 Distribution is the Place Decision in the 4 P’s  Channels of Distribution-path a product takes from producer to final user  Channels end when a product changes form

 ApplesApple Juice Manufacturer Grower Apple Juice Manufacturer Food Broker Retailer(store) Consumer

 Producer –grows a good  Manufacturer-makes or assembles a good on a large scale through laborers and/or machinery  Intermediaries-Channel members who help move products from producer to final user ◦ Merchant intermediaries - take title(ownership) of the good ◦ Agents- do not take title and are paid commission to help buyers and sellers get together  Non-channel members ◦ transportation companies-truck, plane, barge

 Wholesalers ◦ buy large quantities, store goods, & resell to retailers  Wholesalers, Rack Jobbers, Drop shippers  Retailers ◦ sell goods to ultimate consumers through their stores ◦ large companies may be both(Sears) ◦ smaller use wholesalers  Non-store Retailers ◦ Electronic retail outlets-sell goods thru television programs and computers  home shopping network, CCS ◦ Vending Service Companies  Buy manufacturer’s products and sell them thru machines that dispense to consumers ◦ Catalog Companies ◦ Direct Mail

 Negotiate the title of goods between buyer and seller  Two types  Independent manufacturer’s representatives  represent several related companies(Coleman,Daisy, Bushnell, Nikon, Eagle Optics)  Brokers  Principle function to bring buyer and seller together. Typically do not continue relationships, they negotiate the sale & paid commission.

Channel A (direct distribution) Producer  Consumers Indirect Distribution Channel B Producer  Retailer  Consumer Channel C Producer  Wholesaler  Retailer  Consumer Channel D Producer  Agent  Wholesaler  Retailer  Consumer Channel E Producer  Agent  Retailer  Consumer

 Manufacturer/Producer may use more than one channel to reach different customers  Consumer Products ◦ Most commonly used channel is B  Industrial Products ◦ Most commonly used channel is A

 Using outlets to sell products where they previously weren’t sold  example: iPods previously sold in electronic stores can be purchased through vending machines

 Product fits the needs of industrial and consumer users  Patagonia (outdoor clothing) sells through their own stores, catalogs and other retailers

 In-house sales force=most control but most costly ◦ Only use if product is well known and high sales volume  If new company or new product may want to use an agent ◦ Less control but also costs less

 Another issue is the power of retail giants to dictate terms to manufacturers  Wal-mart, etc. may tell a manufacturer how to ship, package, and price products or else they won’t be sold there

Three levels  Intensive distribution(ex. Coca-cola) ◦ objective=complete market coverage (use of all suitable outlets)  Selective Distribution( ex. Ralph Lauren) ◦ objective=select channel members (limited) that are good credit risks, aggressive marketers, & good inventory planners  Exclusive Distribution (ex. Subway) ◦ objective=prestige, image, channel control & high profit (protected territories in a geographic area)

 Form of exclusive distribution ◦ Manufacturer is the wholesaler and retailer ◦ Example: Banana-Republic sells its clothes in company owned stores

Chapters 24 & 25 Part III

 Must be coordinated with other business functions  Must have the products in the right place at the right time  Involves 3 marketing functions ◦ Transporting(moving goods from seller to buyer) ◦ storing ◦ handling

 Motor Carriers(trucking) ◦ Most frequently used ◦ lightweight shipments over moderate distances ◦ Four major types  common carriers-charge a fee, usually specialize in a single commodity (good)  Contracted carriers-negotiate rates with each business  Private carriers-owned by business, transports own goods  Exempt carriers-free from direct regulation of rates and operating procedures. Usually agricultural products

 Trucking advantages ◦ convenient ◦ reduces packaging costs ◦ reduced inventory costs(rapid delivery)  Trucking disadvantages ◦ traffic jams & accidents ◦ equipment breakdowns ◦ Not good for long distances(expensive)

 Rail ◦ Move heavy, bulky freight (coal)  Ton mile-movement of one ton of freight one mile  Carload-min. number of pounds of freight needed to fill a box car ◦ Five specialized services  Piggyback & Fishyback service  Specialized services (refrigerator cars)  Package cars(lower rate after reaching weight)  Diversion-in-Transit(redirection when in route)  Processing-In-Transit(processed in route) ◦ Advantages-low costs, weather not a problem ◦ Disadvantages-lack of flexibility(limited to station stops)

 Water Transportation ◦ oldest method ◦ Internal Waterways (river, lake ports) ◦ Intracoastal Waterways (ports along east or west coast or from Atlantic to Pacific) ◦ International Waterways-almost all international shipments due to low cost ◦ Advantages-low cost ◦ Disadvantages-slow, off-loading, bad weather

 Pipelines  Owned by company using them  Transport oil & natural gas  Carry same amount of ton-miles as trucking  Advantages- dependable  Disadvantage-high cost to construct, breakage

 Air Transportation  Used for high-value, low-weight items  Perishable items (flowers)  Advantages-speed, reduces storage costs  Disadvantages-high cost, bad weather, breakdowns

 US Postal Service-parcel post-packages weighing 16 ounces or less  Express carriers-door-to-door delivery, rates based on speed, weight, & distance  Bus Package companies-less than 100 lbs., must be on scheduled route  Freight Forwarders-combine shipments, use all methods, can obtain lower rates

Chapter 24 and 25 Part IV

 Inventory=amount of goods stored  Storage(holding goods till they are sold) adds time and place utility to goods  Costs involve space, equipment, and personnel  Also the cost of money tied up in inventory

 Production has outpaced consumption  Product is only available during certain times of the year (agricultural)  Items bought in quantity to get discount  Stored in convenient locations to get faster delivery to customers

 Private warehouses(owned by business) ◦ designed to meet needs of owner, often house offices too  Public warehouse(any business that will pay) ◦ rent space and provide services(shipment consolidation, barcode labeling, receiving)  Distribution Center(designed to speed delivery of goods and min. storage costs) ◦ consolidate large orders and redistribute them as separate orders  Bonded warehouses(store products that require the payment of federal tax) ◦ hold until taxes paid, business save by taking out goods only as they need them

 Commodity warehouses-agricultural products  Bulk storage warehouses-bulk form such as chemicals  Cold storage warehouses-store perishables such as fruits  Household goods warehouses-personal property storage  General merchandise warehouse-any item that doesn’t require special handling