15-1 Ch 15 - Place: The Final Frontier  Supply chain: –All of the activities necessary to turn raw materials into a good or service and put it in the hands of the consumer Distribution channels are a subset of the supply chain Logistics management deals with the process of actually moving goods through the supply chain

15-2 Links in the Supply Chain  Supply chain management: The management of flows among the firms in a supply chain to maximize total profitability –Includes physical movement of and sharing of information about goods –Insourcing: Firms contract with a specialist that handles all or part of the company’s supply chains

15-3 Figure 15.3 Hewlett Packard’s Supply Chain

15-4 Links in the Supply Chain  Channel of distribution: The series of firms or individuals that facilitates the movement of a product from producer to final customer  Supply chain links –The supplier network provides raw materials and parts to the manufacturer –Firm manufactures a product –Products are sent to distribution channel for resale to buyers

15-5  Channel intermediaries Firms or individuals such as wholesalers, agents, brokers, and retailers that help move the product from the producer to the consumer or business user

15-6 Functions of Distribution Channels  Channels: –Provide time, place, and ownership utility –Provide logistics and/or physical distribution functions –Create efficiencies by reducing the 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

15-7 Figure 15.4 Reducing Transactions via Intermediaries

15-8 Functions of Distribution Channels –Transport and store goods –Perform facilitating functions to make purchase process easier –Provide setup, repair, and maintenance services for products carried –Provide communication and transaction functions You can eliminate the intermediary, but not the function.

15-9 The Internet in the Distribution Channel  E-commerce has created radical changes in distribution strategies –Disintermediation: Eliminating traditional intermediaries MAY reduce manufacturer costs –Knowledge management: Sharing knowledge with other supply chain members –Online distribution piracy can be problematic

15-10 Channel Composition: Types of Wholesaling Intermediaries  Wholesaling intermediaries: Firms that handle the flow of products from the manufacturer to the retailer/business user –Independent intermediaries Merchant wholesalers Merchandise (manufacturer’s) agents and brokers –Manufacturer-owned intermediaries Sales branches, offices, salespeople

15-11 Types of Distribution Channels  Marketers must consider the number of channel levels when designing a distribution system  Various channel structures exist –Consumer channels –Business-to-business channels –Dual distribution systems and Hybrid marketing systems

15-12 Figure 15.5 Different Types of Dist’n. Channels

15-13 Figure 15.5, Part C Different Types of Channels of Distribution

The Language of Channels  Direct channel: a producer and a customer  Indirect channel: one or more intermediaries –Firms/individuals such as wholesalers, agents, brokers, and retailers that help move product to consumer or business user

15-15 Distribution and the Marketing Mix  Distribution decisions interact with the marketing mix in a number of ways: –Place decisions influence pricing –Distribution decisions can help develop a position in the market –Nature of the product influences choice of distribution channels, especially retailers

15-16 Distribution and Ethical Issues Distribution decisions can create ethical dilemmas –Slotting allowances –Size of channel intermediaries

15-17 Figure 15.6 Steps in Distribution Planning

15-18 Planning a Channel Strategy  Step 1: –Develop distribution objectives that support the firm’s overall marketing goals  Step 2: –Evaluate internal and external environmental influences to develop best channel structure Firm’s ability to handle distribution functions Channel intermediaries available How the competition distributes its products

15-19 Planning a Channel Strategy  Step 3: Choose a distribution strategy –* # of channel levels: Direct vs. indirect vs. dual distribution Issues: cost, control, coverage, conflict –Types of intermediaries (covered earlier in the chapter) –Nature of channel relationships: conventional, vertical, or horizontal system –Distribution Intensity (Penetration/coverage; see later slide)

15-20  Channel relationships: Conventional, vertical, or horizontal system Conventional marketing system: Members work independently of one another –Vertical marketing system (VMS): Formal cooperation among channel members –Many different types: Administered, Corporate, Contractual, Retailer cooperative, Franchise organizations –Horizontal marketing system: Two or more firms at the same channel level agree to work together to get their product to the customer

15-21 Planning a Channel Strategy  Step 3: Choose a distribution strategy –Distribution intensity = f (type of good; conflict) Intensive distribution: Selling through all suitable wholesalers or retailers Exclusive distribution: Selling only through a single outlet in a region Selective distribution: Using fewer outlets than intensive but more than exclusive distribution

15-22 Planning a Channel Strategy  Step 4: Develop distribution tactics –Selecting channel partners (normally a long-term commitment) –Managing the channel Conflict Communication Coordination Customer focus Channel leader/captain: –Dominant firm that controls the channel (via economic, legitimate, reward/coercive power)

Logistics  the process of designing, managing, and improving the movement of products through the supply chain –Purchasing –Manufacturing –Storage –Warehousing –Transport Physical distribution –Inventory control EOQ JIT RFID