that NBC Maintains Adequate Inventory Size and
mix. (Inventory Control)
0
50
StronglyAgree
Undecided
4537
64
79
3
21
26
93
Agreement/disagreement that NBC Warehouses are Adequate and
Strategically Located. (Warehousing)
158 (82%) out of 193 (100%) of the respondents gave favourable response that NBC
warehouses are adequate, and strategically located, while 35(18%) were either
undecided disagreed or strongly disagreed.
Table 4.19: (Q.no.3) NBC Maintains Adequate Inventory Size and mix. (Inventory
Frequency Percent Cumulative percent
64 33 33
79 41 74
3 2 75
21 11 87
26 13 100
193 100
Field Survey, 2014.
Agreement/disagreement that NBC Maintains Adequate Inventory Size and
Percent
UndecidedDisagree
Strongly disagree
3 96
Percent
Percent
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
Agreement/disagreement that NBC Warehouses are Adequate and
158 (82%) out of 193 (100%) of the respondents gave favourable response that NBC
, while 35(18%) were either
Table 4.19: (Q.no.3) NBC Maintains Adequate Inventory Size and mix. (Inventory
Agreement/disagreement that NBC Maintains Adequate Inventory Size and
Percent
94
Out of the 193 respondents, 143 (74%) agreed or strongly agreed that NBC maintains
adequate inventory size and mix while 50 (26%) were either undecided, disagreed or
strongly disagreed.
Table 4.20: (Q.no.4) NBC has Reliable, Computerized, Online, Real Time Order
Processing System. (Order Processing)
Responses Frequency Percent Cumulative percent
Strongly agree 56 29 29
Agree 88 45 74
Undecided 7 4 78
Disagree 25 13 91
Strongly disagree 17 9 100
Total 193 100
Source: Field Survey, 2014.
Figure 4.10: Agreement/disagreement that NBC has Reliable, Computerized, Online,
Real Time Order Processing System. (Order Processing)
Out of 193 respondents, 144 (75%) gave favourable response that NBC has reliable,
computerized, online, real time order processing system while 49 (25%) were either
undecided or gave unfavourable response.
29
45
413 9
0
20
40
60
Strongly agree Agree Undecide Disagree Strongly disagree
Percent
Percent
Table 4.21: (Q.no.5) The Assorted Products (Mix) are always in Stock. (
availability)
Responses Frequency
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
Total
Source: Field Survey, 2014.
Figure 4.11: Agreement/disagreement that The Assorted Products (Mix) are always in
Stock. (Product availability)
Seventy nine percent (79%) of the respondents were in favour of the statement that the
assorted products are always in stock
percent (21%) were either undecided or against it.
Table 4.22: (Q.no.6) The Units Ordere
Responses Frequency
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
Total
Source: Field Survey, 2014.
66
321
95
The Assorted Products (Mix) are always in Stock. (
Frequency Percent Cumulative percent
87 45 45
66 34 79
3 2 81
21 11 92
16 8 100
193 100
Field Survey, 2014.
/disagreement that The Assorted Products (Mix) are always in
vailability)
Seventy nine percent (79%) of the respondents were in favour of the statement that the
assorted products are always in stock at NBC warehouses/depots while twenty one
percent (21%) were either undecided or against it.
The Units Ordered are (100%) Supplied (Product availability)
Frequency Percent Cumulative percent
61 32 32
82 42 74
2 1 75
23 12 87
25 13 100
193 100
Field Survey, 2014.
87
16
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
The Assorted Products (Mix) are always in Stock. (Product
Cumulative percent
/disagreement that The Assorted Products (Mix) are always in
Seventy nine percent (79%) of the respondents were in favour of the statement that the
at NBC warehouses/depots while twenty one
(Product availability)
Strongly agree
Undecided
Strongly disagree
96
Figure 4.12: Agreement/disagreement that The Units Ordered are (100%) Supplied
(Product availability)
Seventy four percent (74%) of the respondents strongly agreed that the units ordered
are (100%) supplied by NBC while twenty six percent (26%) were either undecided,
disagreed or strongly disagreed.
Table 4.23: (Q.no.7) All Orders are (100%) Supplied (Product availability)
Responses Frequency Percent Cumulative percent
Strongly agree 58 30 30
Agree 81 42 72
Undecided 2 1 73
Disagree 23 12 85
Strongly disagree 29 15 100
Total 193 100
Source: Field Survey, 2014.
32
42
1
12 13
0
5
10
15
20
25
30
35
40
45
Strongly agree Agree Undecided Disagree Strongly
disagree
Percent
Percent
97
Figure 4.13: Agreement/disagreement that All Orders are (100%) Supplied (Product
availability)
Seventy two percent (72%) of the respondents accepted that all orders are (100%)
supplied at NBC while twenty eight percent (28%) did not accept.
Table 4.24: (Q.no.8) Order Cycle Time is Right (PDS Timeliness)
Responses Frequency Percent Cumulative percent
Strongly agree 87 45 45
Agree 64 33 78
Undecided 4 2 80
Disagree 29 15 95
Strongly disagree 9 5 100
Total 193 100
Source: Field Survey, 2014.
Figure 4.14: Agreement/disagreement that Order Cycle Time is Right(PDS
Timeliness)
Seventy eight percent (78%) of the respondents were in favour that NBC order cycle
time is right while twenty two percent (22%) were undecided or against the statement.
58
81
2
23
29Strongly agree
Agree
Undecided
Disagree
Strongly agree
8764
429
90
50
100
Strongly
agree
Agre Undecided Disagree Strongly
disagree
Frequency
Frequency
98
Table 4.25: (Q.no.9) The Average Delivery Time is Reliable. (PDS Timeliness)
Responses Frequency Percent Cumulative percent
Strongly agree 76 39 39
Agree 82 42 81
Undecided 5 3 84
Disagree 23 12 96
Strongly disagree 7 4 100
Total 193 100
Source: Field Survey, 2014
Figure 4.15: Extent of agreement/ disagreement that the Average Delivery Time is
Reliable (PDS Timeliness)
Eighty one percent (81%) of the respondents accepted that NBC average delivery time
is reliable while Nineteen (19%) did not.
Table 4.26: (Q.no.10) The Percent Units Delivered in Specified Time Period is
Consistent (PDS Timeliness)
Responses Frequency Percent Cumulative percent
Strongly agree 75 39 39
Agree 77 40 79
Undecided 6 3 82
Disagree 26 13 95
Strongly disagree 9 5 100
Total 193 100
Source: Field Survey, 2014
76
82
5
237 Strongly agree
Agree
Undecided
Diagree
Strongly disagree
Figure 4.16: Extent of agreement/disagreement that the Percent Units Delivered in
Specified Time Period is Consistent
Seventy nine percent (79%) of the respondents strongly agreed or agreed that the
percent units delivered in specified time is consist
(21%) were either undecided, disagreed or strongly disagreed.
Table 4.27: (Q.no11) The Percent Units Received in Acceptable Condition is Right
(PDS Quality)
Responses Frequency
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
Total
Source: Field Survey, 2014.
Figure 4.17: Agreement/disagreement that the Percent Units
condition is right (PDS Quality)
75 77
0
50
100
Strongly
agree
Agree Undecided
71
4
25
20
99
Extent of agreement/disagreement that the Percent Units Delivered in
Specified Time Period is Consistent (PDS Timeliness)
Seventy nine percent (79%) of the respondents strongly agreed or agreed that the
percent units delivered in specified time is consistent at NBC, while twenty one percent
(21%) were either undecided, disagreed or strongly disagreed.
The Percent Units Received in Acceptable Condition is Right
Frequency Percent Cumulative percent
73 38 38
71 37 75
4 2 77
25 13 90
20 10 100
193 100
Field Survey, 2014.
: Agreement/disagreement that the Percent Units Received in
(PDS Quality)
626 9
Undecided Disagree Strongly
disagree
Frequency
Frequency
73 Strongly agree
Agree
Undecided
Disagree
Strongly
Extent of agreement/disagreement that the Percent Units Delivered in
Seventy nine percent (79%) of the respondents strongly agreed or agreed that the
ent at NBC, while twenty one percent
The Percent Units Received in Acceptable Condition is Right
ed in acceptable
100
Seventy five percent (75%) of the respondents accepted that percent units received in
acceptable condition is right whereas twenty five percent (25%) did not.
Table 4.28: (Q.no.12) The Units that are supplied (100%) are Correct Units (PDS
Quality)
Responses Frequency Percent Cumulative percent
Strongly agree 43 22 22
Agree 78 40 62
Undecided 3 2 64
Disagree 44 23 87
Strongly disagree 25 13 100
Total 193 100
Source: Field Survey, 2014.
Figure 4.18: Extent of agreement/disagreement that the Units that are supplied (100%)
are Correct Units (PDS Quality)
Sixty two percent (62%) of the respondent strongly agreed or disagreed that the units
that are supplied by NBC are (100%) correct units whereas thirty eight percent (38%)
either disagreed, strongly disagreed or were undecided.
43
78
3
44
25
0
10
20
30
40
50
60
70
80
90
Strongly agree Agree Undecided Disagree Strongly
disagree
Frequency
Frequency
101
Table 4.29: (Q.no.13) The Units that are delivered (100%) are in Correct Quantity
(PDS Quality)
Responses Frequency Percent Cumulative percent
Strongly agree 51 26 26
Agree 72 37 63
Undecided 7 4 67
Disagree 25 13 80
Strongly disagree 38 20 100
Total 193 100
Source: Field Survey, 2014.
Figure 4.19: Extent of agreement /disagreement that the Units that are delivered
(100%) are in Correct Quantity (PDS Quality)
Sixty three percent (63%) of the respondents accepted that the units that are delivered
(100%) are in correct quantity while thirty seven percent (37%) did not as indicated in
the table above.
26
37
4
13
20Strongly agree
Agree
Undecided
Table 4.30: (Q.no.14) NBC Order Polices are Flexible enough to Pe
Response to Changing Market Demands. (
Responses Frequency
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
Total
Source: Field Survey, 2014.
Figure 4.20: Extent of agreement /disagreement that NBC Order Polices are Flexible
enough to Permit Timely Response to Changing Market Demands (
The table shows that fifty two percent (52%) of the respondents accepted that
order policies are flexible enough to permit timely response to changing market
demands whereas forty eight percent (48%) did not.
0
10
20
30
40
50
60
70
Strongly
agree
Agree
33
68
102
Table 4.30: (Q.no.14) NBC Order Polices are Flexible enough to Permit Timely
Response to Changing Market Demands. (PDS Flexibility)
Frequency Percent Cumulative percent
33 17 17
68 35 52
7 4 56
64 33 89
21 11 100
193 100
Survey, 2014.
Extent of agreement /disagreement that NBC Order Polices are Flexible
enough to Permit Timely Response to Changing Market Demands (PDS Flexibility)
The table shows that fifty two percent (52%) of the respondents accepted that
order policies are flexible enough to permit timely response to changing market
demands whereas forty eight percent (48%) did not.
Agree Undecided Disagree Strongly
disagree
68
7
64
21
Frequency
rmit Timely
Cumulative percent
Extent of agreement /disagreement that NBC Order Polices are Flexible
Flexibility)
The table shows that fifty two percent (52%) of the respondents accepted that NBC
order policies are flexible enough to permit timely response to changing market
Frequency
Table 4.31: (Q.no.15) NBC has Expedite and Substitute Capacity to Respond to
Special Customer Request (PDS
Responses Frequency
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
Total
Source: Field Survey, 2014.
Figure 4.21: Extent of Agreement that NBC has Expedite and Substitute Capacity to
Respond to Special Customer Request (
The table shows that sixty two percent (62%) of the respondents are convinced that
NBC has expedite and substitute capacity to respo
thirty eight percent (38%) are not convinced.
10
43
29
103
NBC has Expedite and Substitute Capacity to Respond to
PDS Flexibility)
Frequency Percent Cumulative percent
46 24 24
73 38 62
10 5 67
43 22 89
29 11 100
193 100
Field Survey, 2014.
Extent of Agreement that NBC has Expedite and Substitute Capacity to
Respond to Special Customer Request (PS Flexibility)
The table shows that sixty two percent (62%) of the respondents are convinced that
NBC has expedite and substitute capacity to respond to special customer requests but
thirty eight percent (38%) are not convinced.
24
73
Strongly agree
Agree
Undecided
Disagree
Strongly disagree
NBC has Expedite and Substitute Capacity to Respond to
Extent of Agreement that NBC has Expedite and Substitute Capacity to
The table shows that sixty two percent (62%) of the respondents are convinced that
customer requests but
Strongly agree
Strongly disagree
104
Table 4.32: (Q.no.16) NBC Responds Timely to Special Requests or Unexpected
Needs of Customers (PDS Flexibility)
Responses Frequency Percent Cumulative percent
Strongly agree 62 32 32
Agree 57 30 62
Undecided 8 4 66
Disagree 42 22 88
Strongly disagree 24 12 100
Total 193 100
Source: Field Survey, 2014.
Of the 193 respondents, 119 (62%) accepted that NBC responds timely to special
requests or unexpected needs of customers while 74 (38%) did not accept as shown in
the table above.
Figure 4.22: Extent of agreement/disagreement that NBC Responds Timely to Special
Requests or Unexpected Needs of Customers (PDS Flexibility)
4.2.18 Analysis of Questions Related to Research Question #2
Research Question #2: Is there any significant relationship between product
availability and customer satisfaction?
To provide answer to this research question, responses to questions #5, 6 and 7 on
product availability in the questionnaire as shown in table 4.21, table 4.22 and table
4.23 which are related to objective #2 and hypothesis #2 were consolidated to yield
table 4.33.
0
10
20
30
40
50
60
70
Strongly Agree Agree Undecided Disagree Strongly
disagree
Frequency
Frequency
105
Table 4.33: Consolidated Response to Qs 5, 6 & 7 Attached to #2 Objective, Research
Question and Hypothesis- Independent Variable (Product Availability)
Response Table 4.21 Table 4.22 Table 4.23 Total % Response
Strongly agree 87 61 58 206 36
Agree 66 82 81 229 39
Undecided 3 2 2 7 1
Disagree 21 23 23 67 12
Strongly Disagree 16 25 29 70 12
Total 193 193 193 579 100
Source: Field Survey, 2014.
The three (3) indicators or factors of product availability as shown in tale 4.21, table
4.22 and table 4.23 have been reduced to one factor- product availability which is a
dimension of physical distribution service to now serve as independent variable to #2
hypothesis.
4.2.19 Analysis of Questions Related to Research Question #3
Research question #3: What is the relationship between PDS timeliness and overall
customer satisfaction?
Responses to questions #8, 9 and 10 on PDS timeliness in the questionnaire which have
been analysed in table 4.24, table 4.25 and table 4.26 that are related to # 3 research
question, objective and hypothesis were consolidated to yield table 4.34.
Table 4.34: Consolidated Responses to Qs 8, 9 & 10 Attached to #3 Objective,
Research Question and Hypothesis- Independent Variable. (PDS Timeliness)
Response Table 4.24 Table 4.25 Table 4.26 Total % Response
Strongly agree 87 76 75 238 41
Agree 64 82 77 223 39
Undecided 4 5 6 15 3
Disagree 29 23 26 78 13
Strongly agree 9 7 9 25 4
Total 193 193 193 579 100
Source: Field Survey, 2014.
106
The three indicators (factors) of PDS timeliness as shown in table 4.24, table 4.25 and
table 4.26 earlier have been reduced to one factor PDS Timeliness to serve as
Independent Variable to # 3 hypothesis.
4.2.10 Analysis of Questions Related to Research Question #4
Research Question # 4: Is there any relationship between PDS quality and overall
customer satisfaction?
Responses to questions # 11, 12 1nd 13 on PDS quality in the questionnaire which had
been analyzed in table 4.27, table 4.28 and table 4.29 that are related to #4 research
question, objective and hypothesis were consolidated to yield table 4.35.
Table 4.35: Consolidated Responses to Qs 11, 12 & 13 Attached to #4 Objective,
Research Question and Hypothesis- Independent Variable. (PDS Quality)
Response Table 4.27 Table 4.28 Table 4.29 Total % Response
Strongly agree 73 43 51 167 29
Agree 71 78 72 221 38
Undecided 4 3 7 14 3
Disagree 25 44 25 94 16
Strongly agree 20 25 38 83 14
Total 193 193 193 579 100
Source: Field Survey, 2014.
The three factors of quality as shown in table 4.27, table 4.28 and table 4.29 earlier
have been reduced to one factor- PDS quality to serve as Independent Variable to #4
hypothesis.
4.2.11 Analysis of Questions Related to Research Question #5
Research Question #5: Is PDS flexibility related to overall customer satisfaction?
Responses to questions #14, 15 and 16 on PDS flexibility in the questionnaire which
had been analyzed in table 4.30, table 4.31 and table 4.32 that are related to #5
objective, research question and hypothesis were consolidated to yield table 4.36.
107
Table 4.36: Consolidated Response to Qs 14, 15 & 16 Attached to #5 Objective,
Research Question and Hypothesis- Independent Variable (PDS Flexibility)
Response Table 4.30 Table 4.31 Table 4.32 Total % Response
Strongly agree 33 46 62 141 24
Agree 68 73 57 198 34
Undecided 7 10 8 25 4
Disagree 64 43 42 149 26
Strongly agree 21 21 24 66 12
Total 193 193 193 579 100
Source: Field Survey, 2014.
The three factors or indicators of PDS flexibility as shown in table 4.30 table 4.31 and
table 4.32 earlier have been reduced to one factor PDS flexibility to serve as
independent variable to #5 hypothesis.
Table 4.37: Combined Consolidated Responses in Tables 4.33, 4.34, 4.35 and 4.36
Attached to #1 Objective, Research Question and Hypothesis- Dependent Variable
(Perceived Physical Distribution Service)
Response Product
Availability
PDS
Timeliness
PDS
Quality
PDS
Flexibility
Total % Responses
Strongly agree 206 238 167 141 752 32
Agree 229 223 221 198 871 38
Undecided 7 15 14 25 61 3
Disagree 67 78 94 149 388 17
Strongly agree 70 25 83 66 244 10
Total 579 579 579 579 2316 100
Source: Field Survey, 2014.
The four (4) dimensions of physical distribution service- product availability, PDS
timeliness, PDS quality and PDS flexibility were brought together to serve as
Dependent Variable for Hypothesis 1.
108
Table 4.38: Consolidated Responses to Qs 1, 2, 3 & 4 Attached to # 1 Objective,
Research Question and Hypothesis- Independent Variable. (PD Activities)
Responses Transportation Ware
housing
Inventory
Control
Order
Processing
Total %
Response
Strongly Agree 59 87 64 56 266 34
Agree 86 71 79 88 324 42
Undecided 5 6 3 7 21 3
Disagree 22 18 21 25 86 11
Strongly Agree 21 11 26 17 75 10
Total 193 193 193 193 772 100
Source: Field Survey, 2014.
Responses to the questions on the four (4) major dimensions of physical distribution
activities namely transportation, warehousing, inventory control and order processing
were brought together to serve as Independent Variable for hypothesis 1.
Analysis of Qs # 17, 18 and 19 on overall customer satisfaction with NBC physical
distribution service, attached to objectives, research questions and hypotheses # 2 to # 5
yielded tables 4.39, 4.40 and 4.41.
Table 4.39: (Q.no.17) I am very satisfied with NBC Marketing Activities.
Response Frequency Percent Cumulative percent
Strongly agree 46 24 24
Agree 72 37 61
Undecided 8 4 65
Disagree 48 25 90
Strongly disagree 19 10 100
Total 193 100
Source: Field Survey, 2014.
Of the 193 respondents, 118 (61%) agreed that they are satisfied with NBC marketing
activities while 75 (39%) did not agree.
109
Table 4.40: (Q.no.18) I wish more of my Suppliers were like NBC
Response Frequency Percent Cumulative percent
Strongly agree 64 33 33
Agree 87 45 78
Undecided 4 2 80
Disagree 29 15 95
Strongly disagree 9 5 100
Total 193 100
Source: Field Survey, 2014.
Out of 193 respondents, 151 (78%) agreed that they would wish more of their suppliers
were like NBC while 42 (22%) could not wish that as shown in the table.
Table 4.41: (Q.no.19) It is a pleasure dealing with NBC
Response Frequency Percent Cumulative percent
Strongly agree 77 40 40
Agree 75 39 79
Undecided 6 3 82
Disagree 26 13 95
Strongly disagree 9 5 100
Total 193 100
Source: Field Survey, 2014.
Seventy nine percent (79%) of the respondents basically agreed that it is a pleasure
dealing with NBC while 41 (21%) did not agree as shown in the table.
Table 4.42: Consolidated responses to Qs 17, 18 and 19 attached to #2 to #5
Objectives, Research Questions and Hypotheses- Dependent Variable-Overall
Customer Satisfaction
Response Table 4.39 Table 4.40 Table 4.41 Total % Response
Strongly agree 46 64 77 187 32
Agree 72 87 75 234 41
Undecided 8 4 6 18 3
Disagree 48 29 26 103 18
Strongly
disagree
19 9 9 37 6
Total 193 193 193 579 100
Source: Field Survey, 2014.
110
Responses to the three questions on satisfaction which were analysed in tables 4.39,
table 4.40 and table 4.41 were consolidated to yield table 4.42. Dependent Variable
(Overall Customer Satisfaction).
Generally, satisfaction questions yielded a high number of positive responses from
respondents. There was a slight difference in figures for those who strongly agreed and
those who agreed and they are more than 72% of the respondents. We can therefore
conclude that customers are generally quite satisfied with NBC physical distribution
service.
4.2.12. Analysis of Questions Related to Research question #6
Research Question #6: How important are the various physical distribution service
elements to customer and how does NBC performance on these elements compare to
that of its major competitor?
Analysis of questions #20 and 22 in the questionnaire yielded tables 4.43, 4.44 and 4.46
on importance rankings and performance of NBC and its major competitor related to
research question #6.
Table 4.43: (Q.no.20) Importance Ranking of the Four (4) Physical Distribution
Service (PDS) Elements by the Staff.
PDS Elements Importance Total
Score
Mean % Ranking
VI
4
I
3
SWI
2
NSI
1
Product Availability 17 6 0 0 86 3.7 92.5 1
PDS Timeliness 3 2 16 2 52 2.3 57.5 3
PDS Quality 3 15 5 0 67 2.9 62.5 2
PDS Flexibility 0 0 2 21 25 1.1 27.5 4
Source: Field Survey, 2014.
Rating Scale:
Very Important (VI) = 4
Important (I) = 3
Some what Important (SWI) = 2
Not so Important (NSI) = 1
111
Out of a total of 23 staff respondents, 17 respondents representing 74% ranked Product
Availability as the most important physical distribution service (PDS) element for soft
drink industry, 3 respondents representing 13% ranked PDS timeliness as the most
important and 3(13%) others ranked PDS quality as the most important.
Generally, using the mean scores the staff ranked Product Availability as the most
important, ranked PDS Quality- second, PDS Timeliness- third and PDS Flexibility-
fourth.
Table 4.44: (Q.no.20) Importance Ranking of the Four (4) Physical Distribution
Service (PDS) Elements by the Customers.
PDS Elements Importance Total Score Mean % Ranking
VI
4
I
3
SWI
2
NSI
1
Product Availability 98 70 2 0 606 3.6 90 1
PDS Timeliness 72 97 1 0 581 3.4 85 2
PDS Quality 0 0 22 148 192 1.1 28 4
PDS Flexibility 0 3 145 22 312 1.8 45 3
Source: Field Survey, 2014.
Rating Scale:
Very Important (VI) = 4
Important (I) = 3
Some what Important (SWI) = 2
Not so Important (NSI) = 1
Out of a total of 170 customer respondents, 98 respondents representing 58% ranked
Product Availability as the most important PDS element, 72(42%) respondents ranked
PDS timeliness as the most important. When the mean values for the PDS elements
rankings were used the results of the PDS elements rankings were Product Availability-
first. PDS Timeliness- second, PDS Flexibility- third and PDS Quality- fourth.
It was noted that there were enough differences between company rankings and
customer rankings which supports the need for this type of research. Hence, NBC
physical distribution service should be customer-driven.
112
Table 4.45: (Q.no.21) Response on whether NBC Customers Buy from NBC Major
Competitor in Soft Drink Industry in Enugu State.
Responses Frequency Percent Cumulative percent
Yes 149 88 88
No 21 12 100
Total 170 100
Source: Field Survey, 2014.
Out of 170 customer respondents, 149 (88%) also buy from NBC major competitor,
hence the need for a differential advantage through physical distribution service.
Table 4.46: (Q.no.22) Performance Rating of NBC and the Major Competitor on
the Four (4) PD Service Elements by Customers.
Major Competitor PD Service
Elements
NBC
% Mean Total P
1
F
2
G
3
E
4
E
4
G
3
F
2
P
1
Total Mean %
83 3.3 560 0 21 78 71 Product
Availability
87 79 4 0 593 3.5 88
80 3.2 542 1 26 83 60 PDS
Timeliness
80 87 3 0 587 3.5 88
83 3.3 561 1 11 98 61 PDS Quality 69 99 1 0 575 3.4 85
73 2.9 496 2 40 98 30 PDS
Flexibility
50 87 27 6 521 3.1 78
80 3.2 2159 4 196 1071 888 Total 1144 1056 70 6 2276 3.4 85
Source: Field Survey, 2014.
Rating Scales:-
Excellent (E) = 4
Good (G) = 3
Fair (F) = 2
Poor (P) = 1
113
Customer
Availability
Timeliness
Quality
Flexibility
NBC M ajor Competitor
Importance to Customers P erfo rm an ce
NSI SWI I VI P F G E
PDS
Elements
Figure 4.23: Competitive benchmarking showing opportunities for improving service
when comparisons are made with customer requirements and the performance of key
competitor
Table 4.46 and figure 4.23 show the performance rating of NBC and its major
competitor on the four (4) physical distribution service elements. The figure which was
plotted from table 4.44 and table 4.46 also shows how important the service elements
are to the customers. NBC performed better than the major competitor in all the service
dimensions listed.
However, there are opportunities for improvement especially of the PDS Flexibility
aspect of the service dimensions which NBC scored the least, but ranked third by the
customers as shown in table 4.44.
4.3 Test of Hypotheses
The various hypotheses for this study were tested with the aid of the SPSS 17.0
statistical software. The following steps were taken;
i. Restatement of the hypotheses in the null and alternate forms
ii. Reference to the data for analysis
iii. The decision rule
iv. Taking the decision.
4.3.1 Test of Hypotheses One
Restatement of the hypothesis in the null and alternate forms
H01: There is no significant relationship between performance of physical
distribution activities and perceived physical distribution service
114
Ha1: There is significant relationship between performance of physical distribution
activities and perceived physical distribution service
The data presented in table 4.38 physical distribution activities and table 4.37 perceived
physical distribution service were used to test this hypothesis.
Table 4.47: Descriptive Statistics for data presented in tables 4.38 and 4.37
Mean Std. Deviation
N
Performance of Physical Distribution
Activities 1.7785 1.24085 772
Perceived physical distribution service 1.9041 1.40820 772
Table 4.48: Pearson correlations test result for hypothesis one
Performance of
Physical Distribution
Activities
Perceived Physical
Distribution Services
Performance
of Physical
Distribution
Activities
Pearson
Correlation 1 .977(**)
Sig. (2-tailed) .000
N 772 772
Perceived
Physical
Distribution
Service
Pearson
Correlation .977(**) 1
Sig. (2-tailed) .000
N 772 772
** Correlation is significant at the 0.01 level (2-tailed).
Table 4.47 shows the descriptive statistics of the relationship between performance of
physical distribution activities and perceived physical distribution service, with a mean
response of 1.7785 and std. deviation of 1.24085 for physical distribution activities and
a mean response of 1.9041 and std. deviation of 1.40820 for perceived physical
115
distribution service. By careful observation of standard deviation values, it can be said
that there is about the same variability of data points amongst the dependent and
independent variables.
Table 4.48 is the Pearson correlation coefficient matrix of the relationship between
performance of physical distribution activities and perceived physical distribution
service, showing the correlation coefficient, significant values and the number of cases.
The correlation coefficient shows 0.977**. This value indicates that correlation is
significant at 0.05 level (2tailed) and implies that there is a positive relationship
between performance of physical distribution activities and perceived physical
distribution service (r = .977).
The Decision Rule;
If the significant/probability value (PV) <0.05 = Reject H0
If the significant/probability value (PV) >0.05 = Accept H0
Decision
The computed correlations coefficient is greater than the table value of r = .195 with
770 degrees of freedom (df. = n-2) at alpha level for a two-tailed test (r = .977, p<
.05). This result indicates that there is a positive relationship between performance of
physical distribution activities and perceived physical distribution service. The
significant/probability value (PV) = 0.000<0.05. Therefore, the researcher rejects the
null hypothesis and concludes that there is a significant relationship between
performance of physical distribution activities and perceived physical distribution
service. The double (**) in table 4.48 shows that the correlation coefficient is even
significant at 0.01 level of significance.
4.3.2 Test of Hypothesis Two
Restatement of the hypothesis in the null and alternate forms
H02: There is no significant relationship between product availability and overall
customer satisfaction.
Ha2: There is significant relationship between product availability and overall
customer satisfaction.
The data presented in table 4.33 Product Availability and table 4.42 overall customer
satisfaction were used to test this hypothesis
116
Table 4.49: Descriptive Statistics for data presented on tables 4.33 and 4.42
Mean Std. Deviation N
Product Availability 2.2556 1.25624 579
Overall Customer Satisfaction 2.3282 1.29656 579
Table 4.50: Pearson Correlations Test Result for Hypothesis Two
Product Availability
Overall Customer
Satisfaction
Product
Availability
Pearson
Correlation 1 .958(**)
Sig. (2-tailed) .000
N 579 579
Overall Customer
Satisfaction
Pearson
Correlation .958(**) 1
Sig. (2-tailed) .000
N 579 579
** Correlation is significant at the 0.01 level (2-tailed).
Table 4.49 shows the descriptive statistics of the relationship between product
availability and overall customer satisfaction, with a mean response of 2.2556 and std.
deviation of 1.25624 for product availability and a mean response of 2.3282 and std.
deviation of 1.29656 for overall customer satisfaction. By careful observation of
standard deviation values, it can be said that there is about the same variability of data
points amongst the dependent and independent variables.
Table 4.50 is the Pearson correlation coefficient matrix of the relationship between
product availability and overall customer satisfaction, showing the correlation
coefficient, significant values and the number of cases. The correlation coefficient
shows 0.958. This value indicates that correlation is significant at 0.05 level (2tailed)
and implies that there is a positive relationship product availability and overall
customer satisfaction (r = .958).
The Decision Rule;
If the significant/probability value (PV) <0.05 = Reject H0
If the significant/probability value (PV) >0.05 = Accept H0
117
Decision
The computed correlations coefficient is greater than the table value of r = .195 with
577 degrees of freedom (df. = n-2) at alpha level for a two-tailed test (r = .958, p<
.05). This result indicates that there is a positive relationship between product
availability and overall customer satisfaction. The significant /probability value (PV) =
0.000<0.05. Therefore, the researcher rejects the null hypothesis and concludes that
there is a significant relationship between product availability and overall customer
satisfaction. The double (**) in table 4.48 shows that the correlation coefficient is even
significant at 0.01 level of significance.
4.3.3 Test of Hypothesis three
Restatement of the hypothesis in the null and alternate forms
H03: There is no significant relationship between PDS timeliness and overall
customer satisfaction.
Ha3: There is significant relationship between PDS timeliness and overall customer
satisfaction.
The data presented in table 4.34 PDS Timeliness and table 4.42 Overall Customer
Satisfaction were used to test this hypothesis.
Table 4.51: Descriptive Statistics for data presented in tables 4.34 and 4.42
Mean Std. Deviation N
PDS Timeliness 2.0069 1.15867 579
Overall Customer
Satisfaction 2.3282 1.29656 579
Table 4.52: Pearson Correlations Test Result for Hypothesis Three
PDS Timeliness
Overall Customer
Satisfaction
PDS Timeliness Pearson
Correlation 1 .883(**)
Sig. (2-tailed) .000
N 579 579
Overall Customer
Satisfaction
Pearson
Correlation .883(**) 1
Sig. (2-tailed) .000
N 579 579
** Correlation is significant at the 0.01 level (2-tailed).
118
Table 4.51 shows the descriptive statistics of the relationship between PDS timeliness
and overall customer satisfaction, with a mean response of 2.0069 and std. deviation of
1.15867 for PDS timeliness and a mean response of 2.3282 and std. deviation of
1.29656 for overall customer satisfaction. By careful observation of standard deviation
values, it can be said that there is about the same variability of data points amongst the
dependent and independent variables.
Table 4.52 is the Pearson correlation coefficient matrix of the relationship between
PDS timeliness and overall customer satisfaction, showing the correlation coefficient,
significant values and the number of cases. The correlation coefficient shows 0.883.
This value indicates that correlation is significant at 0.05 level (2tailed) and implies that
there is a positive relationship between PDS timeliness and overall customer
satisfaction (r = .883).
The Decision Rule;
If the significant/probability value (PV) <0.05 = Reject H0
If the significant/probability value (PV) >0.05 = Accept Ho
Decision
The computed correlations coefficient is greater than the table value of r = .195 with
577 degrees of freedom (df. = n-2) at alpha level for a two-tailed test (r = .883, p<
.05). This result indicates that there is a positive relationship between timeliness and
customer satisfaction. The significant /probability value (PV) = 0.000<0.05. Therefore,
the researcher rejects the null hypothesis and concludes that there is a significant
relationship between PDS Timeliness and overall customer satisfaction. The double
(**) in table 4.48 shows that the correlation coefficient is even significant at 0.01 level
of significance.
4.3.4 Test of Hypothesis four
Restatement of the hypothesis in the null and alternate forms
H04: There is no significant relationship between PDS quality and overall customer
satisfaction.
Ha4: There is significant relationship between PDS quality and overall customer
satisfaction.
119
The data presented in table 4.35 PDS Quality and table 4.42 Overall Customer
Satisfaction were used to test this hypothesis.
Table 4.53:Descriptive Statistics for Data Presented in Tables 4.35 and 4.42
Mean Std. Deviation N
PDS Quality 2.4905 1.41952 579
Overall Customer satisfaction 2.3282 1.29656 579
Table 4.54: Pearson Correlation Test Result for Hypothesis Four
** Correlation is significant at the 0.01 level (2-tailed).
Table 4.54 shows the descriptive statistics of the relationship between PDS quality and
overall customer satisfaction, with a mean response of 2.4905 and std. deviation of
1.41952 for PDS quality and a mean response of 2.3282 and std. deviation of 1.29656
for overall customer satisfaction. By careful observation of standard deviation values, it
can be said that there is about the same variability of data points amongst the dependent
and independent variables.
Table 4.54 is the Pearson correlation coefficient matrix of the relationship between
PDS quality and overall customer satisfaction, showing the correlation coefficient,
significant values and the number of cases. The correlation coefficient shows 0.790.
This value indicates that correlation is significant at 0.05 level (2tailed) and implies that
there is a positive relationship between PDS quality and overall customer satisfaction
(r = .790).
The Decision Rule;
If the significant/probability value (PV) <0.05 = Reject H0
If the significant/probability value (PV) >0.05 = Accept H0
Quality Customer Satisfaction
PDS Quality Pearson Correlation 1 .790(**)
Sig. (2-tailed) .000
N 579 579
Overall Customer
Satisfaction
Pearson Correlation .790(**) 1
Sig. (2-tailed) .000
N 579 579
120
Decision
The computed correlations coefficient is greater than the table value of r = .195 with
577 degrees of freedom (df. = n-2) at alpha level for a two-tailed test (r = .790, p<
.05). This result indicates that there is a positive relationship between PDS quality and
overall customer satisfaction. The significant /probability value (PV) = 0.000<0.05.
Therefore, the researcher rejects the null hypothesis and concludes that there is a
significant relationship between PDS quality and overall customer satisfaction. The
double (**) in table 4.48 shows that the correlation coefficient is even significant at
0.01 level of significance
4.3.5 Test of Hypothesis five
Restatement of the hypothesis in the null and alternate forms
H05: There is no significant relationship between PDS flexibility and overall
customer satisfaction.
Ha5: There is significant relationship between PDS flexibility and overall customer
satisfaction.
The data presented in table 4.36 PDS Flexibility and table 4.42 Overall Customer
Satisfaction were used to test this hypothesis
Table 4.55: Descriptive Statistics for Data Presented in Tables 4.36 and 4.42
Mean Std. Deviation N
PDS Flexibility 2.6580 1.38472 579
Overall Customer Satisfaction 2.3282 1.29656 579
Table 4.56: Pearson Correlations Test Result for Hypothesis Five
PDS
Flexibility
Overall Customer
Satisfaction
PDS Flexibility Pearson Correlation 1 .784(**)
Sig. (2-tailed) .000
N 579 579
Overall customer
satisfaction
Pearson Correlation .784(**) 1
Sig. (2-tailed) .000
N 579 579
** Correlation is significant at the 0.01 level (2-tailed).
121
Table 4.55 shows the descriptive statistics of the relationship between PDS flexibility
and overall customer satisfaction, with a mean response of 2.6580 and std. deviation of
1.38472 for PDS flexibility and a mean response of 2.3282 and std. deviation of
1.29656 for overall customer satisfaction. By careful observation of standard deviation
values, it can be said that there is about the same variability of data points amongst the
dependent and independent variables.
Table 4.56 is the Pearson correlation coefficient matrix of the relationship between
PDS flexibility and overall customer satisfaction, showing the correlation coefficient,
significant values and the number of cases. The correlation coefficient shows 0.784.
This value indicates that correlation is significant at 0.05 level (2tailed) and implies that
there is a positive relationship between PDS flexibility and overall customer
satisfaction (r = .784).
The Decision Rule;
If the significant/probability value (PV) <0.05 = Reject H0
If the significant/probability value (PV) >0.05 = Accept H0
Decision
The computed correlations coefficient is greater than the table value of r = .195 with
579 degrees of freedom (df. = n-2) at alpha level for a two-tailed test (r = .784, p<
.05). This result indicates that there is a positive relationship between PDS flexibility
and overall customer satisfaction. The significant /probability value (PV) = 0.000<0.05.
Therefore, the researcher rejects the null hypothesis and concludes that there is a
significant relationship between PDS Flexibility and overall customer satisfaction. The
double (**) in table 4.48 shows that the correlation coefficient is even significant at
0.01 level of significance.
4.4 Discussion of Findings
This section discusses the main findings of the research and makes comparisons with
findings of previous researches. The section began with a brief discussion of the overall
findings before going on to discuss the main findings based on the objectives of the
study.
As suggested from the overall findings, most customers are satisfied with PDS of NBC
and they are happy to be in business with NBC and wished more of their suppliers were
122
like NBC. Generally, NBC product availability, PDS timeliness, PDS flexibility and
PDS quality are better than those of the key competitor. However, there are
opportunities for improvement especially on the PDS flexibility it scored the least
mark.
Objective 1: To evaluate the relationship between performance of physical distribution
activities and perceived physical distribution service.
The finding that there is significant relationship between performance of PD activities
and perceived PD service supports the theoretical framework of Mentzer et al (2009:60)
that there should be relationships between PD activities performed and perception of
PD benefits received. The strength of this relationship (r = .977) indicates the extent of
impact effective and efficient performance of PD activities can make on perceived PD
service and overall customer satisfaction.
Objective 2: To ascertain the relationship between product availability and overall
customer satisfaction
The finding that there is significant relationship between product availability and
overall customer satisfaction supports the marketing theory, which says that customer
service expectations compared to perceived customer service performance affect
satisfaction. The strength of the relationship (r = .958) shows the extent of the impact
product availability, which was measured in terms of in-stock rate and percent orders,
units and lines filled will make on overall customer satisfaction. This relationship will
greatly affect intention to buy.
Objective 3: To determine the relationship between PDS timeliness and overall
customer satisfaction.
The finding that there is a significant relationship between PDS timelines and overall
customer satisfaction supports Johnson and Gustatson (2000:50) finding that customer
satisfaction is customer’s overall evaluation of the purchase and consumption
experience with a product, service or provider.
The strength of this relationship (r = .883) which PDS timelines, measured in terms of
order cycle time, average delivery time and consistent delivery, has with overall
customer satisfaction will immensely influence purchase decisions.
123
Objective 4: To examine the relationship between PDS quality and overall customer
satisfaction.
The finding that there is significant relationship between PD service quality and overall
customer satisfaction also supports Johnson and Gustatson (2000:50) who found out
that customer satisfaction is customers’ over all evaluation of the purchase and
consumption experience with a product, service or provider.
The strength of relationship (r = .790) PD service quality measured in terms of
minimum damage in transit, and order filling accuracy has with overall customer
satisfaction indicates the extent of impact it makes on overall customer satisfaction.
Objective 5: To identify the relationship between PDS flexibility and overall customer
satisfaction.
The finding that there is significant relationship between PDS flexibility and overall
customer satisfaction supports substantially Manders (2009:1) finding that physical
distribution flexibility has a significant positive impact on customer satisfaction.
Manders’ study took place in Netherlands with manufacturing companies producing
technical products as units of analysis hence the need to confirm the study finding in
Nigeria using company in Fast Moving Consumer Goods (FMCGs) sector. The
Strength of relationship (r = .784) PD service flexibility measured in terms of flexible
order policies, expedite and substitute capacity, and meeting customers’ special needs,
has with overall customer satisfaction indicates the degree of impact it can make on
customer satisfaction.
Objective 6. To ascertain the relative importance of each physical distribution service
variable and benchmark the performance level.
The finding that the relative importance of PD service elements as ranked by customers
in this order;
Product availability 1st
PDS timeliness 2nd
PDS flexibility 3rd
PDS quality. 4th
This indicates the importance ratings or relative degree of importance customers attach
to the various PDS elements.
124
This finding agrees with the finding of Mentzer et al (2009:57) which identifies the
relative importance of PD service elements to purchase decision as;
Availability 1st
Timeliness 2nd
Quality 3rd
The only difference is that the present study considered four (4) PDS elements and the
fourth element PDS flexibility displaced “Quality” in order of importance to customers.
The impact of each PDS element on customer satisfaction and purchase decision
depends on its relative importance to the customer.
The result of mapping the relative importance of PD service elements to customers
against the service performances of NBC and its key competitor indicates that
balancing a responsiveness to customer service requirements on one hand with direct
competitor service offerings comparison on the other hand is a logical basis for setting
customer service standards in a competitive environment.
4.5 Summary
The findings of the study show that effective and efficient performance of PD activities
will lead to better PD service which will invariably result in overall customer
satisfaction and customer loyalty. These findings collaborate with existing literature.
125
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1. Introduction
The study examined the effect of effective and efficient performance of physical
distribution activities- transportation, warehousing, inventory control and order
processing on PD service performance or outcome measured in terms of product
availability, PDS timeliness, PDS quality and PDS flexibility and how these service
elements in turn impact on overall customer satisfaction. The researcher surveyed a
cross section of commercial staff, distributors and major retailers of Nigerian Bottling
Company (NBC) Plc in Enugu state.
The findings will assist companies especially those in Fast Moving Consumer Goods
(FMCGs) sector gain competitive advantage as it becomes more difficult for them to
compete on pure product level.
5.2 Summary of Findings
The study made the following findings;
1. PDS activities-transportation, warehousing, inventory control and order
processing-performance affect PD service-in-stock rate and percent orders,
units, lines filled, order cycle time, average delivery time, consistent delivery,
damage in-transit, order filling accuracy, order policies, capacity to meet and
actually meeting customers’ special needs.
2. Product availability- in-stock rate and percent orders, units and lines filled-
significantly affect overall customer satisfaction.
3. PDS timeliness- order cycle time, average delivery time and consistent delivery-
have significant effect on overall customer satisfaction.
4. PDS quality- minimum damage in-transit, and order filling accuracy
significantly affect overall customer satisfaction.
5. PDS flexibility- flexible policies, expedite and substitute capacity and meeting
customers’ special needs-have significant effect on overall customer
satisfaction.
6. The PDS elements relative importance to purchase decision ranking by
customers in descending order of importance were product availability, PDS
timeliness, PDS flexibility and PDS quality while the staff of the company
126
ranking was product availability, PDS timeliness, PDS quality and PDS
flexibility.
7. NBC performed better than the major competitor in all the PD service elements
examined.
8. Determination of customer service requirements and competitor’s service
offerings was found to be a more logical basis for setting customer service level
in a competitive environment.
5.3 Conclusion
Effective and efficient performance of physical distribution activities will lead to
better physical distribution service which will in turn transcend to overall customer
satisfaction. The resulting customer satisfaction will positively influence customer
purchase decision and translate into competitive advantage and profit for the company.
Implication of Findings
The findings have theoretical and managerial implications.
The outcomes of this study reveal that physical distribution activities must be
considered in a broad perspective to the situation, the strategy and the goal that must
be obtained. Therefore, a model based approach should be used where all the key
dimensions of PD activities that are important for that situation can be compared
together with perceptions of PD service performance instead of considering key
dimensions of PD activities separately which is also not the case in practice where
different PD activities participate together and more often in trade-off relationship.
The managerial and practical implication of the finding is the need for coordination of
PD activities as one system for effective and efficient performance. Ineffective and
inefficient performance of PD activities leads to low level of PD service in terms of
product availability, PDS timeliness, PD service quality and PD service flexibility.
This low level of customer service will lead to undesirable conditions like inadequate
inventory and stock outs, long order cycle time, inconsistent and unreliable delivery,
high damage in-transit and inability to respond to customer changing needs.
All these unpalatable conditions will result in customer dissatisfaction, lost sales, loss
of customers’ goodwill, often loss of customers, and decreased profit for the company.
Also, company’s failure to determine the relative importance of these PD service
elements to customers and examine competitors’ service standards will lead it to
127
spending more and doing better on less important services while spending less and
performing worse than the competitor on more important services. This will never
translate to competitive advantage for the company. Rather, it results in weakness for
the company.
5.4 Recommendations
1. Physical distribution activities- transportation, warehousing, inventory control,
order processing etcetera -should be managed effectively and efficiently using
innovative methods like 3-pL providers, local distribution centers, Just-in-Time
(JIT), stockless distribution, computerized on-line, real time order processing
system and total cost concept.
2. Customer perceptions of the physical distribution service performance should
be measured periodically to ensure that the management of PD activities leads
to the desired results in terms of product availability, PDS timeliness, PDS
flexibility and PDS quality.
3. Customer satisfaction with product availability, PDS timeliness, PDS flexibility,
PDS quality and their relative importance to purchase decision should be
measured periodically for necessary feedback and control.
4. Determination of customer service requirements and competitors service
offerings should be used as a more logical basis for setting customer service
level in a competitive environment.
Contribution to Knowledge
This is seemingly the first empirical study in which a comprehensive model of
conceptual customer service/satisfaction was tested to show the significant relationship
effective and efficient performance of physical distribution activities has with
perception of physical distribution service performance and how this perception is
related to customer satisfaction. Based on these findings, the relative importance of the
PD service elements to customers was established and the performance of the company
and its key competitor on these service elements compared. Consequently, a model of
market-driven customer service standards was developed.
128
Suggestions for Further Studies.
This research was carried out as a descriptive survey study of a company in the Fast
Moving Consumer Goods (FMCGs) sector.
Further research can be done to test this model in manufacturing firms that produce and
sell technical products. Further research can be carried out taking the supply chain
comprising the customers, the producer and the producer’s suppliers as the units of
analysis instead of the firms.
A conceptual model of Market-driven Customer Service Standards (The
Customer Service Mirror)
The customer service mirror is a conceptual model of market-driven customer service
standards that identifies customer service requirements and major competitor’s service
offerings so that a company can adjust its service offerings to exceed those of the major
competitor based on the customers’ evaluation of the company and its major
competitor’s service offerings. The rationale is that in a competitive business
environment with increasing rational buyers, a company can only win by creating and
delivering superior value. It is based on the understanding that consumers take buying
decisions in a comparison context where a firm’s total product is compared to the
competitor’s total product and one that offers superior value to the customer is selected.
Customer service level is a tool that can differentiate the company’s product and
consequently increase sales and profits.
The provision of shorter order cycle times, less product damage, fewer stock-out
situations and substitute capacity than that of competitors is a definite marketing edge
for the company. However, these benefits must be weighed against the cost associated
with the increased service. Naturally, if the marginal benefits are less than the marginal
costs of the increased service, then the company will be in a better position without the
increased service. Interestingly, this situation is avoided by increasing service at
constant cost or even at lower cost through innovations in technology, total cost
analysis and costs trade-offs. The real challenge is that the company has to provide
better customer service than competitors at a cost that does not place the company at a
price disadvantage.
129
This approach to setting customer service standards is called a mirror concept because
it is based on objective evaluation of the company’s service offerings by the customers
as the company is too close to itself to be really objective. We need objectivity in
setting customer service standards, and in exactly the same way as we need a mirror in
which to see our faces. The company’s mirrors are the customers. This approach will
reduce the gaps in service quality,
Assumptions
1. A better customer service leads to higher overall customer satisfaction and more
sales.
2. Customer service can be improved at constant cost or even at lower cost
through innovations.
3. At constant cost/price, more sales lead to higher profit.
4. Continuous customer service improvement is still desirable even if it does not
lead to increased sales, at least for market share and profit sustainability.
Steps
1. Determine customer service requirements and major competitor’s service
offerings.
2. Obtain customers’ evaluation of the company and its major competitor’s service
offerings.
3. Determine the relative importance of customer service elements to customers.
4. Set customer service standards above major competitor’s standards.
5. Ensure continuous service improvements through innovations that lead to costs
minimization.
6. Carry out periodic competitive benchmarking and review (i.e. customers’
evaluation of relative importance of service dimensions and performance of the
company and its major competitor on the dimensions).
130
Figure 5.1: A conceptual model of Market-driven Customer Service Standards.
0
60
70
80
2
95 85 75 65
80
70
60 a
b
c
a2
b2
c2
d
0 70 % B
%
A
Key
Co
mpet
ito
r’s
Off
erin
gs
Sales
%
%
Customers Service Requirements
Company’s Service Standards
Triangle A02B is a reflection of triangle A01B.
In triangle A01B, customers expect at least 70% service level. For this customer service
requirement, there are three possible positions for the key competitor i.e position ‘a’
where he has not met the customer requirement, position ‘b’ where he has met it and
position ‘c’ where he has exceeded it. The company takes a mirror image of the
competitor’s standards to set its service standards above those of the competitor and
watches the impact on its sales. The challenge for the company is to exceed the key
competitor’s service offering at any position the competitor is. In triangle A02B, a2, b2,
c2 represent corresponding response positions of the company. It is a generic strategy
for leaders, challengers, followers and nichers based on their capability and competitive
advantage.
100
75
O1
e2
a2
b2
c2
d2
e2
a
b
c
Maximum service
131
Market challengers, followers and nichers go for segments where they can beat market
leaders service offerings and enjoy better market shares.
The position ‘d2’ shows that improvement in customer service may not necessarily
increase sales but at least it can sustain sales, and the company must not always wait
until the key competitor makes the first move. Therefore, maximum service is achieved
at a point where increase in service is not accompanied by increase in sales as shown at
point “d2”. At this point service is not a criterion for purchase by customers. Emphasis
will have to shift to the product life cycle management. Any further increase in service
may be accompanied by a fall in sales as shown at point ‘e2’.
Please, note that in triangle A01B, if we equate customer service requirement to sales of
the key competitor because of its effect on decision to purchase, then the diagonal 0102
represents the direct relationship between customer service offerings and sales of both
the key competitor and the company.
132
BIBLIOGRAPHY
Alasiri, W. A. and Cole, A. A. (2001), Service Marketing: Principles and Practice,
Lagos: Ade-Ola Printing press Ltd.
Alexa Research (2000), Web Intelligence and Traffic Measurement, USA
Anderson, J.C. and Narus, J.A. (2000), “A Model of the Distributor’s Perspective of
Distributor–Manufacturer Working Relationship”. Journal of Marketing, Volume 48,
Fall, 62-74.
Andreas, E and Wolfgang U. (2002), “Perceived value, The Core of Marketing”,
Journal of Business and Industrial Marketing, Volume 17, Number 2, 107-118.
Anyanwu, Aham and Nwokah, Gladson N. (2008), Contemporary Book on Services
Marketing, Owerri: Avan Global Publications.
Armstrong, G. and Kotler, P. (2009), Marketing: An Introduction, 9th Ed. New Jersey,
Pearson Education Inc.
Ballon, R.H. (2001), Basic Business Logistics: Transportation, Material Management,
Distribution, 2nd Ed., Englewood Cliff NJ Prentice-Hall.
Bertowitz, EN, Kerim, R.A., Hartley, S.W. and Rudelins, W. (2000), Marketing, 6th
Ed., USA: The McGraw Hill Companies Inc.
Bonoma, T. and Johnson, W.J. (1990), “The Social Psychology of Industrial Buying and
Selling”, Industrial Marketing Management, Volume 1, Number 17, 213-224.
Boone, L.E. and Johnson, J.C. (1990), Marketing Channels 2nd Ed. Oklahoma:
Petroleum Publishing Company.
Boone, L.E. and Kurtz, D.L. (2004), Contemporary Marketing, 11th Ed. Ohio, South-
West: Thomas Learning.
Bowersox, D.J. and Cooper, M.B. (1992), Strategic Marketing Channel Management,
Singapore: McGraw – Hill Book Company.
Bucklin, L.P. (1990) “A Theory of Channel Control” Journal of Marketing Volume 37,
Number 1, January 39-47.
Chu, R.,(2002). “Stated-importance versus Derived Importance: Customer Satisfaction
Measurement”, Journal of Service Marketing, Volume 16, Number 4, January,
285-301.
Converse P.D. (1945) ‘The Development of the Science of Marketing – An Exploratory
Survey’, Journal of Marketing Volume 10, July, 14-23, in D.G.B. Jones and E.H.
Shaw ‘A History of Schools of Marketing Thought http://ww.sagepublications.com
Accessed 16 March, 2011 by 10.30pm, 10-21.
133
Coyle, J.J. and Bardi, E.J. (2000), The Management of Business Logistics, 2nd Ed.,
Minnesota: West Publishing Co.
Coyle, J.J., Bardi, J.E., and Largely, C.J. (2003), The Management of Business
Logistics: A Supply Chain Perspective 7th Ed. Canada, South Western: Thomas
Learning.
Cravens, D.W. and Woodruff, R.B. (2001), Marketing, USA: Addison – Wesley
Publishing Company, Inc.
Doyle, P. (1994), Marketing Management and Strategy, London: Prentice Hall.
Drucker, P. (1962), “The Economy’s Dark Continent”, Fortune, April, 103 in Kotler, P.
(2006: 591), Marketing Management, Analysis, Planning and Control, New
York: Prentice Hall.
Ehikwe, A.C (2002), Transportation and Distribution Management, Enugu: Precision
Publishers.
EL-Ansar, A. and Stern, L.W. (1990), “Power Measurement in the Distribution
Channel”, Journal of Marketing Research, Volume 9, February, 47-52.
EL-Ruphia, A. (2000) “Effective Distribution of Locally Produced Items in Nigeria”,
Business Digest Magazine, October, 24-25.
European Logistics Association (ELA) 2004) Logistics Survey. www.elalog.org
Accessed 16 March, 2011 by 9.45pm, 18-20.
Frazier, G.L. and Sheth, J.N. (2001) “An Attitude – Behaviour Framework for
Distribution Channel Management, Journal of Marketing, Volume 43, Number
3, Summer 38-48.
Gaski, J.F. and Nevin, J.R. (2001) “The Differential Effects of Exercised and
Unexercised Power Sources in a Marketing Channel”, Journal of Marketing
Research, Volume 22, May 130-142.
Gilmour, Peter (1997), “Customer Service: Differentiating by Marketing Concept?”,
Journal of the Academy of Marketing Science, Volume 17, Number 3, 141-148.
Guelzo, C.M. (2001), Introduction to Logistics Management, Englewood Cliffs, N.J:
Prentice Hall.
Hair, J.F, Bush, R.P. and Ortinan, D.J. (2007), Marketing Research: In a Digital
Information Environment, New Jersey: Prentice Hall.
Hart, L.W.L.; Heskett, J.L. and Sasser, W.E. (1990), “The Profitable Art of Service
Recovery”, Harvard Business Review, Volume 90, Number 4, July, 148-156.
134
Hertz, A. and Alfreds, B. (2003), Logistical Management, New York: MacMillan
Publishing Company, Inc.
Heskett, J.L. Ivie, R.M. and Glaskowky N.A. (1990), Business Logistics: Management
of Physical Supply and Distribution, 2nd Ed., New York: The Ronald Press
Company http://ww.download-it.org/learning-resources, Accessed 7 March, 2011
by 11pm, 2-5.
Jarboe, G.R. (1996), The Marketing Research Project Manual, USA: West Publishing
Company.
Johnson, D.M. and Gusafsson, A. (2000). Improving Customer Satisfaction, Loyalty,
and Profit: An Integrated Measurement and Management System, San
Francisco: Jossey-Bass Inc.
Jones, D.G.B. and Shaw, E.H. (2002), ‘A History of Schools of Marketing thought’,
htt://www.sagepublishcation.com Accessed 16 March, 2011 by 9.10pm, 6-8.
Kotler P. (2006), Marketing Management: Analysis, Planning and Control, 5th Ed.,
New Jersey: Prentice Hall
Kotler P. and Keller K. L. (2007), Marketing Management, New Delhi India: Practice
Hall.
Kotler, P. (2000), Marketing Management: Analysis, Planning and Control, 5th Ed.,
New Jersey: Prentice Hall Inc.
Kotler, P. (2001), Principles of Marketing: Physical Distribution & Logistics
Management, New York: Prentice Hall.
Kotler, P. (2003). Marketing Management, India: Pearson Education.
Lalonde, B. (1990), “Strategies for Organising Physical Distribution”, Transportation
and Distribution Management, Volume 10, Number 5, January, 21-25.
La-Londe, B. J. (2001), Customer Services in the Distribution, New York: The Free
Press.
Lalonde, B.J. and Zinszar, P.H. (1990) Customer Service; Meaning and Measurement
Chicago, National Council of Physical Distribution Management, Volume 9,
Number 4, January, 58-62.
Lambert, D.M. Stock, J.R. (2000), Strategic Physical Distribution Management,
Homewood: Irwin.
Mentzer, J.T, Games, R. and Krapfel, R.E. (2009), “Physical Distribution Service: A
Fundamental Marketing concept?”, Journal of the Academy of Marketing
Science, Volume 17, Number 1, Winter, 53-62.
135
Meritem Research (2008), www.securities.com/.../company-profile/...Nigeria Bottling
Company, Accessed 16 March, 2011 by 9.45pm, 8-10.
Miles, M. B. and Huberman, A. M. (1994), Qualitative Data Analysis: An Expanded
Source Book, 2nd Ed., Thousand Oak, CA: Sage.
Morden, A.R. (1993), Elements of Marketing, 3rd Ed., London: DP Publishers Ltd.
Murray, M. (2011), Business Logistics Management, Eaglewood Cliffs, New Jersey:
Prentice Hall, Inc.
Nadube, P. M. (2010), Marketing Communication: Theory and Practice, Port-Harcourt:
TND press.
Nielsen, A. C. (2000), “The Out-of-Stock Study Part II. Growing Problems of Stock-
outs Verified by Nielsen Research, Progressive Grocer,” Volume 47, Number 6,
November, 26-31
Nwaizugbo, L.C and Nnabuko, J.O. (2010) “Cost Benefit Implications of Customer
Service Delivery” Nigerian Journal of Marketing, Volume 5, Number 2,
(2009/2010), 92-100.
Ode .E, Iruka, H., Aduba, P and Okechukwu, C. (2011), "Customer Satisfaction Index",
A Seminar Paper Presented in Partial Fulfilment for the Requirement of the
Course: Analytical Techniques, Department of Marketing, University of
Nigeria, Enugu Campus.
OECD (2000), “Transport Logistics; shared solutions to common challenges, Journal
of Business Logistics, Volume 22, Number 1, Winter, 10-15.
Okwandu, G .A. (2004), Research Methods in Business and Social Sciences, Owerri;
Civincs Publishers.
Onah, J.O and Thomas M.J (2004), Marketing Management: Strategies and Cases, 2nd
Ed., Enugu, Nigeria: Institute for Development Studies, University of Nigeria,
Enugu Campus.
Onodugo, V.A. Ugwuonah, G.E. and Ebinne, E.S. (2010), Social Science Research:
Principles, Methods and Applications, Enugu: El’Demak Publishers.
Osuala, O. C. (2005), Research Methods in Management Sciences, Owerri: Avan
Global Publications.
Parasuraman, A. (1997), “Reflection: Gaining Competitive Advantage Through
Customer Value”, Journal of the Academy of Marketing Science, Volume 25,
Number 2, Spring, 154-161.
136
Parasuraman, A., Zeithaml, V. A. and Berry, L.L, (1995), "Refinement and
Reassessment of the V' SERVQUAL Scale'1, Journal of Retailing, Volume 67,
Number 2, March, 25-26.
Parker, D.D. (1962), “Improved Efficiency and Reduced Cost in Marketing”, Journal
of Marketing, April pp 15-21 in Kotler P. (2006: 591) Marketing Management,
Analysis, Planning and Control.
Patterson, P. G., Johnson, L. W. and Spreng, R. A. (19997), Modeling the determinants
of Customer Satisfaction for Business-to-Business Professional Service, Journal
of Academy of Marketing Science, Volume 25, Number 1, 4-17.
Perreault, W.D., Cannon, J.P. and McCarthy E.J. (2010), Essentials of Marketing: A
Marketing Strategy Planning Approach, 12th Ed., New York: McGraw-
Hill/Irwin.
Pignier, C. (2005), “Satisfaction Measurement", Journal of Services Marketing, Volume
16, Number 4, January, 285-301.
Pride, W.M. and Ferrell, O.C. (2001), Marketing, 6th Ed.; Boston: Houghton Mifflin
Company.
Rakowski, James P. (1992), “The Customer Service Concept”. Review of Business and
Economic Research Volume 17, Number 8, Winter, 55-66.
Rushton, A. Croucher, P. and Baker, P. (2006), The Handbook of Logistics and
Distribution Management, 3rd Ed., Great Britain: Kogan Page Limited.
Scahry, Philip B. and Becker, B. W. (2002), “The Impact of Stock-outs on Market
Share: Temporal Effects”, Journal of Business Logistics Volume 1, Number 1,
Spring, 31-43.
Schewe, C.D. and Hiam, A.W. (1998), The Portable MBA in Marketing, 2nd Ed., New
York: John Wiley & Sons, Inc.
Sharma, J.K. (2007), Operations Research; Theory and Applications, 3rd Ed., Delhi:
McMillan India Ltd.
Speh, T.W. (1990), Physical Distribution-Marketing Interfaces: Research and
Managerial Implications, NCPDM Proceedings, Los Angeles, October, 1977.
Srinivasa, E. and Sanrabh A. (2009), Strategies for Organising Transportation and
Distribution Management, New York: Prentice Hall.
Stanton, W.J. (2000), Fundamentals of Marketing, Japan: McGraw-Hill Book
Company.
137
Ugwuonah, G.E (2005), Data Analysis and interpretation: A computer Based
Approach, Uwani-Enugu: Cheston Ltd.
Wagner, S.M. (2011), “Supply Chain Risk Management” Journal of Business Logistics,
Volume 22, Number 1, May, 15-20.
Walter, C.K and Grabner, J. R. (2005), “Stock out Cost Models: Empirical Test in a
Retail Situation”, Journal of Marketing, Volume 39, Number 6, July, 56-68.
Wilson, R.M.S. and Gilligan, C. (1997), Strategic Marketing Management: Planning,
Implementation and Control, 2nd Ed., Oxford: Butterworth – Heinemann.
Zemke, R. (2001), The Service Edge, New York; Penguin Books.
138
APPENDIX 1
Tables for Data Analysis
H01 Independent Variable
Table 4.38: Consolidated Responses to Qs 1, 2, 3 & 4 Attached to # 1 Objective,
Research Question and Hypothesis- Independent Variable. (PD Activities)
Responses Transportation Ware
housing
Inventor
y
Control
Order
Processing
Total %
Response
Strongly Agree 59 87 64 56 266 34
Agree 86 71 79 88 324 42
Undecided 5 6 3 7 21 3
Disagree 22 18 21 25 86 11
Strongly Agree 21 11 26 17 75 10
Total 193 193 193 193 772 100
H01 Independent Variable
H01 Dependent Variable
Table 4.37: Combined Consolidated Response in Tables 4.33, 4.34, 4.35 and 4.36
Attached to #1 Objective, Research Question and Hypothesis- Dependent Variable
(Physical Distribution Service)
Response Product
Availability
PDS
Timeliness
PDS
Quality
PDS
Flexibility
Total %
Responses
Strongly agree 206 238 167 141 752 32
Agree 229 223 221 198 871 38
Undecided 7 15 14 25 61 3
Disagree 67 78 94 149 388 7
Strongly agree 70 25 83 66 244 10
Total 579 579 579 579 2316 100
139
Table 4.33: Consolidated Response to Qs 5, 6 & 7 Attached to #2 Objective,
Research Question and Hypothesis- Independent Variable. (Availability)
Response Table 4.21 Table 4.22 Table 4.23 Total % Response
Strongly agree 87 61 58 206 36
Agree 66 82 81 229 39
Undecided 3 2 2 7 1
Disagree 21 23 23 67 12
Strongly Disagree 16 25 29 70 12
Total 193 193 193 579 100
H03 Independent Variable
Table 4.34: Consolidated Response to Qs 8, 9 & 10 Attached to #3 Objective,
Research Question and Hypothesis- Independent Variable. (Timeliness)
Response Table 4.24 Table 4.25 Table 4.26 Total %
Response
Strongly agree 87 76 75 238 41
Agree 64 82 77 223 39
Undecided 4 5 6 15 3
Disagree 29 23 26 78 14
Strongly agree 9 7 9 25 4
Total 193 193 193 579 100
H04 Independent Variable
Table 4.35: Consolidated Response to Qs 11, 12 & 13 Attached to #4 Objective,
Research Question and Hypothesis- Independent Variable. (Quality)
Response Table 4.27 Table 4.28 Table 4.29 Total % Response
Strongly agree 73 43 51 167 29
Agree 71 78 72 221 38
Undecided 4 3 7 14 3
Disagree 25 24 25 94 16
Strongly agree 20 25 38 83 14
Total 193 193 193 579 100
140
H05 Independent Variable
Table 4.36: Consolidated Response to Qs 14, 15 & 16 Attached to #5 Objective,
Research Question and Hypothesis- Independent Variable. (Flexibility)
Response Table 4.30 Table 4.31 Table 4.32 Total % Response
Strongly agree 33 46 62 141 24
Agree 68 73 57 198 34
Undecided 7 10 8 25 4
Disagree 64 43 42 149 26
Strongly agree 21 21 24 66 12
Total 193 193 193 579 100
H02 - H05 Dependent Variable
Table 4.42: Consolidated response to Qs 17, 18 and 19 attached to #2 to #5
Objectives, Research Questions and Hypothesis- Dependent Variable-Customer
Satisfaction
Response Table 4.39 Table 4.40 Table 4.41 Total %
Response
Strongly agree 46 64 77 187 32
Agree 72 87 75 234 56
Undecided 8 4 6 18 3
Disagree 48 29 26 103 18
Strongly disagree 19 9 9 37 6
Total 193 193 193 579 100
Rating Scales:-
Strongly agree - 5
Agree - 4
Undecided - 3
Disagree - 2
Strongly agree - 1
141
APPENDIX 2
QUESTIONNAIRE FOR THE STAFF OF THE ORGANISATION.
Department of Marketing Faculty of Business Administration University of Nigeria Enugu Campus Enugu State. 7th October, 2013.
Dear Sir,
QUESTIONNAIRE FOR COMPLETION
I am a postgraduate student in the above named University, carrying out a research
work on “Physical Distribution and customer satisfaction” as part of the requirements
for the Award of Master of Science Degree in Marketing.
Please assist me by completing the attached questionnaire. I assure you that all
information given will be used for academic purpose only and will be treated with
utmost confidentiality.
Thank you for your assistance
Yours faithfully,
EWUZIE, CAJETAN .O
PG/M.Sc/09/53941
(Researcher)
INSTRUCTION:
Please tick (√ ) where necessary on the option which you consider most appropriate
SECTION A: BIODATA
1. Gender? Male [ ] Female [ ]
2. Age? 30years & below [ ] 31-40 [ ]
41-50 [ ] 51 & above [ ]
3. Educational Qualification?
National Diploma & below [ ] HND/ B.Sc. [ ]
Masters [ ] Ph.D. & above [ ]\
142
4. Number of years with the organization? 0-5 years [ ]
6-10 years [ ] 11-15 years [ ] 16 years/above [ ]
5. Grade level ?
Below Supervisor [ ] Supervisor [ ] Manager and above [ ]
SECTION B:
Please indicate your level of agreement or disagreement with the following statements
about Physical Distribution System with regard to what is obtainable in Nigeria
Bottling Company (NBC) Plc by ticking (√) in the appropriate box.
S/N Physical Distribution
Activities
Strongly
Agree
Agree Undecided Disagree Strongly
Disagree
1 NBC distribution trucks/vans
are adequate, functional and
well coordinated.
2 NBC warehouses are
adequate and strategically
located.
3 NBC maintains adequate
inventory size and mix.
4 NBC has computerized,
online, real time order
processing system.
Physical Distribution
Service Elements.
Product availability
5 The assorted products (mix)
are always in stock.
6 The units ordered are (100%)
supplied.
7 All orders are (100%)
supplied.
PDS timeliness
8 The time it takes NBC to
supply from receipt of order
is right.
143
9 The average delivery time is
reliable.
10 The percent units delivered in
specified time period is
consistent.
PDS quality
11 The percent units received in
acceptable condition is right.
12 The units that are supplied
(100%) are correct units.
13 The units that are delivered
(100%) are in correct
quantity.
PDS flexibility
14 NBC order policies are
flexible enough to permit
timely response to changing
market demands.
15 NBC has expedite and
substitute capacity to respond
to special customer requests.
16 NBC responds timely to
special requests or
unexpected needs of
customers.
Overall customer
Satisfaction
17 I am very satisfied with NBC
marketing activities.
18 I wish more of my suppliers
were like NBC.
19 It is a pleasure dealing with
NBC.
144
20. How would you rank the importance of these physical distribution service
elements to you? Please rank each physical distribution element from 1 to 4
with 4 being the most important and 1 being the least important. There should
be no ties; rank each element with a different number.
S/N Physical Distribution
Service Elements
Ranking
1 Product availability
2 PDS timeliness
3 PDS quality
4 PDS flexibility
21. Companies at times experience excess stock or stock-outs. Does your company
experience this? (a) Yes [ ] (b)No [ ]
22. If your answer is “yes” how often does your company experience it?
(a) Very often [ ] (b) often [ ] (c) Rarely [ ]
(d) Very rarely [ ]
23. What factors were responsible for the stock-outs?
(a) Raw material [ ] (b) Power supply [ ]
(c) Transportation [ ] (d) Others [ ]
145
APPENDIX 3
QUESTIONNAIRE FOR DISTRIBUTORS AND RETAILERS.
Department of Marketing Faculty of Business Administration University of Nigeria Enugu Campus Enugu State. 7th October, 2013.
Dear Sir,
QUESTIONNAIRE FOR COMPLETION
I am a postgraduate student in the above named University, carrying out a research
work on “Physical Distribution and customer satisfaction” as part of the requirements
for the Award of Master of Science Degree in Marketing.
Please assist me by completing the attached questionnaire. I assure you that all
information given will be used for academic purpose only and will be treated with
utmost confidentiality.
Thank you for your assistance
Yours faithfully,
EWUZIE, CAJETAN O.
PG/M.Sc/09/53941
(Researcher)
146
INSTRUCTION:
Please tick (√ ) where necessary on the option which you consider most
appropriate
SECTION A: BIODATA
1. Sex? Male [ ] Female [ ]
2. Age? 30years & below [ ] 31-40 [ ]
41-50 [ ] 51 & above [ ]
3. Educational Qualification?
National Diploma & below [ ] HND/ B.Sc. [ ]
Masters [ ] Ph.D. & above [ ]
4. Occupation:? Farmer & Business [ ]
Civil/ Public Servant [ ] Unemployed [ ]
SECTION B:
Please indicate your level of agreement or disagreement with the following statements
about Physical Distribution System with regard to what is obtainable in Nigerian
Bottling company (NBC) Plc by ticking (√) in the appropriate box.
S/N Physical Distribution
Activities
Strongly
Agree
Agree Undecided Disagree Strongly
Disagree
1 NBC distribution trucks/vans
are adequate, functional and
well coordinated.
2 NBC warehouses are adequate
and strategically located.
3 NBC maintains adequate
inventory size and mix.
4 NBC has computerized, online,
real time order processing
system.
Physical Distribution Service
Elements.
Product availability
5 The assorted products (mix) are
always in stock.
6 The units ordered are (100%)
supplied.
7 All orders are (100%) supplied.
147
PDS timeliness
8 The time it takes NBC to
supply from receipt of order is
right.
9 The average delivery time is
reliable.
10 The percent units delivered in
specified time period is
consistent.
PDS quality
11 The percent units received in
acceptable condition is right.
12 The units that are supplied
(100%) are correct units.
13 The units that are delivered
(100%) are in correct quantity.
PDS flexibility
14 NBC order policies are flexible
enough to permit timely
response to changing market
demands.
15 NBC has expedite and
substitute capacity to respond to
special customer requests.
16 NBC responds timely to special
requests or unexpected needs of
customers.
Overall Customer
Satisfaction
17 I am very satisfied with NBC
overall physical distribution
service.
18 I wish more of my suppliers
were like NBC.
19 It is a pleasure dealing with
NBC.
148
20. How would you rank the importance of these physical distribution service
elements to you? Please rank each physical distribution element from 1 to 4
with 4 being the most important and 1 being the least important. There can be
no ties; rank each element with a different number.
S/N Physical Distribution
Service Elements
Ranking
1 Product availability
2 PDS timeliness
3 PDS quality
4 PDS flexibility
21. NBC major competitor in Enugu state is 7up Bottling Company:
Do you buy from this company? (a) Yes [ ] (b) No [ ]
22. How would you rate the performances of NBC and this major competitor on
these physical distribution service elements based on your experience or
information? Please thick the appropriate box.
Major Competitor
Physical
Distribution
Service Elements
NBC
Poor Fair Good Excellent Excellent Good Fair Poor
Product availability
PDS timeliness
PDS quality
PDS flexibility
23. Which of these business categories do you belong?
(a) Distribution/ wholesaler [ ]
(b) Retailer [ ]
24. How often are you supplied with NBC products?
(a) Twice a week [ ] (b) Weekly [ ]
(c) Every two week [ ] (d) monthly [ ]
149
25. Would you like to be supplied with NBC product more frequently?
(a) Yes [ ] (b) No [ ]
26. Have you been asked for any of NBC products but you did not have it to sell?
(a) Yes [ ] (b) No [ ]
27. If your answer is “yes” how often do you experience stock-outs?
(a) Very often [ ] (b) often [ ] (c) Rarely [ ]
(d) Very rarely [ ]
28. What factors were responsible for the stock-outs?
(a) Company factors [ ] (b) Customer factors [ ]
150
APPENDIX 4
PILOT STUDY REPORT (Customers)
Questions Responses
S/N Physical Distribution Activities SA
5
A
4
UD
3
D
2
S D
1
1 NBC distribution trucks/vans are adequate, functional and well coordinated.
7 3 1 3 1
2 NBC warehouses are adequate and strategically located.
8 2 1 4 -
Physical Distribution Service
Elements.
Product availability
3 The assorted products (mix) are always in stock.
9 3 - 2 1
4 All orders are (100%) supplied. 6 5 - 3 1
PDS Timeliness
5 The time it takes NBC to supply from receipt of order is right.
5 7 2 1 -
PDS Quality
6 The percent units received in acceptable condition is right.
8 5 - 2 -
PDS Flexibility
7 NBC order policies are flexible enough to permit timely response to changing market demands.
5 6 2 1 1
8 NBC has expedite and substitute capacity to respond to special customer requests.
4 5 1 3 2
Customer Satisfaction
9 I am very satisfied with NBC overall physical distribution service.
8 4 - 3 -
10 It is a pleasure dealing with NBC 7 6 1 1 -
Source: Field Survey 2013
151
PILOT STUDY REPORT (Staff)
Questions Responses
S/N Physical Distribution Activities SA
5
A
4
UD
3
D
2
S D
1
1 NBC distribution trucks/vans are adequate, functional and well coordinated.
8 4 - 3 -
2 NBC warehouses are adequate and strategically located.
9 5 - 1 -
Physical Distribution Service
Elements.
Product availability
3 The assorted products (mix) are always in stock.
9 4 - 2 -
4 All orders are (100%) supplied. 5 6 - 4 -
PDS Timeliness
5 The time it takes NBC to supply from receipt of order is right.
6 8 1 - -
PDS Quality
6 The percent units received in acceptable condition is right.
8 4 1 2 -
PDS Flexibility
7 NBC order policies are flexible enough to permit timely response to changing market demands.
4 5 - 3 3
8 NBC has expedite and substitute capacity to respond to special customer requests.
3 5 1 2 4
Customer Satisfaction
9 I am very satisfied with NBC overall physical distribution service.
9 3 - 3 -
10 It is a pleasure dealing with NBC 8 5 1 1 -
Source: Field Survey 2013
152
APPENDIX 5
Reliability Test for the Instruments
Reliability Statitics for staff
Cronbach’s Alpha N of items
.762 10
Reliability Statistics for Customers
Cronbach’s Alpha N of items
.815 10