Distribution Channels and Supply

Chain Management

Mamta Mohan
 Distribution Channels &
Value networks
• Push Strategy- sales force and trade
promotions
• Pull Strategy- Advertising
• Hybrid channels- IBM, ICICI
- Channel integration & Customer expectations
- ability to order online, pick up at convenient
retail location, return online order, right to avail
discounts on online & offline purchases
 Customers fall in 4 categories
• Habitual shoppers
• Deal seekers
• Variety loving
• High involvement shopper
 Value network
( VN)

• A system of partnership and alliance to source and

deliver its offering.
• Think of the target market and then think of the
supply chain
• SIVA- Solution , information Value and access.
• E.g. Palm- consists of whole community of suppliers,
assemblers of semiconductors , components , plastic
cases, lcd displays, accessories offline & online
resellers, 275,000 developers who have created 21,000
soft wares for computers and smart phones.
 Channel demand planning
• Can estimate if the company can make
more money upstream or down stream.
• More aware of disturbances any where on
supply chain.
 Role of channels
• Sales channel , Service channel , Delivery
channels.
• Bring in financial resources .e.g. 250
strong dealers help Mauriti udyog manage
its capital better.
• Help break bulk 7 create assortment.
• More effective due to specialization,
contacts, experience, scale of operation.
 Functions of channels
• Physical flow
• Title flow
• Payment flow
• Information Flow
• Promotion flow.
 Channel levels
• 0 level – direct marketing
• 1,2, 3 level
• Reverse flow channels- refilling ,
refurbishing , disposing of products.
 Channel design decisions
Analyzing customer's service output
levels-
• Lot size
• Waiting and delivery time.
• Spatial convenience
• Service backup
 Channel design decisions
- Establishing objectives
Vary with product characteristics ( perishable
products, bulky pdts local taxes)
-identifying major alternatives
( types of available intermediaries,
no of intermediaries ( Exclusive, selective
,intensive)
Terms and conditions
 Channel design decisions
- Companies reward the customer to switch fm high
cost to low cost channel.
• cost estimation, economic criterion
- Selecting channels
- No of yrs in business
- Other lines carried
- Growth & profit record
- Financial strength.
- Cooperativeness
- Service reputation
 Channel design decisions
Evaluating channels
• Sales quota attainment
• Average inventory levels
• Customer delivery time
• Treatment of damaged goods
• Cooperation in promotional schemes.
 Channel Management and Leadership

• Channel Captain:
Captain a dominant and controlling
member of a marketing channel

• Channel Conflict
– Horizontal Conflict
• Most often, horizontal conflict causes sparks between
different types of marketing intermediaries that handle
similar products
• Sometimes results from disagreements among channel
members at the same level
– Vertical Conflict
• Channel members at different levels find many
reasons for disputes
• Example: when retailers develop private brands to
compete with producers’ brands or when
producers establish their own retail outlets or
WWW Sites
– The Gray Market
• Grey Good: product made abroad under license
from a Indian firm and then sold in the Indian
market in competition with that firm’s own domestic
output
• Viewed by producers as undesired competition
 Vertical Marketing Systems
• Vertical marketing system (VMS):
planned channel system designed to
improve distribution efficiency and cost
effectiveness by integrating various
functions throughout the distribution
chain
– Forward integration
– Backward integration
• Administered marketing system:
system VMS
that achieves channel coordination when
a dominant channel member exercises its
power

• Corporate marketing system:

system a VMS in
which a single owner operates at each
stage in its marketing channel
• Contractual marketing system:
system VMS
that coordinates channel activities through
formal agreements among channel
members like:
– Wholesaler-Sponsored Voluntary Chains
– Retail Cooperatives
– Franchises