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CHAPTER 15 Creating Value Through Supply Chain Management: Channels of Distribution, Logistics, and Wholesaling M A R K E T I N G Real People, Real Choices.

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Presentation on theme: "CHAPTER 15 Creating Value Through Supply Chain Management: Channels of Distribution, Logistics, and Wholesaling M A R K E T I N G Real People, Real Choices."— Presentation transcript:

1 CHAPTER 15 Creating Value Through Supply Chain Management: Channels of Distribution, Logistics, and Wholesaling M A R K E T I N G Real People, Real Choices Fourth Edition Michael R. Solomon Greg W. Marshall Elnora W. Stuart

2 15-2 Chapter Objectives_1 Understand the concept of the value chain and the key elements in a supply chain. Explain what a distribution channel is and what functions distribution channels perform Describe the types of wholesaling intermediaries found in distribution channels

3 15-3 Chapter Objectives_2 Describe the types of distribution channels and the steps in planning distribution channel strategies Explain how logistics is used in the supply chain

4 15-4 Supply Chain Management The supply chain includes all the firms that engage in activities that are necessary to convert raw materials into a good or service and put it in the hands of the consumer or business customer Supply chain management is the management of flows among the firms in a supply chain to maximize total profitability

5 15-5 Figure 15.3: Supply Chain

6 15-6 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

7 15-7 Functions of Distribution Channels Time, place, and ownership utilities Logistics functions Transportation and storage Efficiency creation Facilitating functions Repair and maintenance functions Risk-taking Communications and transaction functions

8 15-8 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

9 15-9 Types of Wholesaling Intermediaries Wholesaling intermediaries are firms that handle the flow of products from the manufacturer to retailer or business user –Independent –Manufacturer owned

10 15-10 Independent Intermediaries Merchant wholesalers –Full-service –Limited-service –Cash-and-carry wholesalers –Truck jobbers –Drop shippers –Mail-order wholesalers –Rack jobbers Merchandise Agents or Brokers –Manufacturers’ agents –Selling agents –Commission merchants –Merchandise brokers

11 15-11 Manufacturer-Owned Intermediaries Sales branches Sales offices Manufacturers’ showrooms

12 15-12 Figure 15.4: Reducing Transactions

13 15-13 Types of Distribution Channels Consumer channels –Direct –Manufacturer-retailer-consumer –Manufacturer-wholesaler-retailer- consumer Business-to-business channels –Direct –Manufacturer-industrial distributor- business customer

14 15-14 Major Types of Distribution Channels

15 15-15 Consumer Channels

16 15-16 B2B Channels

17 15-17 Dual Distribution Systems Multiple channel usage Example: –pharmaceutical industry sells to hospitals, clinics, and organizational customers directly and to consumers indirectly through drug retailers

18 15-18 Planning a Channel Strategy Develop distribution objectives Evaluate internal and external influences Choose a distribution strategy –Conventional –Vertical Administered, corporate, contractual– –Horizontal Develop distribution tactics

19 15-19 Vertical Marketing Systems Administered – channel members remain independent but voluntarily work together Corporate – single firm owns manufacturing, wholesaling, and retailing operations Contractual – cooperation is enforced by contracts that spell out member rights and the terms of cooperation

20 15-20 Develop Distribution Tactics Selecting channel partners Managing the channel of distribution –Channel leader is the dominant firm that controls the channel –Channel leaders have some form of power relative to other members economic power legitimate power reward or coercive power

21 15-21 Logistics: Implementing the Value Chain Process of designing, managing, and improving the movement of products through the supply chain –purchasing –manufacturing –storage –transport

22 15-22 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, customers’ goals become the logistics provider’s goals

23 15-23 Transportation Mode Considerations Dependability Cost Speed of Delivery Accessibility Capability Traceability

24 15-24 Modes of Transportation Rail Water Truck Air Pipeline Internet

25 15-25 Issues for Discussion Do you think marketers should be concerned with the total supply chain concept? Do intermediaries increase the cost of products? Are consumers better off with intermediaries? Do you think franchises offer the typical businessperson good opportunities? Describe characteristics of your school’s channel of distribution. What other channels should your school try?


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