Delivering Value Through Supply Chain Management: Channels of ...


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Delivering Value Through Supply Chain Management: Channels of ...

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