1. The Nature of The Supply Chain and Distribution
Chapter Eleven
The Nature of The Supply Chain and Distribution 1

2. Unlike real estate, location is becoming progressively less relevant
Unlike real estate, location is becoming progressively less relevant. The three critical factors for the Internet age are logistics, logistics, logistics. - William B. Lipsin, CEO, Ironside Technologies

3. Objectives Explain general purpose of distribution & logistics
Show distribution system’s contributions
Examine tradeoff between customer satisfaction & costs in distribution
Understand a total cost approach to distribution
Understand pervasive nature of distribution
Introduce channel intermediaries and various distribution channels
Introduce vertical marketing systems
Overview distribution’s interaction with other aspects of the marketing mix
Examine channel relations

4. Distribution’s Function
The major purpose of marketing is to satisfy human needs by delivering products of various types to buyers when and where they want them and at a reasonable cost.
The “when and where” is the function of Distribution 2

5. Definitions Logistics Supply Chain In-process inventory
Component parts
& Raw material
Finished goods
Supply Chain

6. Physical Distribution Activities
Inventory management
Order processing
Warehousing and storage
Materials handling
Protective packaging & containerization
Outbound transportation

7. Physical Distribution Objectives
Maximize Customer Service
Minimize Costs

8. Channel of Distribution
All intermediaries involved in the exchange process
Excludes pre-manufacturing (raw materials or component parts)
Facilitate movement of physical goods and title
PRODUCER
INTERMEDIARIES
CONSUMER 4

9. Physical Distribution Functions
Accumulating bulk
Creating
assortments
Breaking bulk
Reducing
transactions
Transportation
& storage 7

10. Modes of Transportation
Rail
Motor
Water
Pipeline
Air

11. Modes of Transportation
Railroads
Medium cost and speed
Low reliability
Many damaged goods
Good Geographic flexibility

12. Modes of Transportation
Motor carrier
Medium reliability
Good speed
Good flexibility
Above average damage
Now more competitive and unregulated

13. Modes of Transportation
Air freight
Expensive
Very fast
Above average reliability
Average flexibility
Average reputation for undamaged goods

14. Modes of Transportation
Water transportation
Low cost
Low reliability
Limited flexibility
Limited damage

15. Modes of Transportation
Pipeline
Mostly gas and petroleum
Low cost
High reliability
Limited flexibility
Texas
Kansas

16. Modes of Transportation
Intermodal transportation
Ship + Truck (fishyback)
Rail + Truck (piggyback)
Air + Truck (birdyback)

17. Storage & Inventory COntrol
Breaking
Bulk

18. Total Cost: A Systems Approach
Handling
Costs
Shipping
Costs
Costs
Transportation

19. Total Cost: A Systems Approach
@$#*&!*&%

20. Communication & Transaction Functions
Gather & Disseminate
Information 1 9 24 37 2 3 57
Buying & Selling
Personal
Selling
Advertising
Sales
Promotion 12

21. Facilitating Functions
Extra Services
Payment &
Credit Services
Risk Taking 13

22. Typical Channels of Distribution
ANUFACTURER
ONSUMER
GENT
ETAILER
HOLESALER 14

23. Business-to-Business Channels
Direct
Wholesaler 21

24. Vertical Marketing Systems
Corporate systems - total ownership
Contractual - legal relationships
Administered - strong leadership 23

25. Planning the Channel of Distribution
Determining the structure
Marketing mix strategy
Organizational resources
External environmental factors
Market characteristics
Consumer preferences and behavior
The nature and availability of Intermediaries
Other environmental factors 26

26. Intensive Distribution
Producer
Retailer
Seeks to obtain maximum product exposure at the retail level

27. Selective Distribution Product is sold in a limited number of outlets
Producer
Product is sold in a limited number of outlets
Retailer

28. Exclusive Distribution
Producer
Product is sold in only one outlet in a given area
Retailer

29. Channel Relationships
Cooperation
Conflict
Power
Coercive
Expert
Legitimate 28

30. Other Distribution Management Issues
One Coca Cola Distributor
One thousand retailers OK
Reverse distribution
Difficult
Backward
channel
Ethical, Political, & Legal 29

31. Review Explain general purpose of distribution & logistics
Show distribution system’s contributions
Examine tradeoff between customer satisfaction & costs in distribution
Understand a total cost approach to distribution
Understand pervasive nature of distribution
Introduce channel intermediaries and various distribution channels
Introduce vertical marketing systems
Overview distribution’s interaction with other aspects of the marketing mix
Examine channel relations