Chapter Eleven The Nature of The Supply Chain and Distribution
Unlike real estate, location is becoming progressively less relevant. The three critical factors for the Internet age are ...
Objectives <ul><li>Explain general purpose of distribution & logistics </li></ul><ul><li>Show distribution system’s contri...
Distribution’s Function <ul><li>The major purpose of marketing is to satisfy human needs by delivering products of various...
Definitions Logistics Supply Chain Component parts  & Raw material In-process inventory Finished goods
Physical Distribution Activities <ul><li>Inventory management </li></ul><ul><li>Order processing </li></ul><ul><li>Warehou...
Physical Distribution Objectives  Minimize Costs Maximize Customer Service
Channel of Distribution <ul><li>All  intermediaries involved in the exchange process </li></ul><ul><li>Excludes  pre-manuf...
Physical Distribution Functions Transportation & storage Reducing transactions Breaking bulk Accumulating bulk Creating as...
Modes of Transportation Motor Rail Air Pipeline Water
Modes of Transportation <ul><li>Railroads </li></ul><ul><ul><li>Medium cost and speed </li></ul></ul><ul><ul><li>Low relia...
Modes of Transportation <ul><li>Motor carrier </li></ul><ul><ul><li>Medium reliability </li></ul></ul><ul><ul><li>Good spe...
Modes of Transportation <ul><li>Air freight </li></ul><ul><ul><li>Expensive </li></ul></ul><ul><ul><li>Very fast </li></ul...
Modes of Transportation <ul><li>Water transportation </li></ul><ul><ul><li>Low cost </li></ul></ul><ul><ul><li>Low reliabi...
Modes of Transportation <ul><li>Pipeline </li></ul><ul><ul><li>Mostly gas and petroleum </li></ul></ul><ul><ul><li>Low cos...
Modes of Transportation <ul><li>Intermodal transportation </li></ul><ul><ul><li>Ship + Truck (fishyback) </li></ul></ul><u...
Storage & Inventory COntrol Storage Breaking Bulk
Total Cost: A Systems Approach Transportation Costs Shipping Costs Handling Costs
Total Cost: A Systems Approach   @$#*&!*&%
Communication & Transaction Functions Personal Selling Advertising Sales Promotion Gather & Disseminate Information 1 9 24...
Facilitating Functions Extra Services Payment & Credit Services Risk Taking
Typical Channels of Distribution ANUFACTURER ONSUMER HOLESALER ETAILER GENT
Business-to-Business Channels Direct Wholesaler
Vertical Marketing Systems <ul><li>Corporate systems - total ownership </li></ul><ul><li>Administered - strong leadership ...
Planning the Channel of Distribution <ul><li>Determining the structure </li></ul><ul><ul><li>Marketing mix strategy </li><...
Intensive Distribution <ul><li>Seeks to obtain  maximum  product  exposure  at the retail level </li></ul>Producer Retaile...
Selective Distribution Product is sold in a  limited  number of outlets Producer Retailer Retailer Retailer Retailer Retai...
Exclusive Distribution Product is sold in only  one  outlet in a given area Producer Retailer
Channel Relationships <ul><li>Cooperation </li></ul><ul><li>Conflict </li></ul><ul><li>Power </li></ul><ul><ul><li>Coerciv...
Other Distribution Management Issues <ul><li>Reverse distribution </li></ul>One Coca Cola Distributor One thousand retaile...
Review <ul><li>Explain general purpose of distribution & logistics </li></ul><ul><li>Show distribution system’s contributi...
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    1. 1. Chapter Eleven The Nature of The Supply Chain and Distribution
    2. 2. Unlike real estate, location is becoming progressively less relevant. The three critical factors for the Internet age are logistics, logistics, logistics. - William B. Lipsin, CEO, Ironside Technologies
    3. 3. Objectives <ul><li>Explain general purpose of distribution & logistics </li></ul><ul><li>Show distribution system’s contributions </li></ul><ul><li>Examine tradeoff between customer satisfaction & costs in distribution </li></ul><ul><li>Understand a total cost approach to distribution </li></ul><ul><li>Understand pervasive nature of distribution </li></ul><ul><li>Introduce channel intermediaries and various distribution channels </li></ul><ul><li>Introduce vertical marketing systems </li></ul><ul><li>Overview distribution’s interaction with other aspects of the marketing mix </li></ul><ul><li>Examine channel relations </li></ul>
    4. 4. Distribution’s Function <ul><li>The major purpose of marketing is to satisfy human needs by delivering products of various types to buyers when and where they want them and at a reasonable cost. </li></ul><ul><li>The “when and where” is the function of Distribution </li></ul>
    5. 5. Definitions Logistics Supply Chain Component parts & Raw material In-process inventory Finished goods
    6. 6. Physical Distribution Activities <ul><li>Inventory management </li></ul><ul><li>Order processing </li></ul><ul><li>Warehousing and storage </li></ul><ul><li>Materials handling </li></ul><ul><li>Protective packaging & containerization </li></ul><ul><li>Outbound transportation </li></ul>
    7. 7. Physical Distribution Objectives Minimize Costs Maximize Customer Service
    8. 8. Channel of Distribution <ul><li>All intermediaries involved in the exchange process </li></ul><ul><li>Excludes pre-manufacturing (raw materials or component parts) </li></ul><ul><li>Facilitate movement of physical goods and title </li></ul>PRODUCER INTERMEDIARIES CONSUMER
    9. 9. Physical Distribution Functions Transportation & storage Reducing transactions Breaking bulk Accumulating bulk Creating assortments
    10. 10. Modes of Transportation Motor Rail Air Pipeline Water
    11. 11. Modes of Transportation <ul><li>Railroads </li></ul><ul><ul><li>Medium cost and speed </li></ul></ul><ul><ul><li>Low reliability </li></ul></ul><ul><ul><li>Many damaged goods </li></ul></ul><ul><ul><li>Good Geographic flexibility </li></ul></ul>
    12. 12. Modes of Transportation <ul><li>Motor carrier </li></ul><ul><ul><li>Medium reliability </li></ul></ul><ul><ul><li>Good speed </li></ul></ul><ul><ul><li>Good flexibility </li></ul></ul><ul><ul><li>Above average damage </li></ul></ul><ul><ul><li>Now more competitive and unregulated </li></ul></ul>
    13. 13. Modes of Transportation <ul><li>Air freight </li></ul><ul><ul><li>Expensive </li></ul></ul><ul><ul><li>Very fast </li></ul></ul><ul><ul><li>Above average reliability </li></ul></ul><ul><ul><li>Average flexibility </li></ul></ul><ul><ul><li>Average reputation for undamaged goods </li></ul></ul>
    14. 14. Modes of Transportation <ul><li>Water transportation </li></ul><ul><ul><li>Low cost </li></ul></ul><ul><ul><li>Low reliability </li></ul></ul><ul><ul><li>Limited flexibility </li></ul></ul><ul><ul><li>Limited damage </li></ul></ul>
    15. 15. Modes of Transportation <ul><li>Pipeline </li></ul><ul><ul><li>Mostly gas and petroleum </li></ul></ul><ul><ul><li>Low cost </li></ul></ul><ul><ul><li>High reliability </li></ul></ul><ul><ul><li>Limited flexibility </li></ul></ul>Texas Kansas
    16. 16. Modes of Transportation <ul><li>Intermodal transportation </li></ul><ul><ul><li>Ship + Truck (fishyback) </li></ul></ul><ul><ul><li>Rail + Truck (piggyback) </li></ul></ul><ul><ul><li>Air + Truck (birdyback) </li></ul></ul>
    17. 17. Storage & Inventory COntrol Storage Breaking Bulk
    18. 18. Total Cost: A Systems Approach Transportation Costs Shipping Costs Handling Costs
    19. 19. Total Cost: A Systems Approach @$#*&!*&%
    20. 20. Communication & Transaction Functions Personal Selling Advertising Sales Promotion Gather & Disseminate Information 1 9 24 1 37 2 3 57 Buying & Selling
    21. 21. Facilitating Functions Extra Services Payment & Credit Services Risk Taking
    22. 22. Typical Channels of Distribution ANUFACTURER ONSUMER HOLESALER ETAILER GENT
    23. 23. Business-to-Business Channels Direct Wholesaler
    24. 24. Vertical Marketing Systems <ul><li>Corporate systems - total ownership </li></ul><ul><li>Administered - strong leadership </li></ul><ul><li>Contractual - legal relationships </li></ul>
    25. 25. Planning the Channel of Distribution <ul><li>Determining the structure </li></ul><ul><ul><li>Marketing mix strategy </li></ul></ul><ul><ul><li>Organizational resources </li></ul></ul><ul><ul><li>External environmental factors </li></ul></ul><ul><ul><li>Market characteristics </li></ul></ul><ul><ul><li>Consumer preferences and behavior </li></ul></ul><ul><ul><li>The nature and availability of Intermediaries </li></ul></ul><ul><ul><li>Other environmental factors </li></ul></ul>
    26. 26. Intensive Distribution <ul><li>Seeks to obtain maximum product exposure at the retail level </li></ul>Producer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer Retailer
    27. 27. Selective Distribution Product is sold in a limited number of outlets Producer Retailer Retailer Retailer Retailer Retailer Retailer
    28. 28. Exclusive Distribution Product is sold in only one outlet in a given area Producer Retailer
    29. 29. Channel Relationships <ul><li>Cooperation </li></ul><ul><li>Conflict </li></ul><ul><li>Power </li></ul><ul><ul><li>Coercive </li></ul></ul><ul><ul><li>Expert </li></ul></ul><ul><ul><li>Legitimate </li></ul></ul>
    30. 30. Other Distribution Management Issues <ul><li>Reverse distribution </li></ul>One Coca Cola Distributor One thousand retailers OK <ul><li>Ethical, Political, & Legal </li></ul>Difficult Backward channel
    31. 31. Review <ul><li>Explain general purpose of distribution & logistics </li></ul><ul><li>Show distribution system’s contributions </li></ul><ul><li>Examine tradeoff between customer satisfaction & costs in distribution </li></ul><ul><li>Understand a total cost approach to distribution </li></ul><ul><li>Understand pervasive nature of distribution </li></ul><ul><li>Introduce channel intermediaries and various distribution channels </li></ul><ul><li>Introduce vertical marketing systems </li></ul><ul><li>Overview distribution’s interaction with other aspects of the marketing mix </li></ul><ul><li>Examine channel relations </li></ul>

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