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DEPARTMENT OF BUSINESS ADMINISTRATION & RESEARCH
Shri Sant Gajanan Maharaj College of Engg., Shegaon
Sales and Distribution Management
Unit-4
Marketing Logistics
Marketing Logistics
Management
What is distribution channel?
• A set of interdependent organizations involved
in the process of making a product or service
available for use or consumption by the
consumer or business user.
How a Distributor Reduces the
Number of Channel Transactions
= Customer= Manufacturer
A. Number of contacts
without a distributor
M x C = 3 X 3 = 9
1
3
2
4
5
6
7
8
9
How a Distributor Reduces the
Number of Channel Transactions
= Distributor= Customer= Manufacturer
B. Number of contacts
with a distributor
M x C = 3 + 3 = 6
Store
1
2
3
4
5
6
Distribution Channel Functions
Ordering
Payments
Communication
Transfer
Negotiation
Financing
Risk Taking
Physical
Distribution
Information
Consumer Marketing Channels
Wholesaler Jobber Retailer Consumer   
Consumer
Retailer Consumer
Manufacturer
0-level channel
Wholesaler Retailer Consumer Mfg
2-level channel
Mfg
3-level channel
1-level channel
Manufacturer
Industrial
distributors
Manufacturer
Consumer
Manufacturer’s
representative
Manufacturer’s
sales branch
Industrial Marketing Channels
Customers’ Desired Service Levels
• Lot size
• Waiting time
• Spatial convenience
• Product variety
• Service backup
Why are marketing intermediaries used?
Distribution channel function
• Information
• Promotion
• Contact
• Matching
• negotiation
Channel level
Channel behavior and organization
• Channel conflict
• Vertical marketing system
• Horizontal marketing system
• Hybrid marketing systems
Types of Vertical Marketing Systems
Corporate
Common Ownership at Different
Levels of the Channel
Contractual
Contractual Agreement Among
Channel Members
Administered
Leadership is Assumed by One or
a Few Dominant Members
Conventional Distribution Channel vs. Vertical Marketing Systems
Vertical
marketing
channel
Manufacturer
Retailer
Conventional
marketing
channel
Consumer
Manufacturer
Consumer
Retailer
Wholesaler
Wholesaler
Channel conflict
• Horizontal conflict
• Vertical conflict
Vertical marketing systems
• Conventional distribution
• VMS
• Corporate VMS
• Contractual VMS
• Administered VMS
• Franchise organization
Innovations in Marketing
Systems
Horizontal Marketing
System
Hybrid Marketing
System
Two or more companies
at one channel level join
together to increase
coverage
Example: Banks in
Grocery Stores
A single firm sets up two
or more marketing
channels to increase
coverage
Example: Retailers,
Catalogs, and Sales
Force
2.channel design decision
• Analyzing consumer service needs
• Setting channel objectives and constraints
• Identifying major alternatives
• Evaluating the major alternatives
Identifying major alternative
• Types of intermediaries
• Number of marketing intermediaries
• Responsibilities of channel members
Selling
costs
(dollars)
Level of sales (dollars)
Break-Even Cost Chart
Company
sales force
Manufacturer’s
sales agency
SB
Number of marketing intermediaries
• Intensive distribution
• Exclusive distribution
• Selective distribution
3.Channel management Decision
• Selecting channel members
• Motivating channel members
• Evaluating channel members
Channel Management Decisions
Selecting
FEEDBACK
Motivating
Training
Evaluating
Goals of Logistics
system
• Provide a Targeted Level of Customer Service at
the Least Cost.
• Maximize Profits, Not Sales.
Higher Distribution Costs/
Higher Customer Service
Levels
Lower Distribution Costs/
Lower Customer Service
Levels
physical distribution and logistics
management
• Physical distribution(marketing logistics)
• major logistics function
• Integrated logistics management
• Third-party logistics
Major logistics function
• Order processing
• Warehousing
• Inventory
• transportation
Integrated logistics management
• Cross-functional teamwork inside the
company
• Building channel partnerships
Third-party logistics
• An independent logistics provider that
performs any or all of the functions required
to get their clients’ product to market.
Integrated Logistics Management
Concept Recognizes that Providing Better Customer
Service and Trimming Distribution Costs Requires
Teamwork, Both Inside the Company and Among All
the Marketing Channel Organizations.
Cross-Functional Teamwork inside
the Company
Building Channel Partnerships
Third-Party Logistics
What is DRP ?
Distribution resource planning (DRP) is a method used in business
administration for planning orders within a supply chain. DRP enables the user to
set certain inventory control parameters (like a safety stock) and calculate the
time-phased inventory requirements. This process is also commonly referred to as
Distribution Requirements Planning
Emergence of Distribution Resource Planning
The need for more detailed distribution planning led to the emergence of
distribution requirements planning (DRP) during the 1970s.
 DRP is a widely used and potentially powerful technique for helping outbound
logistics systems manage and minimize inbound inventories.
This concept extended the time-phase order point found in material requirements
planning (MRP) logic to the management of channel inventory.
 By the 1980s DRP had become a standard approach for planning and controlling
distribution logistics activities and had evolved into distribution resource planning.
The concept now embraces all business functions in the supply channel, not just
inventory and logistics, and is termed DRP .
DRP is usually used with an MRP system, although most DRP models are
more comprehensive than stand-alone MRP models and can schedule
transportation. The underlying rationale for DRP is to more accurately fore-
cast demand and then use that information to develop delivery schedules.
This way, distribution firms can minimize inbound inventory by using MRP
in conjunction with other schedules.
Forecast demand for each stock-keeping unit (SKU)
Current inventory level of the SKU
Target safety stock
Recommended replenishment quantity
Replenishment lead time
One of the key elements of DRP is the DRP table, which includes the following elements:
The on-hand inventory at the end of a period.
The backordered demand at the end of a period.
The required quantity of product needed at the beginning of
a period.
The constrained quantity of product available at the
beginning of a period.
The recommended order quantity at the beginning of a
period.
DRP uses several variables:
DRP needs the following information:
The demand in a future
period.
The scheduled receipts at
the beginning of a period.
The safety stock
requirement for a period.
The on-hand inventory at
the beginning of a period
Reduces freight costs.
Reduces inventory level.
Decreases warehousing space.
Reduces customer freight cost.
Enhances budgeting
capitability.
Logistical Benefits of DRP
Figure 8.1: DRP links to internal MPC system
Figure 8.2: Distribution requirements planning
and the logistic system
Figure 8.3: Field warehouse DRP record
Figure 8.5: Field warehouse to central
warehouse records for DRP
Management Issues with DRP
• Data integrity and completeness
• Organizational support
• Problem solving
Data Integrity and completeness
• A key issue is the use of aggregate forecasts
which are later on broken down into detailed
forecasts.
• Forecast errors should be avoided especially
biased errors.
• Management programs should be established
to monitor the process.
• Inventory accuracy depends on transaction
process routines and discipline.
Organizational support
• Where does DRP fit within the Supply Chain
Management?
Problem Solving
• Sales promotion
• Closing a warehouse
• Monitoring stock aging
Channel Management
•Selecting channel members.
•Training channel members.
•Motivating channel members.
•Evaluating channel members performance.
Selecting Channel Member
Manufacturer has to ensure that the channel members
possess certain essential qualifications. Some of the common
qualifications irrespective of the product lines involved are
• Business reputation.
• Business capacity.
• Salesmanship.
• Experience in the line.
• Financial capacity.
• Creditworthiness.
• Capacity to provide storage facilities, showrooms, shops,
service workshops .
• Positive attitude towards the company.
• Capacity to offer assortment of products and services
required by the customers.
• Good relations with consumers, opinion leaders, government
officials and others.
Selection Process
• Giving ‘Dealer Wanted’ Ad.
• Conducting interviews.
• Selecting the highly qualified members.
EXAMPLE:
Ford ‘Dealer Wanted’ Ad
Ford is a big name. In fact it’s the largest selling brand of automobiles
worldwide.
A name with a 90-year heritage, responsible for creating the
automobile industry.
With the imminent tie-up of the Ford Motor Company with Mahindra &
Mahindra, there exists an opportunity for dealers who can think big.
The people we are looking for are dynamic entrepreneurs and previous
experience is not a necessary qualification.
If you are already a car dealer, you will receive substantial company
support, including comprehensive training for your sales and service
staff.
We are committed to long-term relationships, so you will ultimately be
marketing a full range of Ford vehicles, from small cars to tough trucks.
So, if you’re prepared to think really big and if you wish to join the
fraternity of 10000 successful Ford dealers, apply to…
Managing the Dealer Network
Territory of operation, Trade margin, Functions which the
dealers have to perform, Functions which the firm has
to perform
•Fixing the trade relations mix
•Servicing the dealer.
•Securing shelf space and merchandising support from
dealers.
•Dealer motivation.
•Performance appraisal of dealers.
•Dealer training and development.
TRAINING CHANNEL MEMBERS
EXAMPLE:
Ford Motor Company beams training programs and
technical information via its satellite based Fordstar
Network to more than 6000 dealer sites. Service
engineers at each dealership sit around a
conference table and view a monitor on which an
instructor explains procedures such as repairing
onboard electronics and asks and answers
questions.
MOTIVATING CHANNEL MEMBERS
A company needs to view its intermediaries in the same
way that it views its end users. The company should
provide training programs, market research programs
and other capability-building programs to improve
intermediaries performance. Producers use the
following types of power to elicit co-operation
•Reward power
•Coercive power
•Expert power
•Legitimate power
Intermediaries can aim for a relationship based
on co-operation, partnership or distribution
programming. They often use positive
motivators such as
•Higher margins.
•Special deals.
•Premiums.
•Display allowances.
•Co-operative advertising allowances.
•Sales contests.
NEGATIVE SANCTIONS
•Threatening to reduce margins.
•Slowdown delivery.
•Terminating the relationship.
Distribution programming i.e., supplier – distributor
arrangement can be defined as building a
planned, professionally managed, vertical
marketing system that meets the needs of both
manufacturer and distributors. The manufacturer
establishes a department within the company
called Distributor-Relations Planning.
EVALUATING CHANNEL MEMBERS
PERFORMANCE
Producers must periodically evaluate intermediaries’
performance against such standards as:
•Sales-quota attainment.
•Average inventory levels
•Customer delivery time
•Co-operational promotional and training programs.
THANK YOU

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Sdm 4.0

  • 1. DEPARTMENT OF BUSINESS ADMINISTRATION & RESEARCH Shri Sant Gajanan Maharaj College of Engg., Shegaon Sales and Distribution Management Unit-4 Marketing Logistics
  • 3. What is distribution channel? • A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.
  • 4. How a Distributor Reduces the Number of Channel Transactions = Customer= Manufacturer A. Number of contacts without a distributor M x C = 3 X 3 = 9 1 3 2 4 5 6 7 8 9
  • 5. How a Distributor Reduces the Number of Channel Transactions = Distributor= Customer= Manufacturer B. Number of contacts with a distributor M x C = 3 + 3 = 6 Store 1 2 3 4 5 6
  • 7. Consumer Marketing Channels Wholesaler Jobber Retailer Consumer    Consumer Retailer Consumer Manufacturer 0-level channel Wholesaler Retailer Consumer Mfg 2-level channel Mfg 3-level channel 1-level channel Manufacturer
  • 9. Customers’ Desired Service Levels • Lot size • Waiting time • Spatial convenience • Product variety • Service backup
  • 10. Why are marketing intermediaries used?
  • 11. Distribution channel function • Information • Promotion • Contact • Matching • negotiation
  • 13. Channel behavior and organization • Channel conflict • Vertical marketing system • Horizontal marketing system • Hybrid marketing systems
  • 14. Types of Vertical Marketing Systems Corporate Common Ownership at Different Levels of the Channel Contractual Contractual Agreement Among Channel Members Administered Leadership is Assumed by One or a Few Dominant Members
  • 15. Conventional Distribution Channel vs. Vertical Marketing Systems Vertical marketing channel Manufacturer Retailer Conventional marketing channel Consumer Manufacturer Consumer Retailer Wholesaler Wholesaler
  • 16. Channel conflict • Horizontal conflict • Vertical conflict
  • 17. Vertical marketing systems • Conventional distribution • VMS • Corporate VMS • Contractual VMS • Administered VMS • Franchise organization
  • 18. Innovations in Marketing Systems Horizontal Marketing System Hybrid Marketing System Two or more companies at one channel level join together to increase coverage Example: Banks in Grocery Stores A single firm sets up two or more marketing channels to increase coverage Example: Retailers, Catalogs, and Sales Force
  • 19. 2.channel design decision • Analyzing consumer service needs • Setting channel objectives and constraints • Identifying major alternatives • Evaluating the major alternatives
  • 20. Identifying major alternative • Types of intermediaries • Number of marketing intermediaries • Responsibilities of channel members
  • 21. Selling costs (dollars) Level of sales (dollars) Break-Even Cost Chart Company sales force Manufacturer’s sales agency SB
  • 22. Number of marketing intermediaries • Intensive distribution • Exclusive distribution • Selective distribution
  • 23. 3.Channel management Decision • Selecting channel members • Motivating channel members • Evaluating channel members
  • 25. Goals of Logistics system • Provide a Targeted Level of Customer Service at the Least Cost. • Maximize Profits, Not Sales. Higher Distribution Costs/ Higher Customer Service Levels Lower Distribution Costs/ Lower Customer Service Levels
  • 26. physical distribution and logistics management • Physical distribution(marketing logistics) • major logistics function • Integrated logistics management • Third-party logistics
  • 27. Major logistics function • Order processing • Warehousing • Inventory • transportation
  • 28. Integrated logistics management • Cross-functional teamwork inside the company • Building channel partnerships
  • 29. Third-party logistics • An independent logistics provider that performs any or all of the functions required to get their clients’ product to market.
  • 30. Integrated Logistics Management Concept Recognizes that Providing Better Customer Service and Trimming Distribution Costs Requires Teamwork, Both Inside the Company and Among All the Marketing Channel Organizations. Cross-Functional Teamwork inside the Company Building Channel Partnerships Third-Party Logistics
  • 31. What is DRP ? Distribution resource planning (DRP) is a method used in business administration for planning orders within a supply chain. DRP enables the user to set certain inventory control parameters (like a safety stock) and calculate the time-phased inventory requirements. This process is also commonly referred to as Distribution Requirements Planning
  • 32. Emergence of Distribution Resource Planning The need for more detailed distribution planning led to the emergence of distribution requirements planning (DRP) during the 1970s.  DRP is a widely used and potentially powerful technique for helping outbound logistics systems manage and minimize inbound inventories. This concept extended the time-phase order point found in material requirements planning (MRP) logic to the management of channel inventory.  By the 1980s DRP had become a standard approach for planning and controlling distribution logistics activities and had evolved into distribution resource planning. The concept now embraces all business functions in the supply channel, not just inventory and logistics, and is termed DRP .
  • 33. DRP is usually used with an MRP system, although most DRP models are more comprehensive than stand-alone MRP models and can schedule transportation. The underlying rationale for DRP is to more accurately fore- cast demand and then use that information to develop delivery schedules. This way, distribution firms can minimize inbound inventory by using MRP in conjunction with other schedules.
  • 34. Forecast demand for each stock-keeping unit (SKU) Current inventory level of the SKU Target safety stock Recommended replenishment quantity Replenishment lead time One of the key elements of DRP is the DRP table, which includes the following elements:
  • 35. The on-hand inventory at the end of a period. The backordered demand at the end of a period. The required quantity of product needed at the beginning of a period. The constrained quantity of product available at the beginning of a period. The recommended order quantity at the beginning of a period. DRP uses several variables:
  • 36. DRP needs the following information: The demand in a future period. The scheduled receipts at the beginning of a period. The safety stock requirement for a period. The on-hand inventory at the beginning of a period
  • 37. Reduces freight costs. Reduces inventory level. Decreases warehousing space. Reduces customer freight cost. Enhances budgeting capitability. Logistical Benefits of DRP
  • 38. Figure 8.1: DRP links to internal MPC system
  • 39. Figure 8.2: Distribution requirements planning and the logistic system
  • 40. Figure 8.3: Field warehouse DRP record
  • 41. Figure 8.5: Field warehouse to central warehouse records for DRP
  • 42. Management Issues with DRP • Data integrity and completeness • Organizational support • Problem solving
  • 43. Data Integrity and completeness • A key issue is the use of aggregate forecasts which are later on broken down into detailed forecasts. • Forecast errors should be avoided especially biased errors. • Management programs should be established to monitor the process. • Inventory accuracy depends on transaction process routines and discipline.
  • 44. Organizational support • Where does DRP fit within the Supply Chain Management?
  • 45. Problem Solving • Sales promotion • Closing a warehouse • Monitoring stock aging
  • 46. Channel Management •Selecting channel members. •Training channel members. •Motivating channel members. •Evaluating channel members performance.
  • 47. Selecting Channel Member Manufacturer has to ensure that the channel members possess certain essential qualifications. Some of the common qualifications irrespective of the product lines involved are • Business reputation. • Business capacity. • Salesmanship. • Experience in the line. • Financial capacity. • Creditworthiness. • Capacity to provide storage facilities, showrooms, shops, service workshops . • Positive attitude towards the company. • Capacity to offer assortment of products and services required by the customers. • Good relations with consumers, opinion leaders, government officials and others.
  • 48. Selection Process • Giving ‘Dealer Wanted’ Ad. • Conducting interviews. • Selecting the highly qualified members.
  • 49. EXAMPLE: Ford ‘Dealer Wanted’ Ad Ford is a big name. In fact it’s the largest selling brand of automobiles worldwide. A name with a 90-year heritage, responsible for creating the automobile industry. With the imminent tie-up of the Ford Motor Company with Mahindra & Mahindra, there exists an opportunity for dealers who can think big. The people we are looking for are dynamic entrepreneurs and previous experience is not a necessary qualification. If you are already a car dealer, you will receive substantial company support, including comprehensive training for your sales and service staff. We are committed to long-term relationships, so you will ultimately be marketing a full range of Ford vehicles, from small cars to tough trucks. So, if you’re prepared to think really big and if you wish to join the fraternity of 10000 successful Ford dealers, apply to…
  • 50. Managing the Dealer Network Territory of operation, Trade margin, Functions which the dealers have to perform, Functions which the firm has to perform •Fixing the trade relations mix •Servicing the dealer. •Securing shelf space and merchandising support from dealers. •Dealer motivation. •Performance appraisal of dealers. •Dealer training and development.
  • 51. TRAINING CHANNEL MEMBERS EXAMPLE: Ford Motor Company beams training programs and technical information via its satellite based Fordstar Network to more than 6000 dealer sites. Service engineers at each dealership sit around a conference table and view a monitor on which an instructor explains procedures such as repairing onboard electronics and asks and answers questions.
  • 52. MOTIVATING CHANNEL MEMBERS A company needs to view its intermediaries in the same way that it views its end users. The company should provide training programs, market research programs and other capability-building programs to improve intermediaries performance. Producers use the following types of power to elicit co-operation •Reward power •Coercive power •Expert power •Legitimate power
  • 53. Intermediaries can aim for a relationship based on co-operation, partnership or distribution programming. They often use positive motivators such as •Higher margins. •Special deals. •Premiums. •Display allowances. •Co-operative advertising allowances. •Sales contests.
  • 54. NEGATIVE SANCTIONS •Threatening to reduce margins. •Slowdown delivery. •Terminating the relationship. Distribution programming i.e., supplier – distributor arrangement can be defined as building a planned, professionally managed, vertical marketing system that meets the needs of both manufacturer and distributors. The manufacturer establishes a department within the company called Distributor-Relations Planning.
  • 55. EVALUATING CHANNEL MEMBERS PERFORMANCE Producers must periodically evaluate intermediaries’ performance against such standards as: •Sales-quota attainment. •Average inventory levels •Customer delivery time •Co-operational promotional and training programs.