Managing the Distribution Channel and Supply Chain


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Managing the Distribution Channel and Supply Chain

  1. 1. Managing the Distribution Channel and Supply Chain Session Overview Distribution trends Types of channels Supply chain management MBA 2005 2
  2. 2. Forces for Change Proliferation of customer’s needs Shifts in the balance of channel power Changing strategic priorities MBA 2005 3 Proliferation of Customer’s Needs Expanding capabilities for addressing specific customer demands– “segments of one”, direct dialogue with the end user Both manufacturers and intermediaries are striving to respond more quickly to orders in a more cost-effective manner Heightened customer expectations MBA 2005 4
  3. 3. Shifts in the Balance of Channel Power Enhanced bargaining powers – concentration e.g. retail sector: grocery retailers with 1-2% margins turning to manufacturers with 10-15% margins for discounts More knowledgeable intermediaries Credible threats of backward integration – taking over supplier’s activities or displacing them with their MBA 2005 5 own products Distribution systems MBA 2005 6
  4. 4. Changing Strategic Priorities An emphasis on understanding and responding to customer’s real requirements in order to deliver superior value A willingness to cross boundaries within and outside of the firm and challenge how things can be done differently Any activity that is not pivotal to the strategy can be performed better by another organisation MBA 2005 7 Functions of channel Intermediaries Reconcile the needs of producers and consumers Improve efficiency Improve accessibility Provide specialist services MBA 2005 8
  5. 5. MBA 2005 9 Types of Channels: Consumer markets MBA 2005 10
  6. 6. Types of Channels: Industrial Markets MBA 2005 11 Types of Channels: Services MBA 2005 12
  7. 7. Planning distribution strategy 1. Identify Demonstrated Customer Buying Intentions 2. Map Channel Selection to Key Buying Criteria 3. Provide Flexible Channel Options MBA 2005 13 1. Identify Demonstrated Customer Buying Intentions Study the histories of buying behaviour Examine channel preferences Which channels do they want or think they want? Can define the outer boundaries of what could work in terms of new channels MBA 2005 14
  8. 8. 2. Mapping Channel Selection to Key Buying Criteria The channel is another type of “product” A competitive offering Something offered to induce a customer to do business Channels differ in their ability to satisfy various buying criteria MBA 2005 15 Mapping Criteria: expert advice / training, customisation to specs, delivery flexibility, on-site installation, fast/local support, ordering speed, self-service, lowest price, 24 hour - 7 day support Channels: direct salesforce, distributors/partners, retail stores, call centres, Internet. MBA 2005 16
  9. 9. 3. Provide Flexible Channel Options Customers participate in different types of purchasing situations Increasingly multiple channels will be required to respond to these situations Too simplistic to rely on one channel MBA 2005 17 4. Monitor and Respond to Changes in Buying Behaviour? Initially customers may require “high- touch” and high service This may dissipate as they become more familiar with the product Priorities shift It may be more difficult to justify higher margins that go to support high service (field sales) A lower-cost channel may be the only MBA 2005option 18
  10. 10. Supply Chain Management An innovative approach to distribution processes, bolstering links with suppliers and customers, and integrating production and marketing initiatives. Formal Definition: The integration of business processes from end user through original suppliers that provide products, services, and information MBA 2005 19 that add value for customers. SCM Goals Waste reduction, minimize duplication, harmonizing operations and systems and enhancing quality. Time compression, compression of order to delivery cycle time. Flexible response, the meeting of customer’s unique requirements in a cost effective manner. Unit cost reduction, reduce cost per unit to the end user by first determining the level of performance desired by the customer. MBA 2005 20
  11. 11. Stages Firms Go Through in Adopting Supply Chain Management MBA 2005 21 Channel Alternatives MBA 2005 22
  12. 12. Channel Administration Channel participants must be selected, and arrangements must be made to ensure that all obligations are assigned. Members must be motivated to perform the tasks necessary to achieve channel objectives. Conflict within the channel must be properly controlled. Performance must be controlled and evaluated. MBA 2005 23 The role of distribution in building the Haier brand Distribution forms a key part of the strategy to make Haier a global brand In the US, Haier products can be found at Wal-Mart, Best Buy, Home Depot, Office Depot, etc Haier now has 62 distributors and more than 30,000 outlets around the world The ties with these retail brands boosts Haier’s brand image (Interbrand, 2005) MBA 2005 24