1. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Chapter 13: Marketing Channels and Supply-Chain Management Pride/Ferrell Foundations of Marketing Fourth Edition Prepared by Milton Pressley University of New Orleans

2. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Objectives 1.Describe the foundations of supply-chain management. 2.Explore the role and significance of marketing channels and supply chains. 3.Identify types of marketing channels. 4.Understand factors that influence marketing channel selection. 5.Identify the intensity of market coverage. 6.Examine strategic issues in marketing channels, including leadership, cooperation, and conflict. 7.Examine physical distribution as a part of supply- chain management. 8.Explore legal issues in channel management.

3. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Distribution The decisions and activities that make products available to customers when and where they want to purchase them

4. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Foundations of the Supply Chain Supply Chain - all activities associated with the flow and transformation of product from raw materials through to the end customer Operations Management Logistics Management Supply Management

5. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Supply Chain Components Operations Management –Total set of managerial activities used to transform resource inputs into products Logistics Management –Planning, implementing, and controlling the flow and storage of products and information from the point of origin to consumption Supply Management –The processes that enable the progress of value from raw material to final customer and back

6. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Foundations of the Supply Chain Supply-chain management - a set of approaches used to integrate the functions of operations management, logistics management, supply management, and marketing channel management so that products are produced and distributed in the right quantities, to the right locations, and at the right time

7. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Tasks in Supply-Chain Management

8. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Technology Facilitates Supply-Chain Management Technology-based tools help supply-chain managers improve efficiency and effectiveness.

9. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Role of Marketing Channels in Supply Chains Marketing channel (channel of distribution or distribution channel) - A group of individuals and organizations that direct the flow of products from producers to customers within the supply chain Marketing intermediaries - Middlemen that link producers to other intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products

10. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Marketing Channel Activities Performed by Intermediaries

11. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Marketing Channels Create Utility Time utility - Having products available when the customer wants them Place utility - Making products available in locations where customers wish to purchase them Possession utility - Giving the customer access to the product to use or to store for future use Form utility - Assembling, preparing, or otherwise refining the product to suit individual customer needs

12. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Visit the Apple Web Site by clicking on the @ symbol below. After reviewing the Site, discuss what type of utility this marketing channel is creating. Discussion Question

13. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Efficiency in Exchanges Provided by an Intermediary

14. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Typical Marketing Channels for Consumer Products

15. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Typical Marketing Channels for Business Products Industrial distributor – An independent business organization that takes title to industrial products and carries inventories

16. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Visit the Dell Web Site by clicking on the @ symbol below. After reviewing the Site, discuss which of the channels shown in Figure 13.3 best describes how Dell distributes its business products. Discussion Question

17. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Multiple Marketing Channels and Channel Alliances Dual distribution - The use of two or more marketing channels to distribute the same products to the same target market Strategic channel alliance - An agreement whereby the products of one organization are distributed through the marketing channels of another Using Multiple Marketing Channels Coca-Cola products are available in grocery stores and restaurants around the world.

18. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Factors Affecting Channel Selection

19. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Supply Chain Concerns

20. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. If you were selecting the marketing channel for a new type of nail gun for building contractors, what would be the most important things to consider? Would this change if the nail gun was also going to be sold to consumers? Discussion Question

21. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Figure 13.5 Intensity of Market Coverage

22. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Intensity of Market Coverage Intensive Distribution - Using all available outlets to distribute product Selective Distribution - Using only some available outlets to distribute a product Exclusive Distribution - Using a single outlet in a fairly large geographic area to distribute a product

23. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Intensive Distribution Most brands of bottled water, like Aquafina, are distributed through intensive distribution.

24. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Strategic Issues in Marketing Channels Channel Integration Channel Leadership, Coordination, and Conflict Competitive Priorities Strategic Issues

25. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Leadership Channel Captain - The dominant leader of a marketing channel or a supply chain Channel Power - The ability of one channel member to influence another member’s goal achievement Channel Leadership The producer of Candie’s products provides channel leadership.

26. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Channel Integration Vertical Channel Integration - Combining two or more stages of the marketing channel under one management Vertical marketing systems (VMSs) - A marketing channel managed by a single channel member to achieve efficient, low-cost distribution aimed at satisfying target customer Horizontal Channel Integration - Combining organizations at the same level of operation under one management

27. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Physical Distribution in Supply-Chain Management Physical distribution (logistics) –Activities used to move products from producers to consumers and other end users Outsourcing –The contracting of physical distribution tasks to third parties who do not have managerial authority within the marketing channel Cycle time –The time needed to complete a process

28. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Proportional Cost of Each Physical Distribution Function as a Percentage of Total Distribution Costs Source: From Davis Database, 2005, reprinted by permission of Establish Inc./Herbert W. Davis and Company

29. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Order Processing The receipt and transmission of sales order information - Order entry - Order handling - Order delivery Electronic data interchange (EDI) - A computerized means of integrating order processing with production, inventory, accounting, and transportation

30. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Inventory Management Developing and maintaining adequate assortments of products to meet customers’ needs - Reorder point - Order lead time - Usage rate - Safety stock Inventory Management This handheld inventory management device allows employees to have an instant overview of every item – and its price – in the warehouse at any given time.

31. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Just-In-Time An inventory-management approach in which supplies arrive just when needed for production or resale

32. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Materials Handling Physical handling of tangible goods, supplies, and resources –Unit loading One or more boxes are placed on a pallet or skid; these units then can be loaded efficiently by mechanical means such as forklifts, trucks, or conveyer systems –Containerization The consolidation of many items into a single, large container that is sealed at its point of origin and opened at its destination

33. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Warehousing The design and operation of facilities for storing and moving –Enables firms to compensate for dissimilar production and consumption rates –Helps stabilize prices and the availability of seasonal items

34. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Warehousing Private warehouses - Company-operated facilities for storing and shipping products Public warehouses - Storage space and related physical distribution facilities that can be leased by companies Distribution centers - Large, centralized warehouses that focus on moving rather than storing

35. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Transportation The movement of products from where they are made to intermediaries and end users Transport Modes –Railroads: Heavy, bulky full carloads of freight –Trucks: Flexible schedules, speed, and access –Waterways: Heavy, low-value, nonperishable goods –Airplanes: Perishable goods, high-value, low-bulk –Pipelines: Petroleum products, chemicals

36. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Characteristics and Ratings of Transportation Modes by Selection Criteria

37. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Waterway Transportation Transportation Waterway transportation is used to move heavy, nonperishable products, such as large equipment, grain, motor vehicles, and chemicals.

38. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Coordinating Transportation Intermodal transportation –Two or more transportation modes used in combination Piggyback Fishyback Birdyback Freight forwarders –Organizations that consolidate shipments from several firms into efficient lot sizes Megacarriers –Freight transportation firms that provide several modes of shipment

39. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Legal Issues in Channel Management Dual distribution Restricted sales territories Tying agreements –An agreement in which a supplier furnishes a product to a channel member with the stipulation that the channel member must purchase other products as well Exclusive dealing –A situation in which a manufacturer forbids an intermediary to carry products of competing manufacturers Refusal to deal

40. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. After Reviewing This Chapter You Should: Know how to describe the foundations of supply-chain management. Be able to explore the role and significance of marketing channels and supply chains. Be able to identify types of marketing channels. Understand factors that influence marketing channel selection. Know how to identify the intensity of market coverage. Be able to examine strategic issues in marketing channels, including leadership, cooperation, and conflict. Be able to examine physical distribution as a part of supply-chain management. Know how to explore legal issues in channel management.

41. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Concepts Distribution Supply chain Operations management Logistics management Supply management Supply-chain management Marketing channel Marketing intermediaries Industrial distributor Dual distribution Strategic channel alliance Intensive distribution Selective distribution Exclusive distribution Channel captain Channel power Vertical channel integration Vertical marketing systems Horizontal channel integration Physical distribution Outsourcing Cycle time Order processing Electronic data interchange (EDI) Inventory management Just-in-time (JIT)

42. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Concepts Materials handling Warehousing Private warehouses Public warehouses Distribution centers Transportation Intermodal transportation Freight forwarders Megacarriers Tying agreement Exclusive dealing