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Supply Channel Analysis Chapters 4&5 with Duane Weaver.

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Presentation on theme: "Supply Channel Analysis Chapters 4&5 with Duane Weaver."— Presentation transcript:

1 Supply Channel Analysis Chapters 4&5 with Duane Weaver

2 OUTLINE Channel Flows Customizing Flows Channel Efficiency Template Zero-based Channel Design Equity Principle Who SHOULD be in the Channel? Single or Dual Channel

3 Channel Flows 8 generic flowsCosts Physical PossessionStorage, delivery, sustainability OwnershipInventory, Shipping, Loss PromotionSelling, ads, promos, public relations, publicity… NegotiationTime, legal costs, templates, contracts FinancingCredit terms, terms, conditions of sale, risks RiskingPrice guarantees, warranties, insurance, repair, after-sale support/service, reputation OrderingAdministration, technology, time PaymentProcessing, collection, bad debt servicing

4 Customizing Flows It is possible to remove intermediaries and thus minimize profit sharing, however, the flow must continue somehow! Look at clumping flows to one member Look at splitting flows to sub-flows and sub- members IMPORTANT CONSIDERATIONS: Recognizable channel members Channel Layout matches Channel Cost/Usage Accounts for all the relevant costly flow activities

5 Channel Efficiency Template EFFICIENCY TEMPLATE Weights for FlowsProportional Flow Performance of Channel Member CostBenefit Final Weight1224Total Physical Possession Ownership Promotion Negotiation Financing Risking Ordering Payment Total100 Normative Profit Share 100

6 Zero-based Channel Design 1. Meets target market segment’s demand for service outputs while… 2. Minimizing the cost of performing the necessary flows for those service output demands It’s all about maximizing profitability by maximizing customer satisfaction…key… “KNOW THY CUSTOMER WELL” How? Define target markets, understand each target market’s buyer behavior and end-user demands, meet those requirements with maximum utility and minimum cost (more efficiently than competitors) GAP ANALYSIS? - look for points of leverage…means by which you can increase satisfaction with a lower incremental cost (this might mean reducing one satisfaction measure that is high cost in return for satisfying more significant factors that are lower cost in total)

7 Equity Principle Normative profit share measures that portion of the total channel profits that each channel member’s efforts generates. Therefore, competition in channel distribution should be given based on value provided relative to degree of participation (flaw=this can vary by weighting (monopoly, limited supply, accessiblity)

8 Type of Channel? Do you use intermediaries at all? Do you select a retail or non-retail channel partner? Decisions should be based on the ability of that channel type to meet the end user’s service output demands regarding any positive or negative impacts that type could have on other service output demands

9 Deciding who SHOULD be in the Channel? Let’s look at Figure 5.2, p. 111 Get together in your groups. Select a single product or service to provide and discuss the advantages and disadvantages of non-retail vs. retail intermediaries. Why would you choose one over the other? Discuss your findings with the class.

10 Single or Dual Channel Dual Distribution = …whenever more than one channel coexists in a market Criteria: Demand – segmentation Users with differing service output demands Supply – cost Actual cost to distribute in that manner Coordination Increased conflict, overhead, management…exclusivities, conditions

11 THANKS! IN THE END: The chosen channel structure must help to meet targeted segments’ expressed demands for service outputs while looking at economies of scope, scale and inherent efficiencies.

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