1. Michael R. Solomon Greg W. Marshall Elnora W. Stuart
M A R K E T I N G
Real People, Real Choices
Fourth Edition
CHAPTER 15 Creating Value Through Supply Chain Management: Channels of Distribution, Logistics, and Wholesaling
Michael R. Solomon Greg W. Marshall Elnora W. Stuart

2. Chapter Objectives_1
Understand the concept of the value chain and the key elements in a supply chain.
Explain what a distribution channel is and what functions distribution channels perform
Describe the types of wholesaling intermediaries found in distribution channels

3. Chapter Objectives_2
Describe the types of distribution channels and the steps in planning distribution channel strategies
Explain how logistics is used in the supply chain

4. Supply Chain Management
The supply chain includes all the firms that engage in activities that are necessary to convert raw materials into a good or service and put it in the hands of the consumer or business customer
Supply chain management is the management of flows among the firms in a supply chain to maximize total profitability

5. Figure 15.3: Supply Chain

6. What Is a Distribution Channel?
Series of firms or individuals that facilitate the movement of a product from the producer to the final customer
Direct
Indirect

7. Functions of Distribution Channels
Time, place, and ownership utilities
Logistics functions
Transportation and storage
Efficiency creation
Facilitating functions
Repair and maintenance functions
Risk-taking
Communications and transaction functions

8. Creating Efficiencies
Breaking bulk – channel members purchase large quantities from manufacturers and sell smaller quantities to many different customers
Creating assortments – channel members provide a variety of products in one location

9. Types of Wholesaling Intermediaries
Wholesaling intermediaries are firms that handle the flow of products from the manufacturer to retailer or business user
Independent
Manufacturer owned

10. Independent Intermediaries
Merchant wholesalers
Full-service
Limited-service
Cash-and-carry wholesalers
Truck jobbers
Drop shippers
Mail-order wholesalers
Rack jobbers
Merchandise Agents or Brokers
Manufacturers’ agents
Selling agents
Commission merchants
Merchandise brokers

11. Manufacturer-Owned Intermediaries
Sales branches
Sales offices
Manufacturers’ showrooms

12. Figure 15.4: Reducing Transactions

13. Types of Distribution Channels
Consumer channels
Direct
Manufacturer-retailer-consumer
Manufacturer-wholesaler-retailer-consumer
Business-to-business channels
Manufacturer-industrial distributor-business customer

14. Major Types of Distribution Channels

15. Consumer Channels

16. B2B Channels

17. Dual Distribution Systems
Multiple channel usage
Example:
pharmaceutical industry sells to hospitals, clinics, and organizational customers directly and to consumers indirectly through drug retailers

18. Planning a Channel Strategy
Develop distribution objectives
Evaluate internal and external influences
Choose a distribution strategy
Conventional
Vertical
Administered, corporate, contractual–
Horizontal
Develop distribution tactics

19. Vertical Marketing Systems
Administered – channel members remain independent but voluntarily work together
Corporate – single firm owns manufacturing, wholesaling, and retailing operations
Contractual – cooperation is enforced by contracts that spell out member rights and the terms of cooperation

20. Develop Distribution Tactics
Selecting channel partners
Managing the channel of distribution
Channel leader is the dominant firm that controls the channel
Channel leaders have some form of power relative to other members
economic power
legitimate power
reward or coercive power

21. Logistics: Implementing the Value Chain
Process of designing, managing, and improving the movement of products through the supply chain
purchasing
manufacturing
storage
transport

22. Logistics and Customer Satisfaction
Traditionally, logistics was thought of as physical distribution
order processing, warehousing, materials handling, transportation, and inventory control
objective to deliver product at lowest cost
Now, customers’ goals become the logistics provider’s goals

23. Transportation Mode Considerations
Dependability
Cost
Speed of Delivery
Accessibility
Capability
Traceability

24. Modes of Transportation
Rail
Water
Truck
Air
Pipeline
Internet

25. Issues for Discussion
Do you think marketers should be concerned with the total supply chain concept?
Do intermediaries increase the cost of products? Are consumers better off with intermediaries?
Do you think franchises offer the typical businessperson good opportunities?
Describe characteristics of your school’s channel of distribution. What other channels should your school try?