Delivering Value Through Supply Chain Management: Channels of ...
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  • 1. Delivering Value Through Supply Chain Management: Channels of Distribution and Logistics
  • 2. Chapter Objectives
    • Understand the concept of the value chain and the key elements in a supply chain
    • Explain what a distribution channel is and what functions distribution channels perform
    • Describe the types of wholesaling intermediaries found in distribution channels
    • Describe the types of distribution channels and the steps in planning distribution channel strategies
    • Explain how the supply chain uses logistics
  • 3. Place: The Final Frontier
    • Value chain: a series of activities directed at designing, producing, marketing, delivering, and supporting any product.
    • Supply chain: Activities necessary to turn raw materials into a good or service and put it in the hands of the consumer:
  • 4. Slide 15-12 Define the term marketing channel… NATURE AND IMPORTANCE OF MARKETING CHANNELS
  • 5. Slide 15-12 Define the term marketing channel…
      • A: A marketing channel consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users.
    NATURE AND IMPORTANCE OF MARKETING CHANNELS
  • 6. Figure 15.2: The Generic Value Chain
  • 7. Links in the Supply Chain
    • Supply chain management: the management of flows among the firms in a supply chain to maximize total profitability
      • Includes physical movement of and sharing of information about goods
      • Insourcing: contracting with a specialist that services the company’s supply chains
  • 8. Supply Chain vs. Channel of Distribution
    • Channel of distribution: facilitates movement of a product from producer to final customer
    • Supply chain: begins with raw materials
  • 9. Slide 15-7 Terms used for marketing intermediaries
  • 10. Slide 15-15 FIGURE 15-4 Common marketing channels for consumer goods and services How would you define your organizations marketing channel?
  • 11. Slide 15-17 FIGURE 15-5 Common marketing channels for business goods and services
  • 12. Slide 15-19 FIGURE 15-6 Representative consumer electronic marketing channels
  • 13. Figure 15.3: Supply Chain
  • 14. The Importance of Distribution: You Can’t Sell What Isn’t There!
    • Direct channel: a producer and a customer
    • Indirect channel: one or more intermediaries
      • Firms/individuals such as
      • wholesalers, agents,
      • brokers, and retailers
      • that help move
      • product to consumer
      • or business user
  • 15. Functions of Distribution Channels
    • To ease the flow of goods from producer to customer
    • To provide time, place, and ownership utility
  • 16. Functions of Distribution Channels (cont’d)
    • To provide logistics or physical distribution functions
    • To create efficiencies by reducing number of transactions
      • Breaking bulk: purchasing large quantities of goods to sell one/few at a time to customers
      • Creating assortments: providing variety of products in one location
  • 17. Figure 15.4: Reducing Transactions via Intermediaries
  • 18. Functions of Distribution Channels (cont’d)
    • To make purchase process easier
    • To manage risk
    • To perform communication and transaction functions
  • 19. The Internet in the Distribution Channel
    • Radical changes in distribution strategies
      • Disintermediation: eliminating traditional intermediaries
      • Knowledge management: sharing knowledge with other supply chain members
    DELL
  • 20. Channel Composition: Types of Wholesaling Intermediaries
    • Wholesaling intermediaries: firms that handle the flow of products from the manufacturer to the retailer/business user
  • 21. Independent Intermediaries
    • Merchant wholesalers: buy goods from manufacturers and sell to retailers and other B2B customers
      • Full-service merchant wholesalers
      • Limited-service merchant wholesalers
      • Cash-and-carry wholesalers Truck jobbers Drop shippers Rack jobbers Mail-order wholesalers
  • 22. Independent Intermediaries (cont’d)
    • Merchandise Agents/Brokers: provide services in exchange for commissions
      • Manufacturers’ agents/reps
      • Selling agents
      • Commission merchants
      • Merchandise brokers
    • Manufacturer-Owned Intermediaries
      • Sales branches
      • Sales offices
      • Manufacturers’ showrooms
  • 23. Types of Distribution Channels
    • Consumer Channels
      • Direct channel: producer sells directly to customers
      • Indirect channel: producer uses one or more intermediaries to reach consumers
  • 24. Types of Distribution Channels (cont’d)
    • Business-to-business channels
    • Dual distribution systems
    • Hybrid marketing systems
  • 25. Figure 15.6: Steps in Distribution Planning
  • 26. Planning a Channel Strategy
    • Step 1: Develop distribution objectives that support the firm’s overall marketing goals.
    • Step 2: Evaluate internal and external environmental influences to develop best channel structure.
      • Firm’s ability to handle distribution functions
      • Channel intermediaries available
      • How the competition distributes its products
  • 27. Planning a Channel Strategy (cont’d)
    • Step 3: Choose a distribution strategy
      • Channel relationships: conventional, vertical, or horizontal system
      • Conventional marketing system: members work independently of one another
  • 28. Planning a Channel Strategy (cont’d)
    • Step 3: Choose a distribution strategy
      • Vertical marketing system (VMS): formal cooperation among channel members
        • Administered VMS
        • Corporate VMS
        • Contractual VMS
        • Retailer cooperative
        • Franchise organizations
  • 29. Planning a Channel Strategy (cont’d)
    • Step 3: Choose a distribution strategy
      • Horizontal marketing system: two or more firms at the same channel level agree to work together to get their product to the customer
  • 30. Planning a Channel Strategy (cont’d)
    • Step 3: Choose a distribution strategy
      • Distribution intensity
      • Intensive distribution: selling through all suitable wholesalers or retailers
      • Exclusive distribution: selling only through a single outlet in a region
      • Selective distribution: using
      • fewer outlets than intensive
      • but more than
      • exclusive distribution
  • 31. Planning a Channel Strategy (cont’d)
    • Step 4: Develop distribution tactics
      • Selecting channel partners: normally a long-term commitment
      • Managing the channel
        • Channel leader/captain: dominant firm that controls the channel (via economic, legitimate, reward/coercive power)
  • 32. Distribution Channels and the Marketing Mix
    • Place decisions affect:
      • Pricing
      • Product and its positioning
  • 33. Logistics: Implementing the Supply Chain
    • Logistics: the process of designing, managing, and improving the movement of products through the supply chain
      • Purchasing
      • Manufacturing
      • Storage
      • Transport
  • 34. Logistics: Implementing the Supply Chain (cont’d)
    • Physical distribution: the activities used to move finished goods from manufacturers to final customers
  • 35. LOGISTICS CONCEPT COMPONENTS
    • 1. TOTAL COST APPROACH
    • 2. AVOIDANCE OF SUBOPTIMIZATION – A SYSTEMS APPROACH
    • 3. USE OF COST TRADE-OFFS
    • 4. HIGHER LEVEL OF CUSTOMER SERVICE
  • 36. Logistics Functions
    • Major Focus is on Customer Service through:
    • Order processing
    • Warehousing
    • Materials handling
    • Transportation
    • Inventory Control
  • 37. Logistics Functions (cont’d)
    • Transportation: mode by which products move among channel members
    • Modes differ in their--
        • Dependability (safety and punctuality)Cost
        • Speed of delivery
        • Accessibility (different locations served)
        • Capability (variety of products handled)
        • Traceability (ability to locate goods
        • in shipment)
  • 38. Modes of Transportation
    • Railroads: carry heavy, bulky items over long distances
    • Water: carry large, bulky goods (especially internationally)
    • Trucks: carry consumer goods in short haul; allow flexibility in locations
  • 39. Modes of Transportation (cont’d)
    • Air: carry high value-items; fastest and most expensive mode
    • Pipelines: carry petroleum/chemical products
    • Internet: distribute
    • services such as banking,
    • news, and entertainment
  • 40. Logistics Functions (cont’d)
    • Inventory control: activities to ensure foods are always available to meet customers’ demands
      • Radio frequency identification (RFID)
      • Just in time (JIT)