280 Chapter 10 Product, Price, and Place Copyright Goodheart-Willcox Co., Inc. Place Strategies The first and most important strategy related to place is determining the exact channel of distribution. For example, products that must get to end users quickly need a direct channel or a short indirect channel. Milk is an example of a product that must reach the end user quickly. Durable products with no expiration date can have a longer channel of distribution. The strategy for place should provide timely delivery for the lowest cost. Transportation, storage, and utility costs are factors to consider when determining the strategy for place. Transportation Costs Each type of transportation has different costs, efficiencies, and time constraints. For example, when shipping large quantities of durable products, it may be okay to choose a less expensive, slower mode of transportation. However, when shipping perishable goods, a more expensive, faster mode of transportation may be necessary. Some place strategies involve product handling activities, which affect transportation costs. Activities associated with product handling include bulk-breaking and freight forwarding. Breaking bulk is one product handling activity that can be included in place strategies. Bulk-breaking is the process of separating a large quantity of goods into smaller quantities for resale. Intermediaries buy goods in bulk and then break the bulk quantity into smaller lots of goods to resell. For example, it is easier and cheaper to ship a pallet of copy paper rather than 40 individual cartons separately. The office supply store buys copy paper by the pallet and then sells cartons or individual reams to customers. Transportation costs can be managed using the services of freight forwarders. A freight forwarder is a company that organizes shipments. Shipments from various companies are combined into one sizeable shipment. The freight forwarder hires a transportation company to move the shipments from various companies as one large shipment. By putting smaller shipments together, companies save money in the shipment of their goods. Storage Costs Storage is also critical to the strategy for place. Products need protection from weather, theft, and damage. Retail and manufacturing businesses need areas to store physical inventory. This may increase distribution costs, which will affect the final product pricing. If a business does not have enough storage space in the facility, it will need to rent, lease, or build space. FYI A freight forwarder is a company that organizes shipments. It is not a shipper or carrier, rather it specializes in the logistics of supply-chain management and assists companies in contracting carriers.