Managing Retailing, Whole Saling and Market Logistic Delivering Value Through Supply Chain Management: Channels of Distribution and Logistics - Managing Retailing, Whole Saling and Market Logistic

Chapter Objectives value chain key elements in a supply chain distribution channel functions of distribution channels wholesaling intermediaries found in distribution channels

Chapter Objectives types of distribution channels steps for distribution channel strategies how supply chain uses logistics

Place: The Final Frontier Value chain: a series of activities directed at designing, producing, marketing, delivering, and supporting any product. Supply chain: Activities necessary to turn raw materials into a good or service and put it in the hands of the consumer: LIDROCK.COM

Figure 15.2: The Generic Value Chain

Links in the Supply Chain Supply chain management: the management of flows among the firms in a supply chain to maximize total profitability UPS.COM

Links in the Supply Chain Supply chain management: physical movement of goods sharing of information about goods In-sourcing: contracting with a specialist that services the company’s supply chains UPS.COM

Supply Chain vs. Channel of Distribution facilitates movement of a product from producer to final customer Supply chain: begins with raw materials

Figure 15.3: Supply Chain

The Importance of Distribution You Can’t Sell What Isn’t There

The Importance of Distribution: You Can’t Sell What Isn’t There! Direct channel: a producer to a customer Indirect channel: one or more intermediaries

The Importance of Distribution: You Can’t Sell What Isn’t There! intermediaries wholesalers, agents, brokers, retailers they help move product to consumer or business user

Functions of Distribution Channels To ease the flow of goods from producer to customer To provide time, place, and ownership utility logistics or physical distribution functions

Functions of Distribution Channels create efficiencies by reducing number of transactions Breaking bulk: purchasing large quantities of goods to sell one/few at a time to customers Creating assortments: providing variety of products in one location

Figure 15.4: Reducing Transactions via Intermediaries

Functions of Distribution Channels To make purchase process easier To manage risk To perform communication and transaction functions

The Internet in the Distribution Channel Radical changes in distribution strategies Disintermediation: eliminating traditional intermediaries Knowledge management: sharing knowledge with other supply chain members DELL

Channel Composition: Types of Wholesaling Intermediaries firms that handle the flow of products from the manufacturer to the retailer/business user

Independent Intermediaries Merchant wholesalers: buy goods from manufacturers sell to retailers and other B2B customers

Independent Intermediaries Merchant wholesalers: Full-service merchant wholesalers Limited-service merchant wholesalers Cash-and-carry wholesalers Truck jobbers Drop shippers Rack jobbers Mail-order wholesalers

Independent Intermediaries Merchandise Agents/Brokers: provide services in exchange for commissions Manufacturers’ agents/reps Selling agents Commission merchants Merchandise brokers

Independent Intermediaries Manufacturer-Owned Intermediaries Sales branches Sales offices Manufacturers’ showrooms

Types of Distribution Channels Consumer Channels Direct channel: producer sells directly to customers Indirect channel: producer uses one or more intermediaries to reach consumers

Types of Distribution Channels (cont’d) Business-to-business channels Dual distribution systems Hybrid marketing systems MERCK.COM

Figure 15.6: Steps in Distribution Planning

Planning a Channel Strategy Step 1: Develop distribution objectives that support the firm’s overall marketing goals. How can distribution work with other elements of marketing mix to increase profit? To Increase market share Increase sales volume ? To make firm product available when, where, and in the quantities customer at the minimum cost.

Strategy Bulky products Fragile Product New product Primary distribution objective is to minimize shipping cost Fragile Product minimize handling New product Maximum product exposure Make product available near customer (work / live)

Planning a Channel Strategy Step 2: Evaluate internal and external environmental influences to develop best channel structure. ability to handle distribution functions Channel intermediaries available How competition distributes products Long / Short, intensive / selective / exclusive

Planning a Channel Strategy (cont’d) Step 3: Choose a distribution strategy Channel relationships: conventional, vertical, or horizontal system Conventional marketing system: Multilevel distribution channel in which channel member work independently of one another members work independently of one another

Planning a Channel Strategy (cont’d) Step 3: Choose a distribution strategy Vertical marketing system (VMS): formal cooperation among channel members Administered VMS Corporate VMS Contractual VMS Retailer cooperative Franchise organizations IGAINC.COM

Planning a Channel Strategy (cont’d) Step 3: Choose a distribution strategy Horizontal marketing system: two or more firms at the same channel level agree to work together to get their product to the customer Alliance

Planning a Channel Strategy (cont’d) Step 3: Choose a distribution strategy Distribution intensity Exclusive distribution: selling only through a single outlet in a region Selective distribution: using fewer outlets than intensive but more than exclusive distribution Intensive distribution: selling through all suitable wholesalers or retailers

Planning a Channel Strategy (cont’d) Step 4: distribution tactics Selecting channel partners: normally a long-term commitment Managing the channel Channel leader/captain: dominant firm that controls the channel (via economic, legitimate, reward/coercive power)

Distribution Channels and the Marketing Mix Place decisions affect: Pricing Product and its positioning ENTERPRISE RENT-A-CAR

Logistics: Implementing the Supply Chain the process of designing, managing, and improving the movement of products through the supply chain Purchasing Manufacturing Storage Transport

Logistics: Implementing the Supply Chain (cont’d) Physical distribution: the activities used to move finished goods from manufacturers to final customers

Logistics Functions Order processing Warehousing Materials handling

Logistics Functions (cont’d) Transportation: mode by which products move among channel members

Logistics Functions Transportation modes differ in their-- Dependability (safety and punctuality) Cost Speed of delivery Accessibility (different locations served) Capability (variety of products handled) Traceability (ability to locate goods in shipment)

Modes of Transportation Railroads: carry heavy, bulky items over long distances Water: carry large, bulky goods (especially internationally) Trucks: carry consumer goods in short haul; allow flexibility in locations

Modes of Transportation (cont’d) Air: carry high value-items; fastest and most expensive mode Pipelines: carry petroleum/chemical products Internet: distribute services such as banking, news, and entertainment

Logistics Functions (cont’d) Inventory control: activities to ensure foods are always available to meet customers’ demands Radio frequency identification (RFID) Just in time (JIT)

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