Marketing (4th Edition) by Grewal & Levy, McGraw-Hill - Irwin, 2014.

1. Principles of Marketing
MKT3010
Chapter 16
Supply Chain and
Channel Management
Patricia Knowles, Ph.D.
Associate Professor
Clemson University 1

2. 2
Principles of Marketing
MKT3010
2
Supply Chain and Channel Management
These are the learning objectives guiding the chapter and will be explored in more detail in the
following slides.
Understand the importance of marketing
channels and supply chain management.
Understand the difference between direct and
indirect marketing channels.
Describe how marketing channels are
managed.
Describe the flow of information and
merchandise in the marketing channel.
LO1
LO2
LO3
LO4

3. 33
Supply Chain Management
Why would a supply chain be more efficient with a distribution center rather than simply
delivering directly to stores? The distribution center serves as a place to accumulate
merchandise from many vendors and then allocate it to stores in the quantities they need.
Imagine the congestion if every vendor had to deliver to every store.
Principles of Marketing
MKT3010

4. 44
Marketing Channels Add Value
Principles of Marketing
MKT3010
How does supply chain management reduce inventory levels? What effect does supply chain
management have on sales? An efficient supply chain can lower overall inventory in the system
because merchandise is delivered when it is needed (just-in-time). By having an efficient supply
chain, the retailers stay in stock, and sales increase.
Reduce number of
transactions
Increase value for
consumers
More efficient and
effective ©Brand X Pictures/PunchStock

5. 55
Marketing Channel Management Affects
Other Aspects of Marketing
Principles of Marketing
MKT3010
Customers expect to have their goods delivered and services performed on time. What happens
when the supply chain breaks down? Imagine you order a textbook from Amazon, which
promises to deliver it by Saturday, before your classes start on Monday. What happens in terms
of your satisfaction with Amazon if some link in the supply chain breaks down and you don’t
receive your book until Tuesday?
Fulfilling delivery promises
Meeting customer expectations
Reliant on an efficient supply chain
Courtesy Zara International, Inc. Courtesy Zara International, Inc.

6. 66
Designing Marketing Channels
Principles of Marketing
MKT3010
There are no intermediaries between the buyer and seller in a direct marketing channel. In
indirect marketing channels, one or more intermediaries work with manufacturers to provide
goods and services to customers.

7. 77
Types of Vertical Marketing Systems
Principles of Marketing
MKT3010
In essence, cooperation is naturally greater in a corporate system than in an independent supply
chain.
Administered
vertical
marketing
system
Corporate
vertical
marketing
system
Contractual
vertical
marketing
system

8. 88
Managing Marketing Channels and Supply
Chains Through Strategic Relationships
Principles of Marketing
MKT3010
Strategic
Relationships
Mutual Trust
Open
Communications
Common Goals
Interdependence
Credible
Commitments

9. 99
Principles of Marketing
MKT3010
Check Yourself
1. What are the differences between an indirect
and a direct marketing channel?
2. What are the differences among the three types
of vertical marketing systems?
3. How do firms develop strong strategic
partnerships with their supply chain partners?

10. 1010
Principles of Marketing
MKT3010
Making Information Flow Through Marketing
Channels
Each step requires the collection and dissemination of information.

11. 1111
Data Warehouse
Principles of Marketing
MKT3010
Why would Macy’s want to access the information by vendor? By month? What would they do
with the data? The retailer wants to know what designer men’s suits are selling the most so they
can order more or see if that designer has other products – perhaps shirts and ties that they
could carry. Retailers are always interested in slow months – perhaps if they could be identified
for a certain item, say handbags, then the retailer could run a promotion that month.

12. 1212
Electronic Data Interchange
Principles of Marketing
MKT3010
The growth of EDI systems has allowed for advanced tracking of information. Each system can
seamlessly integrate with others, which creates value for both customers and the firm.
Cycle time
Quality of
communications
Easily analyzed
and used
PhotobyCabela’s

13. 1313
Principles of Marketing
MKT3010
Vendor-Managed Inventory
Vendor-managed inventory (VMI) is an approach for improving supply chain efficiency in
which the manufacturer is responsible for maintaining the retailer’s inventory levels in each of its
stores.
DH Kong/Plush Studios/Getty Images

14. 1414
Pull and Push Supply Chain
Principles of Marketing
MKT3010
What kinds of items are better for pull? They will realize new products might do better using a
pull strategy as would seasonal items. For push, items such as milk, eggs, and basic underwear
work well.
Pull
• Orders based on sales
data
• More accurate
inventory
• Better when demand is
uncertain
Push
• Merchandise allocated
based on forecast
• Does not need
sophisticated IS system
• Good for steady
demand items

15. 1515
Check Yourself
Principles of Marketing
MKT3010
1. What are the marketing channel links associated
with each information flow?
2. How do marketing channel members use data
warehouses to make decisions?
3. What is EDI and how is it used?
4. Why do some marketing channels use VMI,
while others do not?
5. What is the difference between push and pull
supply chains?

16. 1616
Making Merchandize Flow Through
Marketing Channels
Principles of Marketing
MKT3010
Supply chains enable the flow of not just information but also goods. Keeping goods flowing is
not a simple task. Under what circumstances might a manufacturer deliver directly to stores
(flow 2) rather than to a distribution center (flow 1)? (1) Because the retailer demands it. (2)
Because merchandise is bulky (furniture) or needs to be delivered daily (tortillas).

17. 1717
The Distribution Center
Principles of Marketing
MKT3010
Shipping to store
Preparing to ship
Getting Merchandise Floor Ready
Storing and Cross-Docking
Receiving and checking using UPC and RFID
Management of inbound transportation

18. 1818
Check Yourself
Principles of Marketing
MKT3010
1. How does merchandise flow through a typical
marketing channel?
2. What activities occur in a distribution center and
what technologies facilitate those activities?
3. Why have just-in-time supply chain systems
become so popular?

19. 1919
Glossary
Principles of Marketing
MKT3010
Merchandise cartons that are cross-docked are prepackaged by the vendor for a specific store.
Manufacturers can ship merchandise either directly to a store or to a distribution center, where
it is then shipped to the store.
Electronic data interchange (EDI) is the computer-to-computer exchange of business
documents from a retailer to a vendor and back.
Just-in-time inventory systems are inventory management systems designed to deliver less
merchandise on a more frequent basis than traditional inventory systems.
Radio frequency identification (RFID) tags are tiny computer chips that automatically transmit
to a special scanner all the information about a container’s contents or individual products.
A strategic relationship or partnering relationship involves the supply chain members being
committed to maintaining the relationship over the long term and investing in opportunities that
are mutually beneficial.

20. 2020
Glossary
Principles of Marketing
MKT3010
Supply chain management is a set of approaches and techniques firms employ to integrate
their suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a
seamless operation in which merchandise is produced and distributed in the right quantities, to
the right locations, and at the right time, as well as to minimize system wide costs while
satisfying the service levels that their customers require.
Vendor-managed inventory (VMI) is an approach for improving supply chain efficiency in
which the manufacturer is responsible for maintaining the retailer’s inventory levels in each of its
stores.