1) Supply chain management involves coordinating the flow of goods from raw materials to the final consumer across multiple firms to maximize total profits. Distribution channels facilitate this movement and include various intermediaries. 2) Managing distribution effectively can reduce costs and increase profits through strategies like breaking bulk, creating product assortments, and dual distribution systems. Choosing efficient transportation modes is also important. 3) Vertical marketing systems involve cooperation among channel members and include administered, contractual, and corporate models. The level of coordination and control impacts which distribution and logistics strategies are selected.

1. Creating Value Through
Supply Chain Management:
Channels of Distribution,
Logistics, and Wholesaling

2. Place: The Final Frontier
• Parity in product, promotion and price
• Place offers opportunity for differentiation
• E.g. Netflix, Walmart, I-tunes
• Managing distribution can spell enormous cost
savings and profits
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3. Supply Chain Management
• The supply chain – firms involved in all activities
from raw material procurement to delivering the
final product to the consumer
• Supply chain management – management of flows
among the firms in a supply chain to maximize total
profitability
• E.g. Hewlett Packard (Identify the flows)
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4. What Is a Distribution
Channel?
• Series of firms or individuals that facilitate the
movement of a product from the producer to the
final customer
• Direct
• Indirect
• Channel Intermediaries
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5. Functions of Distribution Channels
• Time, place, and ownership utilities
• Logistics functions
• Transportation and storage
• Efficiency creation
• Breaking bulk
• Creating assortments
• Facilitating functions
• Repairs and replacements
• Credit and financing
• Risk taking
• Information flow & research
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6. Creating Efficiencies
• Breaking bulk – channel members purchase large
quantities from manufacturers and sell smaller
quantities to many different customers
• Creating assortments – channel members provide a
variety of products in one location
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7. The Internet
• Small firms selling products distributable over the
Internet (e.g. software, music, books, magazines,
newspapers, etc.)
• Small firms completing the sale over the Internet but
outsourcing logistics and transportation functions
• Disintermediation - process by which traditional
intermediaries are eliminated
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8. Types of Wholesaling Intermediaries
• Wholesaling intermediaries – firms that handle
the flow of products from the manufacturer to
retailer or business user
• Independent
• Merchant wholesalers (assume title and full
risks, earn profits)
• Agents and brokers (merely bring buyers and
sellers together; earn commissions)
• Manufacturer owned
• Sales branches, offices and showrooms
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9. Independent Intermediaries
Merchant wholesalers Merchandise Agents or Brokers
• Full-service • Manufacturers’
• Limited-service agents
• Cash-and-carry • Selling agents
wholesalers • Commission
• Truck jobbers merchants
• Drop shippers • Merchandise
• Mail-order brokers
wholesalers
• Rack jobbers
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10. Types of Distribution
• Channels
Consumer channels
• Direct (e.g. farmers market, Internet)
• Manufacturer-retailer-consumer (e.g. HP’s computers
through Best Buy)
• Manufacturer-wholesaler-retailer-consumer (e.g.
Breyers ice cream)
• Business-to-business channels
• Direct (most high value industrial products)
• Manufacturer-industrial distributor-business customer
(smaller industrial products, e.g. valves, etc.)
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11. Dual Distribution Systems
• Multiple channel usage
• Example:
• pharmaceutical industry sells to hospitals, clinics, and
organizational customers directly and to consumers
indirectly through drug retailers
• Hybrid marketing systems
• Using several channels at the same time
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12. Deciding on a channel strategy
• Profit potential
• Control over distribution, promotion and pricing
• Resources availability
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13. •
Marketing Systemschannel
Conventional – multi-level distribution
in which members work independently of one
another
• Vertical – channel in which there is cooperation
among channel members at two or more
different levels of the channel
• Horizontal – two or more firms at the same
channel level agree to work together (e.g.
Smaller stores in Walmart; banks inside grocery
stores)
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14. Vertical Marketing
Systems
• Administered – channel members remain
independent but voluntarily work together
• Corporate – single firm owns manufacturing,
wholesaling, and retailing operations (e.g. Sears)
• Contractual – cooperation is enforced by contracts
that spell out member rights and the terms of
cooperation (e.g. IGA food stores ; Ace Hardware)
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15. •
Contractual VMS
Wholesaler-sponsored – wholesalers get
retailers to work together under their leadership
in a voluntary chain (e.g. IGA)
• Retailer-cooperative – group of retailers with a
wholesaling operation to help them compete
more effectively with large chains (e.g. True
Value Hardware)
• Franchise organizations – cooperation is
explicitly defined and strictly enforced by
franchiser (e.g. McDonalds)
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16. Distribution Intensity
• Intensive distribution
• Maximize coverage by using all available
outlets (e.g. gum, sodas, milk, bread, etc.)
• Exclusive distribution
• Limited outlets in a region
• Generally for high priced products (e.g. cars,
jewelry, pianos, etc.)
• Selective distribution
• In between (e.g. house hold appliances,
electronic equipment, etc.)
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17. Managing the Channel
• Selecting channel partners
• Managing the channel of distribution
• Channel leader is the dominant firm that controls the
channel (channel captain)
• Channel leaders have some form of power relative to
other members
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18. Logistics and Customer Satisfaction
• Traditionally, logistics was thought of as physical
distribution
• order processing, warehousing, materials handling,
transportation, and inventory control
• objective to deliver product at lowest cost
• Now, deliver products at the lowest cost provided,
expected service quality is maintained
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19. Logistics Functions
• Order processing
• Warehousing
• Materials handling
• Transportation
• Inventory Control
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20. Transportation Mode
Considerations
• Dependability
• Cost
• Speed of Delivery
• Accessibility
• Capability
• Traceability
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21. Modes of Transportation
• Rail
• Water
• Truck
• Air
• Pipeline
• Internet
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