3rd Quarter 2002 Analyst Presentation

Name: 3rd Quarter 2002 Analyst Presentation
Uploaded: 2017-08-14T12:11:43+00:00
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Description: 3rd Quarter 2002 Analyst Presentation

Managing the Supply Chain
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Chapter 5 Managing the Supply Chain Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

3rd Quarter 2002 Analyst Presentation
4/17/2017 6:58:45 AM Learning Objectives Discuss the retailer’s role as one of the institutions involved in the larger supply chain. Describe the types of supply chains by length, width, and control. Explain the terms dependency, power, and conflict and their impact on supply chain relations. Understand the importance of having collaborative supply chain relationships.

4/17/2017 6:58:45 AM The Supply Chain LO 1 Supply Chains Is a set of institutions that moves goods from the point of production to the point of consumption. Channel Used interchangebly with chain.

4/17/2017 6:58:45 AM The Supply Chain LO 1 The supply chain, or channel, is affected by five external forces: Consumer behavior Competitor behavior Socioeconomic environment Technological environment Legal and ethical environment

4/17/2017 6:58:45 AM The Supply Chain LO 1 A supply chain or channel must perform eight marketing functions: Buying Selling Storing Transporting Sorting Financing Information gathering Risk taking

4/17/2017 6:58:45 AM The Supply Chain LO 1 A marketing function does not have to be shifted in its entirety to another institution or to the consumer but can be divided among several entities.

4/17/2017 6:58:45 AM The Supply Chain LO 1 Marketing System Is the set of institutions performing marketing functions (activities), the relationships between these institutions, and the functions that are necessary to create exchange transactions with target populations or consumers.

4/17/2017 6:58:45 AM The Supply Chain LO 1 Primary Marketing Institutions Are those channel members that take title to the goods as they move through the marketing channel. They include manufacturers, wholesalers, and retailers.

Primary Marketing Institutions
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Primary Marketing Institutions LO 1 Costco is a primary marketing institution that acts as both a wholesaler (selling to small businesses) and a retailer (selling to households).

4/17/2017 6:58:45 AM The Supply Chain LO 1 Facilitating Marketing Institutions Are those that do not actually take title but assist in the marketing process by specializing in the performance of certain marketing functions.

The Supply Chain: Institutions Participating in
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM The Supply Chain: Institutions Participating in The Supply Chain LO 1: Exhibit 5.1 Primary (Take Title) Facilitating (Do Not Take Title) Manufacturers Wholesalers Retailers Agents/Brokers Financial Institutions Market Researchers Transporters Advertising Agencies Warehouses Insurers

4/17/2017 6:58:45 AM The Supply Chain LO 1 Public Warehouse Is a facility that stores goods for safekeeping for any owner in return for a fee, usually based on space occupied.

Facilitating Institutions
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Facilitating Institutions LO 1 Freelance broker Manufacturer’s agent Sales agent Purchasing agents

The Supply Chain: Sorting Process
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM The Supply Chain: Sorting Process LO 1 SOURCE: Virginia Newell Lusch, used with permission.

The Supply Chain: Sorting Process
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM The Supply Chain: Sorting Process LO 1 ASSORTMENT SOURCE: Virginia Newell Lusch, used with permission.

4/17/2017 6:58:45 AM Types of Supply Chains LO 2 Length Width Control

4/17/2017 6:58:45 AM Supply Chain Length LO 2 Direct Supply Chain Is the channel that results when a manufacturer sells its goods directly to the final consumer or end user. Indirect Supply Chain Is the channel that results once independent channel members are added between the manufacturer and the consumer.

Supply Chain Length: Strategic Decisions in
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Supply Chain Length: Strategic Decisions in Supply Chain Design LO 2: Exhibit 5.2 Supply Chain Length Direct Indirect Supply Chain Width (Intensive, Selective, and Exclusive) Controlling the Supply Chain

Supply Chain Length: Direct and Indirect
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Supply Chain Length: Direct and Indirect Supply Chains LO 2: Exhibit 5.3 Direct Supply Chain Indirect Supply Chains Manufacturer Manufacturer Manufacturer Wholesaler Retailer Retailer Consumer Consumer Consumer

4/17/2017 6:58:45 AM Supply Chain Width LO 2 Intensive distribution Means that all possible retailers are used in a trade area. Selective distribution Means that a moderate number of retailers are used in a trade area. Exclusive distribution Means only one retailer is used to cover a trading area.

Width of Marketing Supply Chain:
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Width of Marketing Supply Chain: Exclusive Distribution LO 2: Exhibit 5.4 Manufacturer Retailer Only one retailer in trading area sells the product(s)

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Width of Marketing Supply Chain: Selective Distribution LO 2: Exhibit 5.4 Manufacturer Retailer Retailer Moderate number of retailers in each trading area sell the product(s)

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Width of Marketing Supply Chain: Intensive Distribution LO 2: Exhibit 5.4 Manufacturer Retailer Retailer Retailer Retailer All possible retailers in the trading area sell the product(s)

Control of the Supply Chain
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Control of the Supply Chain LO 2 Conventional Marketing Channel Is one in which each channel member is loosely aligned with the others and takes a short-term orientation. Vertical Marketing Channels Are capital-intensive networks of several levels that are professionally managed and centrally programmed to realize the technological, managerial, and promotional economies of a long-term relationship orientation.

Marketing Channel Patterns
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Marketing Channel Patterns LO 2: Exhibit 5.5 Marketing Channels Conventional Marketing Channels Vertical Marketing Channel System Corporate Systems Contractual Systems Administered Systems Wholesaler- Sponsored Groups Retailer-Owned Cooperatives Franchised Retail Programs

Vertical Marketing Channels
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Vertical Marketing Channels LO 2 Quick Response (QR) Systems Also known as Efficient Consumer Response (ECR) Systems, are integrated information, production, and logistical systems that obtain real-time information on customer actions by capturing sale data at point-of-purchase terminals and then transmitting this information back through the entire channel to enable efficient production and distribution scheduling.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Vertical Marketing Channels LO 2 Stock-Keeping Units Are the lowest level of identification of merchandise.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Vertical Marketing Channels LO 2 Corporate Vertical Marketing Systems Exist where one channel institution owns multiple levels of distribution and typically consists of either a manufacturer that has integrated vertically forward to reach the consumer or retailer that has integrated vertically backward to create a self-supply network.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Vertical Marketing Channels LO 2 Contractual Vertical Marketing Systems Use a contract to govern the working relationship between channel members and include wholesaler-sponsored voluntary groups, retailer-owned cooperatives, and franchised retail programs.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Vertical Marketing Channels LO 2 Wholesaler-Sponsored Voluntary Groups Involve a wholesaler that brings together a group of independently owned retailers and offers them a coordinated merchandising and buying program that will provide them with economies like those their chain store rivals are able to obtain.

Wholesale Sponsored Voluntary Group
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Wholesale Sponsored Voluntary Group LO 2 Wholesale sponsored voluntary groups, such as NAPA, have been a major force in marketing channels since the mid-1960s. These marketing institutions offer members coordinated merchandising and buying programs that help lower costs.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Vertical Marketing Channels LO 2 Retailer-Owned Cooperatives Are wholesale institutions, organized and owned by member retailers, that offer scale economies and services to member retailers, which allows them to compete with larger chain-buying organizations. TRU*SERV, Ace, Handy Hardware

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Vertical Marketing Channels LO 2 Franchise Is a form of licensing by which the owner of a product, service, or business method (the franchisor) obtains distribution through affiliated dealers (franchisees).

Advantages to Franchise Ownership
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Advantages to Franchise Ownership LO 2: Exhibit 5.6 Advantages to Franchisee Franchisor provides managerial skills that are taught to franchisee. Franchisee can begin a business with a relatively small capital investment. Franchisee can acquire a relatively well known or established line of business. Franchisee can acquire rights to a well-defined geographical area. The standardized marketing programs and operating procedures enable the franchisee to be competitive immediately. Because they own a piece of the action, franchisees tend to be more motivated and bottom-line oriented than managers of corporate chain stores.

Disadvantages to Franchise Ownership
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Disadvantages to Franchise Ownership LO 2: Exhibit 5.6 Disadvantages to Franchisee Too many franchises can be located in a geographical area. Too many franchisors make promises they cannot keep (e.g., overstating the income potential of a franchise). Franchisors can include a buyback agreement whereby the franchisee must sell back the franchise at a given point in time or the franchise agreement is for a short duration. Under most franchise agreements, payments to the franchisor are a percentage of a franchisee’s profitability. Franchise systems may be too inflexible in terms of operating procedures (hours, product selection, etc.) for the franchisee. In short, the franchisee must surrender to freedom to make many decisions.

4/17/2017 6:58:45 AM Yum! Brands Inc. LO 2 Yum! Brands Inc. (YUM), the parent of Pizza Hut, has nearly 33,000 restaurants in 100 countries and territories. These restaurants are operated by the company or, under the terms of franchise or license agreements, by franchisees or licensees that are independent third parties or by affiliates in which the company owns a noncontrolling equity interest.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Vertical Marketing Channels LO 2 Administered Vertical Marketing Channels Exist when one of the channel members takes the initiative to lead the channel by applying the principles of effective interorganizational management.

Managing Retailer-Supplier Relations
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Managing Retailer-Supplier Relations LO 3 Dependency Power Conflict Managing Cooperative Relations

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Managing Retailer-Supplier Relations LO 3 Dependency Every supply chain needs to perform eight marketing functions, which can be performed by any combination of the members. None of the respective institutions and isolate itself; each depends on the others to do an effective job.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Managing Retailer-Supplier Relations LO 3 Power Is the ability of one channel member to influence the decisions of the other channel members.

Managing Retailer-Supplier Relations:
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Managing Retailer-Supplier Relations: Types of Power LO 3 Reward Power is based on B’s perception that A has the ability to provide rewards for B. Expertise Power is based on B’s perception that A has some special knowledge. Referent Power is based on the identification of B with A.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Managing Retailer-Supplier Relations: Types of Power LO 3 Coercive Power is based on B’s belief that A has the capability to punish or harm B if B doesn’t do what A wants. Legitimate Power is based on A’s right to influence B, or B’s belief that B should accept A’s influence. Informational Power is based on A’s ability to provide B with factual data.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Managing Retailer-Supplier Relations LO 3 Conflict Conflict is inevitable in every channel relationship because retailers and suppliers are interdependent; that is, every channel member is dependent on every other channel member to perform some specific task.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Managing Retailer-Supplier Relations: Conflict LO 3 Perceptual Incongruity occurs when the retailer and supplier have different perceptions of reality. Goal Incompatibility occurs when achieving the goals of either the supplier or the retailer would hamper the performance of the other. Dual Distribution occurs when a manufacturer sells to independent retailers and also through its own retail outlets.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Managing Retailer-Supplier Relations: Conflict LO 3 Domain Disagreements occur when there is disagreement about which member of the marketing channel should make decisions. Diverter is an unauthorized member of a channel who buys and sells excess merchandise to and from authorized channel members. Gray Marketing is when branded merchandise flows through unauthorized channels.

3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Managing Retailer-Supplier Relations: Conflict LO 3 Free Riding is when a consumer seeks product information, usage instructions, and sometimes even warranty work from a full-service store but then, armed with the brand’s model number, purchases the product from a limited-service discounter or over the internet.

Conflict Process Role of Channel Interdependency
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Conflict Process Role of Channel Interdependency Interdependency LO 3 Dependency of Retailer on Supplier Dependency of Supplier on Retailer Supplier’s Power Sources Power of Retailer Over Supplier Power of Supplier Over Retailer Retailer’s Power Sources Conflict Potential Conflict Potential FEEDBACK Conflict Conflict Perceived Felt Manifest Perceived Felt Manifest Conflict Resolution

Collaboration in the Channel
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Collaboration in the Channel LO 4 Facilitating Channel Collaboration Category Management

Facilitating Channel Collaboration
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Facilitating Channel Collaboration LO 4 Mutual trust occurs when both the retailer and its suppliers have faith that each will be truthful and fair in their dealings with the other.

4/17/2017 6:58:45 AM Facilitating Channel Collaboration: Supply Chain Best Management Practices LO 4: Exhibit 5.7 All supply chain members must remember that satisfying the retail consumer is the only way anyone can be successful. Successful partners work together in good times and bad. Never abandon a supply chain partner at the first sign of trouble. Never abuse power in negotiations. Rather, understand your partner’s needs prior to negotiations and work to satisfy those needs.

4/17/2017 6:58:45 AM Facilitating Channel Collaboration: Supply Chain Best Management Practices LO 4: Exhibit 5.7 Share profits fairly among partners. Limit the number of partners for each merchandise line. By doing so you can signal greater commitment and trust to your partners, thus building stronger relationships. Set high ethical standards in your business transactions. Successful partners plan together to help the supply chain operate efficiently and effectively. Treat your partner as you wish to be treated.

Facilitating Channel Collaboration
3rd Quarter 2002 Analyst Presentation 4/17/2017 6:58:45 AM Facilitating Channel Collaboration LO 4 Two-Way Communication occurs when both retailer and supplier communicates openly their ideas. Concerns, and plans. Solidarity exists when a high value is placed on the relationship between a supplier and retailer.

4/17/2017 6:58:45 AM Category Management LO 4 Category Management (CM) Is the process of managing all the SKUs within a product category and involves the simultaneous management of price, shelf space, merchandising strategy, promotional efforts, and other elements of the retail mix within the category based on the firm’s goals, the changing environment, and consumer behavior.

4/17/2017 6:58:45 AM Question to Ponder How can a manufacturer employ an e-tailing strategy while maintaining a strong partnership with its retailers?

3rd Quarter 2002 Analyst Presentation

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