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DELIVER VALUE THROUGH

SUPPLY CHAIN MANAGEMENT,


CHANNEL OF DISTRIBUTION,
AND LOGISTIC
Chapter 15
OBJECTIVE 1
Understand The Concept of a Supply Chain
SUPPLY CHAIN
All the activities necessary to turn raw materials into a
good or service and put it in the hands of the consumer
or business customer.

Supply Chain Management


The management of flows among firms in the
supply chain to maximize total profitability
INSOURCING
A practice in which a company contracts with a specialist
firm to handle all or part of its supply chain operations.

Unlike outsourcing, insourcing means that


the client company brings in an external
company to run its essential operations.
CHANNEL OF DISTRIBUTION

The series of Firms or individuals that facilitates the


movement of a product from the producer to the final
customer.
Hewlett Packards Supply
Chain
OBJECTIVE 2
Explain What a Distribution Channel is and What
Functions Distribution Channel Perform
FUNCTIONS OF DISTRIBUTION
CHANNELS
Time, place, and ownership utility
Provide logistics, physical distribution
Increase efficiency by reducing number of transactions
Break bulk
Create assortments
FUNCTIONS OF DISTRIBUTION
CHANNELS
Transport and store goods
Facilitate purchase process
Repair and maintenance services
Provide communication and transaction functions
Channels Reduce Transactions
INTERNET DISTRIBUTION
With the Internet, the need for intermediaries and
much of what we assume about the needs and benefits of
channels will change. Channel intermediaries that
physically handle the product may become obsolete.
DISINTERMEDIATION
(OF THE CHANNEL OF DISTRIBUTION)

The elimination of some layers of the channel of


distribution in order to cut costs and improve the
efficiency of the channel.
KNOWLEDGE MANAGEMENT
a comprehensive approach to
collecting, organizing, storing, and
retrieving a firms information assets.

Companies using the Internet are also developing better


ways to implement knowledge management. The assets
include databases, company documents, and the
practical knowledge of employees whose past experience
may be relevant to solving a new problem.
OBJECTIVE 3
Discuss The Types of Wholesaling Intermediaries
Found in Distribution Channels
WHOLESALING INTERMEDIARIES

Firms that handle the flow of products from the


manufacturer to the retailer or business user. There are
several types of wholesalers.
MERCHANT WHOLESALERS
Independent intermediaries that buy goods from
manufacturers and sell to retailers and other
business-to-business customers. They take title to
goods, they assume risks, and can suffer losses if
products are stolen, get damaged, or dont sell.
Because they own the products, they develop their
own marketing strategies.
MERCHANT WHOLESALERS
Full-service merchant wholesalers
Provide services including delivery, credit, product-
use assistance, repairs, advertising, and other
promotional support.

Limited-service merchant wholesalers


Provide fewer services for their customers. They
take title to no merchandise, but are less likely to
provide delivery, credit, or marketing assistance.
TYPES OF LIMITED-SERVICE
WHOLESALERS

Cash-and-carry Truck jobbers


Drop shippers

Mail-order wholesalers

Rack jobbers
MERCHANDISE AGENTS OR BROKERS

Manufacturers reps
Selling agents

Commission merchants

Merchandise brokers
MANUFACTURER-OWNED
INTERMEDIARIES
Sales branches are manufacturer-owned
facilities that carry inventory and provide sales
and service to customers in a specific geographic
area.
Sales offices are manufacturer-owned facilities
that do not carry inventory but provide selling
functions in a geographic area.
Manufacturers showrooms are manufacturer-
owned or leased facilities in which products are
permanently displayed for customers to visit
OBJECTIVE 4
Describe the Types of Distribution Channels and
How Place Fits in With the Other Three Ps in the
Marketing Mix
TYPES OF DISTRIBUTION CHANNELS

Consumer Channels
B2B Channels

Dual and Hybrid Distribution System


Consumer channels

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall


B2B channels

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall


DISTRIBUTION AND THE
MARKETING MIX
Distribution decisions interact with the marketing
mix in a number of ways:
Place decisions often influence prices that will be
charged to final customers.
Distribution decisions can help develop a
position a product in the market. For example,
selling a fashion item in an elite retailer will
enhance the products image.
The nature of the product in turn influences the
choice of distribution channels, especially
retailers.
SLOTTING ALLOWANCE

A fee paid in exchange for agreeing to place a


manufacturers products on a retailers valuable shelf
space.
OBJECTIVE 5
List The Steps to plan a distribution channel
Strategy
DISTRIBUTION PLANNING

Develop Evaluate Choose

Step 4
Step 1

Step 3
Step 2
Environme Develop
Distribut Distribut Distributio
ntal
ion Influences ion n Tactics
Objective Strategy
s
Channel Strategies
Conventional Vertical Marketing System

PRODUCER PRODUCER

WHOLESALER
WHOLESALER
RETAILER

RETAILER

CONSUMER CONSUMER

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall


Vertical marketing system
ADMINISTERED VMS

CORPORATE VMS

CONTRACTUAL VMS

RETAILER CO-OP

FRANCHISE ORGANIZATION
Distribution Intensity
Few Many

Number of
Outlets

EXCLUSIVE SELECTIVE INTENSIVE

Copyright 2012 Pearson Education, Inc. Publishing as Prentice Hall


CHANNEL LEADER / CAPTAIN
The channel leader, sometimes called a channel
captain, is the dominant firm that controls the
channel. The captain has power relative to other
channel members. The power comes from a variety of
sources:
Economic power when it has the ability to control

resources.
Legitimate power if it has legal authority to call

the shots.
Reward or coercive power if it engages in

exclusive distribution and has the ability to give


profitable products and to take them away from the
channel intermediaries.
OBJECTIVE 6
Explain Logistics and How it Fits into the Supply
Chain Concept
LOGISTICS
Process of designing, managing, and improving the
movement of products through the supply chain

PURCHASING
MANUFACTURING
STORAGE
TRANSPORTATION
LOGISTICS FUNCTIONS
ORDER PROCESSING
WAREHOUSING
MATERIALS HANDLING
TRANSPORTATION
INVENTORY CONTROL
TRANSPORTATION ATTRIBUTES
DEPENDABILITY

COST

DELIVERY TIME

VARIETY OF PRODUCTS
TRACEABILITY
MODES OF TRANSPORTATION
AND USAGE
Railroads: heavy, bulky items over long
distances
Water: large, bulky goods (especially
internationally)
Trucks: consumer goods in short haul; allow
flexibility in locations
Air: high value-items; fastest and most expensive
mode
Pipelines: petroleum/chemical products
Internet: services such as banking, news, and
entertainment
INVENTORY CONTROL
Firms store goods for many reasons, such as
enabling production to meet seasonal demand
and creating economies in ordering.
Some companies are phasing in a sophisticated
technology known as radio-frequency
identification (RFID), which lets them tag
products with tiny chips containing information
about the items content, origin, and destination.

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