Chapter 15 THE FUTURE OF BUSINESS Gitman & McDaniel 5 th Edition THE FUTURE OF BUSINESS Gitman & McDaniel 5 th Edition Chapter Distributing Products in a Timely and Efficient Manner Distributing Products in a Timely and Efficient Manner Prepared by Deborah Baker Texas Christian University Prepared by Deborah Baker Texas Christian University 15

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 2 1What is physical distribution? 2What are distribution channels and their functions? 3How are channels organized? 4When would a marketer use exclusive, selective, or intensive distribution? 5What is wholesaling, and what are the types of wholesalers? 6What are the different kinds of retail operations and the components of a successful retailing strategy? 7How can supply chain management increase efficiency and customer satisfaction? 8What are the trends in distribution? Learning Goals

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 3 Learning Goal 1 What is physical distribution? 1

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 4 Physical Distribution 1 Management of the acquisition of raw materials to the factory Management of the movement of products from the producer to industrial users and consumers The Role of Distributio n The Role of Distributio n

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 5 Supply Chain 1 Suppliers of Raw Materials Suppliers of Raw Materials CD Factory CD Factory Wholesale or Distribution Center Wholesale or Distribution Center Retailers, Wholesalers, Distribution Centers Retailers, Wholesalers, Distribution Centers Customers Finished CDs

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 6 2 Learning Goal 2 What are distribution channels and their functions?

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 7 2 Distribution Channels Industrial Distributors Industrial Distributors Independent wholesalers that buy related product lines from manufacturers and sell them to industrial users. Wholesalers Firms that sell finished goods to retailers, manufacturers, and institutions. Agents and Brokers Agents are sales representatives of manufacturers and wholesalers, and brokers are entities that bring buyers and sellers together. Retailers Firms that sell goods to consumers and to industrial users for their own consumption.

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 8 2 Channels of Distribution

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 9 2 Functions of Distribution Channels Ease the flow of goods Perform needed functions Reduce the number of transactions

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 10 2 Functions of Distribution Channels Without a marketing intermediary Publishers Students With a marketing intermediary Publishers Students Bookstore

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 11 2 Functions of Distribution Channels Channels ease the flow of goods Channels ease the flow of goods Accumulating Sorting out Allocating

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 12 3 Learning Goal 3 How are channels organized?

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 13 3 Vertical Marketing Systems Basic Types of Vertical MarketingSystems MarketingSystems Corporate Administrative Contractual

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 14 3 Corporate Distribution Systems Backward Integration Occurs when a wholesaler or retailer gains control over the production process Forward Integration Forward Integration Occurs when a manufacturer acquires a marketing intermediary closer to the customer

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 15 4 When would a marketer use exclusive, selective, or intensive distribution? Learning Goal 4

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 16 4 The Intensity of Market Coverage Selective Distribution Selective Distribution A manufacturer selected a limited number of dealers in an area (but more than one or two) to market its products. Intensive Distribution Intensive Distribution A manufacturer tries to sell its products wherever there are potential customers. Exclusive Distribution A manufacturer selects only one or two dealers in an area to market its products.

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 17 4 The Intensity of Market Coverage ExclusiveSelectiveIntensive Jaguar automobiles Sharp TV Wrigley’s gum

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 18 What is wholesaling, and what are the types of wholesalers? Learning Goal 5 5

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 19 5 Manufacturer Wholesaling intermediaries Agents and brokers Agents and brokers Merchant wholesalers Merchant wholesalers Retailers or industrial users Customers Full- service Limited- service Often selective or exclusive distribution Often intensive distribution The Two Categories of Wholesalers

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 20 Learning Goal 6 6 What are the different kinds of retail operations and the components of a successful retailing strategy? What are the different kinds of retail operations and the components of a successful retailing strategy?

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 21 Types of Retail Operations 6 In-Store Retailing Nonstore Retailing Department store Specialty store Convenience store Supermarket Discount store Off-price retailer Factory outlet Catalog store Hypermart Vending machine Direct selling Direct-response marketing Home shopping networks Internet retailing

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 22 Components of a Successful Retailing Strategy 6 Define a target market Develop a product offering Create an image and a promotional strategy Choose a location Set prices

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 23 Creating a Store’s Atmosphere 6 Fixture type and density Merchandise type and density Employee type and density Sound Odors

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 24 Learning Goal 7 7 How can supply chain management increase efficiency and customer satisfaction? How can supply chain management increase efficiency and customer satisfaction?

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 25 Responsibilities of Supply Chain Managers 7  Make channel strategy decisions  Coordinate the sourcing and procurement of raw materials  Schedule production  Process orders  Manage inventory  Transport and store supplies and finished goods  Coordinate customer service activities

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 26 Major Modes of Transportation 7  Railroads  Motor carriers  Pipelines  Water transportation  Airways

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 27 Transportation Decisions 7 Criteria for Mode of Transportation Criteria for Mode of Transportation Reliability Transit Time Cost Capability Accessibility Traceability

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 28 7 HighestLowest Relative cost Transit time Reliability Capability Accessibility Traceability Air Water Pipe Water Truck Air Truck Rail Truck Rail Truck Rail Pipe Rail Truck Air Rail Pipe Truck Air Water Air Water Pipe Ranking Modes of Transportation

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 29 Learning Goal 8 8 What are the trends in distribution?

Chapter 15 Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved 30 Trends in Distribution 8 Information Sharing Category Management