SUPPLY CHAIN AND MARKETING CHANNELS

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SUPPLY CHAIN AND MARKETING CHANNELS

  1. 1. SUPPLY CHAIN AND MARKETING CHANNELS Professor Ed Fox Cox School of Business Southern Methodist University
  2. 2. What is a Channel of Distribution? <ul><li>A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user </li></ul><ul><li>Channel decisions are among the most important decisions that management faces and directly affect every other marketing decision </li></ul>
  3. 3. Distribution Channels EXAMPLES Manufacturer Broker/ Distributor Wholesaler Grower Consumer Packaged Goods Retailer Component Manufacturer Automobile Manufacturer Commodity Supplier Automobiles Dealer
  4. 4. Why Are Intermediaries Used? <ul><li>Greater efficiency in making goods available to target markets </li></ul><ul><li>Offer the firm more than it can achieve on it’s own because of the intermediaries’: </li></ul><ul><ul><li>contacts </li></ul></ul><ul><ul><li>experience </li></ul></ul><ul><ul><li>specialization </li></ul></ul><ul><ul><li>scale of operation </li></ul></ul><ul><li>Match supply and demand </li></ul>
  5. 5. Supply Chain DESIGN ISSUES Analyze Consumer Needs Set Channel Objectives & Constraints Identify Major Alternatives Evaluate the Major Alternatives Variety Convenience (Decentralization) Lot Size Waiting Time
  6. 6. Supply Chain DESIGN ISSUES Analyze Consumer Needs Set Channel Objectives & Constraints Exclusive Distribution Selective Distribution Intensive Distribution Identify Major Alternatives Evaluate the Major Alternatives
  7. 7. Supply Chain Simulation “BEER GAME”
  8. 8. Supply Chain Management QUICK RESPONSE & E.C.R.
  9. 9. Supply Chain Management WHAT IS QUICK RESPONSE? <ul><li>Quick Response (QR) was pioneered by apparel retailers and manufacturers </li></ul><ul><ul><li>Addressed high demand uncertainty and long lead times </li></ul></ul><ul><ul><li>Examples include retailers Dayton Hudson and Sears, and manufacturers Levi Strauss and Milliken & Co </li></ul></ul><ul><li>As discount department stores adopted QR, non-fashion manufacturers increased focus n integrated supply chain management </li></ul><ul><ul><li>Emphasis was on cost reduction </li></ul></ul><ul><ul><li>Examples include retailers Wal-Mart, Kmart and Target, and manufacturer Procter & Gamble </li></ul></ul>
  10. 10. Supply Chain Management WHAT IS QUICK RESPONSE? <ul><li>Quick Response (QR) encompasses a number of related initiatives and techniques to integrate the supply chain across functions within and between retailers and manufacturers </li></ul><ul><ul><li>QR leverages the application of technology </li></ul></ul><ul><li>The danger is that QR, poorly implemented, can simply shift costs from retailer to manufacturer </li></ul>
  11. 11. Supply Chain Management QUICK RESPONSE <ul><li>Point-of Sale Data </li></ul><ul><li>Scanning </li></ul><ul><li>or </li></ul><ul><li>Forecasting </li></ul>Consumer Retailer Manufacturer <ul><li>EDI </li></ul><ul><li>Electronic Ordering </li></ul><ul><li>Electronic Funds Transfer </li></ul><ul><li>Cross Docking </li></ul><ul><li>Computer Controlled Material Handling </li></ul><ul><li>Flow Through Distribution </li></ul><ul><li>Barcoding </li></ul><ul><li>Vendor Managed Inventory </li></ul><ul><li>Just-in-Time Manufacturing </li></ul>Product Information <ul><li>Quick Response effectiveness depends on: </li></ul><ul><ul><li>Integration of manufacturer and retailer systems </li></ul></ul><ul><ul><li>Commitment </li></ul></ul><ul><ul><li>Capabilities of technology </li></ul></ul>
  12. 12. Trends in Quick Response <ul><li>Consolidation in discount and department stores has left strong, sophisticated national retailers that demand Quick Response (QR) from suppliers </li></ul><ul><ul><li>For example, most Target and Kmart suppliers are on EDI, 2500+ Wal-Mart Retail Link users (1995) </li></ul></ul><ul><ul><li>Facilitated by standardization; e.g., Voluntary Interindustry Communcations Standards (VICS) and Uniform Product Codes (UPC) </li></ul></ul><ul><li>Many variations on cross-docking </li></ul><ul><ul><li>Streamline “picking” and other material handling </li></ul></ul><ul><li>Manufacturing flexibility is lagging distribution initiatives </li></ul>
  13. 13. Supply Chain Management WHAT IS E.C.R.? <ul><li>Efficient Consumer Response (ECR) is essentially Quick Response adapted for the U.S. packaged goods industry </li></ul><ul><ul><li>Broader scope than QR </li></ul></ul><ul><li>Promise of $30 billion savings from: </li></ul><ul><ul><li>Efficient Store Assortment </li></ul></ul><ul><ul><li>Efficient Product Introduction </li></ul></ul><ul><ul><li>Efficient Promotion </li></ul></ul><ul><ul><li>Efficient Replenishment </li></ul></ul>
  14. 14. Supply Chain Management E.C.R. <ul><li>Point-of Sale Data </li></ul><ul><li>Scanning </li></ul><ul><li>or </li></ul><ul><li>Forecasting </li></ul>Consumer Retailer Manufacturer <ul><li>Category Management </li></ul><ul><li>EDI </li></ul><ul><li>Electronic Ordering </li></ul><ul><li>Electronic Funds Transfer </li></ul><ul><li>Continuous Replenishment Program (CRP) </li></ul><ul><li>Direct Store Delivery (DSD) </li></ul><ul><li>Supplier Managed Inventory </li></ul><ul><li>Store Order Pallets </li></ul><ul><li>Cross Docking </li></ul><ul><li>Computer Controlled Material Handling </li></ul><ul><li>Flow Through Distribution </li></ul><ul><li>Barcoading </li></ul><ul><li>Just-in-Time Manufacturing </li></ul>Product Information <ul><li>ECR involves supply chain initiatives beyond Quick Response </li></ul>
  15. 15. Trends in E.C.R. <ul><li>Retailers are hesitant to make investments </li></ul><ul><ul><li>EDI is prevalent </li></ul></ul><ul><ul><li>Continuous Replenishment Programs (CRP) and Direct Store Delivery (DSD), initiatives that are manufacturer funded, are increasingly common </li></ul></ul><ul><ul><li>Few retailers are investing in warehouse systems, which represent large retailer investments </li></ul></ul><ul><li>Scanning discipline and continuing mistrust have limited the exploitation of scanner data for ECR </li></ul><ul><li>Efficient assortment and efficient promotions have seen the most activity </li></ul>

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