Physlcul dlsLrlbuLlon und dlsLrlbuLlon chunnels

0strbuton
Channe1s
seL of lnLerdeendenL orgunlzuLlons
(lnLermedlurles) lnvolved ln Lhe rocess of
muklng u roducL or servlce uvulluble for use or
consumLlon.
Chunnel declslons
uffecL oLher murkeLlng declslons
lnvolve long-Lerm commlLmenLs
o1e o1 1ntermedares
reuLer efflclency ln muklng goods
uvulluble Lo LurgeL murkeLs.
lnLermedlurles rovlde
ConLucLs
Lxerlence
SeclullzuLlon
Scule of oeruLlon
MuLch suly und demund.
Channe1 Iunctons
nformation
Promotion
Contact
Matching
Negotiation
Physical Distribution
Financing
Risk taking
PhysicaI Distribution PhysicaI Distribution - - Nature and Importance Nature and Importance
- PhysicaI distribution: Moving tangible products
through distribution channels
- PhysicaI distribution or Iogistics) consists of all
activities involved in moving the right amount of the
right products to the right place at the right time
- n the past years, the surge of e-commerce has
underscored the importance of physical distribution
the challenge relates to fulfillment, which entails
having the merchandise that is ordered by a
customer in stock and then packing and shipping
it in an efficient, timely manner
% ROL OF MARK%ING CANNLS
IN MARK%ING S%RA%GY
Marketing channels are key because they are the means oI
making goods and services available to ultimate users.
Four Iunctions oI marketing channels:
Channels Iacilitate the exchange process by reducing the
number oI marketplace contacts necessary to make a sale.
Distributors adjust Ior discrepancies in the market`s
assortment oI goods and services via sorting, channeling
products to meet the buyer`s and producer`s needs.
Channel members tend to standardize payment terms, delivery
schedules, prices, purchase lots, and other conditions.
Channels Iacilitate searches by both buyers and sellers and
bring them together to complete the exchange process.
%YPS OF MARK%ING CANNLS
Most channel options involve at least one marketing
intermediary, an organization that operates between producers
and consumers or business users.
A retailer owned and operated by someone other than the
manuIacturer oI the products it sells.
A wholesaler who takes title to the goods it handles and then
distributes these goods to retailers, other distributors, or
sometimes end consumers.
Service Iirms market primarily through short channels
because they sell intangible products and need to maintain
personal relationships within their channels.
DIRECT SELLING
Direct channelcarries goods directly Irom a producer to the
business purchaser or ultimate user.
Direct sellinga marketing strategy in which a producer
establishes direct sales contact with its product`s Iinal users.
Internet and direct mail are also potentially important tools Ior
direct selling.
CHANNELS USING MARKETING
INTERMEDIARIES
For some products, using intermediaries may be more
eIIicient, less expensive, and less time-consuming.
DUAL DISTRIBUTION
Movement oI products through more than one channel to
reach the Iirm`s target market.
Used to maximize the Iirm`s coverage in the marketplace or
to increase the cost-eIIectiveness oI the Iirm`s marketing
eIIort.
REVERSE CHANNELS
Channels designed to return goods to their producers.
Growing importance because oI rising prices Ior raw
materials, increasing availability oI recycling Iacilities, and
passage oI additional antipollution and conservation laws.
Also used Ior recalls and repairs.
CANNL S%RA%GY DCISIONS
SELECTION OF A MARKETING CHANNEL
Multiple Iactors aIIect selection oI a marketing
channel.
Market Factors
Product Factors
Organizational Factors
Competitive Factors
DETERMINING DISTRIBUTION INTENSITY
Intensive distribution Distribution oI a product through all
available channels.
Selective distribution Distribution oI a product through a limited
number oI channels.
Exclusive distribution Distribution oI a product through a single
wholesaler or retailer in a speciIic geographic region.
Restrictions are illegal iI they reduce competition or create a
monopoly.
WHO SHOULD PERFORM CHANNEL FUNCTIONS?
Intermediary must provide better service at lower costs than
manuIacturers or retailers can provide Ior themselves.
Consolidation oI channel Iunctions can represent a strategic
opportunity Ior a company.
CANNL MANAGMN% AND LADRSIP
Marketers have relationships with intermediaries in distribution channels.
,nnel c,5t,in Dominant and controlling member oI a marketing channel.
CHANNEL CONFLICT
Horizontal conIlictdisagreements among channel members at the same level,
such as two competing discount stores.
Vertical conIlict occurs among members at diIIerent levels oI the channel.
The gray marketgoods produced Ior overseas markets that re-enter the U.S.
market and compete against domestic versions.
ACHIEVING CHANNEL COOPERATION
Best achieved when all members oI channel see themselves as equal components;
channel captain should provide this leadership.
'R%ICAL MARK%ING SYS%MS
'ertic,l m,rketing system ('S) Planned channel system designed to
improve distribution eIIiciency and cost-eIIectiveness by integrating various
Iunctions throughout the distribution channel.
CORPORATE AND ADMINISTERED SYSTEMS
Corporate marketing systemsingle owner runs organizations at each
stage oI the marketing channel.
Administered marketing systemdominant channel member exercises
power to achieve channel coordination.
CONTRACTUAL SYSTEMS
Contractual marketing systemcoordinates distribution through Iormal
agreements among channel members.
Include wholesaler-sponsored voluntary chains, retail cooperatives, and
Iranchises.
%asks in PhysicaI Distribution Management %asks in PhysicaI Distribution Management
- PhysicaI distribution refers to the actual physical flow of
products
- n contrast, physicaI distribution management is the
development and operation of processes resulting in the
effective and efficient physical flow of products
- Effective physicaI distribution management requires
careful attention to five interrelated activities:
1. Order processing
2. nventory control
3. nventory location and warehousing
4. Materials handling
5. Transportation
%asks in PhysicaI Distribution Management %asks in PhysicaI Distribution Management
1. Order Processing
- The starting point in a physical distribution system is order
processing, which is a set of procedures for receiving,
handIing, and fiIIing orders promptIy and accurateIy
- Electronic data interchange ED):
- Between customer and supplier orders, invoices, and
other business functions are transmitted by computer
- Originally, ED required a direct computer link between
supplier and customer, now it is being conducted via the
nternet
- ED can trim the cost of order processing significantly,
which in turn may reduce purchase prices
%asks in PhysicaI Distribution Management %asks in PhysicaI Distribution Management
2. Inventory ControI
- The goal of inventory control is to satisfy the order-
fuIfiIIment expectations of customers whiIe minimizing
both the investment and fIuctuations in inventories
- Just-in-%ime:
- JT combines inventory control, purchasing, and
production scheduling
- Applying JT, a firm buys in smaII quantities that arrive
ust in time for production and then it produces in
quantities ust in time for saIe
%asks in PhysicaI Distribution Management %asks in PhysicaI Distribution Management
2. Inventory ControI (continued)
- Just-in-%ime:
- .
- Benefits of JT are:
- Dramatic cost savings
- Shortened and more flexible and reliable production and
delivery schedules
- Quick responses to quality problems
- Market-Response Systems:
- The central promise is that those who intend to consume a
product shouId activate a process to produce and deIiver
repIacement items
- n this way, a product is puIIed through a channeI on the
basis of demand
%asks in PhysicaI Distribution Management %asks in PhysicaI Distribution Management
3. Inventory Location and Warehousing
- Management must make critical decisions about the
size, location, and transportation of inventories
- These areas are interrelated, often in complex ways
- One key consideration in managing inventories is
warehousing, which embraces a range of
functions, such as assembIing, dividing, and
storing products and preparing them for
reshipping
%asks in PhysicaI Distribution Management %asks in PhysicaI Distribution Management
4. MateriaIs andIing
- Selecting the proper equipment to physicaIIy
handIe products, including the warehouse building
itself, is the materials handling subsystem of
physical distribution management
- Equipment that is well matched to the task can
minimize losses from breakage, spoilage, and theft
- Efficient equipment can reduce handling costs as
well as time required for handling
%asks in PhysicaI Distribution Management %asks in PhysicaI Distribution Management
5. %ransportation
- Management must decide on both the mode of
transportation and the particuIar carriers
- The leading modes of transportation are raiIroads,
trucks, pipeIines, water vesseIs, and airpIanes
- Using two or more modes of transportation to move
freight is termed intermodaI transportation; this
approach is intended to seize the advantages of
multiple forms of transportation
esigning the Marketing Channel
ecisions involving the development of
new marketing channels either where
none had previously existed or to the
modification of existing channels
Channel Design:
ChanneI Design ChanneI Design
1. A decision made by the marketer
2. The creation or modification of channels
3. The active allocation of distribution tasks in an
attempt to develop an efficient structure
4. The selection of channel members
5. A strategic tool for gaining a differential advantage
istinguishing points of the definition include:
Who ngages in ChanneI Design? Who ngages in ChanneI Design?
Producers,
rarulaclurers, serv|ce
prov|ders, lrarcr|sors
Loo| doWr lre
crarre|
loWard lre rar|el
Loo| up lre
crarre|
lo secure
supp||ers
Loo| oolr up ard
doWr
lre crarre|
F|rrs
wro|esa|ers
Rela||ers
ChanneI Design Paradigm ChanneI Design Paradigm
Recogr|ze lre reed lor
crarre| des|gr dec|s|or
Recogr|ze lre reed lor
crarre| des|gr dec|s|or
Z 3e|ecl
crarre| reroers
Z 3e|ecl
crarre| reroers
5 Eva|uale
re|evarl var|ao|es
5 Eva|uale
re|evarl var|ao|es
Croose lre 'oesl
crarre| slruclure
Croose lre 'oesl
crarre| slruclure
2 3el & coord|rale
d|slr|oul|or oojecl|ves
2 3el & coord|rale
d|slr|oul|or oojecl|ves
3 3pec|ly
d|slr|oul|or las|s
3 3pec|ly
d|slr|oul|or las|s
1 0eve|op a|lerral|ve
crarre| slruclures
1 0eve|op a|lerral|ve
crarre| slruclures
When to Make a ChanneI When to Make a ChanneI
Design Decision Design Decision
0eve|op|rg a reW producl or
producl ||re
A|r|rg ar ex|sl|rg producl al a
reW rar|el
Va||rg a rajor crarge |r sore
olrer corporerl ol lre
rar|el|rg r|x
Eslao||sr|rg a reW l|rr
Adapl|rg lo crarg|rg
|rlerred|ary po||c|es lral ray
|rr|o|l alla|rrerl ol d|slr|oul|or
oojecl|ves
0eve|op|rg a reW producl or
producl ||re
A|r|rg ar ex|sl|rg producl al a
reW rar|el
Va||rg a rajor crarge |r sore
olrer corporerl ol lre
rar|el|rg r|x
Eslao||sr|rg a reW l|rr
Adapl|rg lo crarg|rg
|rlerred|ary po||c|es lral ray
|rr|o|l alla|rrerl ol d|slr|oul|or
oojecl|ves
0ea||rg W|lr crarges |r
ava||ao|||ly ol parl|cu|ar ||rds ol
|rlerred|ar|es
0per|rg up reW geograpr|c
rar|el|rg areas
Fac|rg lre occurrerce ol rajor
erv|rorrerla| crarges
Veel|rg lre cra||erge ol corl||cl
or olrer oerav|ora| proo|ers
Rev|eW|rg ard eva|ual|rg
0ea||rg W|lr crarges |r
ava||ao|||ly ol parl|cu|ar ||rds ol
|rlerred|ar|es
0per|rg up reW geograpr|c
rar|el|rg areas
Fac|rg lre occurrerce ol rajor
erv|rorrerla| crarges
Veel|rg lre cra||erge ol corl||cl
or olrer oerav|ora| proo|ers
Rev|eW|rg ard eva|ual|rg
Distribution Objectives Distribution Objectives
Setting distribution objectives
requires knowledge of which,
if any, existing objectives
& strategies may impinge
on these distribution objectives.
ChanneI Structure Dimensions ChanneI Structure Dimensions
1. Number of
levels in the channel
2. ntensity at the
various levels
3. Types of
intermediaries
at each level
llocation lternatives
Number of LeveIs Number of LeveIs
Range from two to five or more
Number of alternatives is limited to two or three
choices
Limitations result from the following factors:
Particular industry practices
Nature & size of the market
Availability of intermediaries
Intensity at the 'arious LeveIs Intensity at the 'arious LeveIs
ntensive Selective Exclusive
Many Few One
Intensity Dimension
Numbers of Intermediaries (retaiI IeveI)
#elationship between the intensity of distribution
dimension & number of retail intermediaries used in a
given market area
%ypes of Intermediaries %ypes of Intermediaries
Numerous types
Manager's emphasis on types of distribution
tasks performed by these intermediaries
Watch emerging types
Electronic online auction firms eBay)
ndustrial products sold in B2B markets
Chemdex, Converge.com)
'ariabIes Affecting ChanneI Structure 'ariabIes Affecting ChanneI Structure
1. Market Variables
2. Product Variables
3. Company Variables
4. ntermediary Variables
5. Environmental Variables
6. Behavioral Variables
ategories of Variables
Market Geography Location, geographical size,
& distance from producer
Market Size Number of customers in a
market
Market Density Number of buying units
consumers or industrial firms)
per unit of land area
Market Behavior Who buys, & how, when, and
where customers buy
Market 'ariabIes Market 'ariabIes
Product 'ariabIes Product 'ariabIes
Bulk & Weight
Perishability
Unit Value
Degree of Standardization
Technical versus Nontechnical
Newness
Company 'ariabIes Company 'ariabIes
6 6
Size The range of options is
relative to a firm's size
Financial The greater the capital, the
Capacity lower the dependence on
intermediaries
Managerial ntermediaries are necessary
Expertise when managerial experience
is lacking
Objectives Marketing & objectives may
& Strategies limit use of intermediaries
Intermediary 'ariabIes Intermediary 'ariabIes 6 6
Availability Availability of intermediaries
influences channel structure.
Cost Cost is always a consideration in
channel structure.
Services Services that intermediaries
offer are closely related to the
selection of channel members.
nvironmentaI 'ariabIes nvironmentaI 'ariabIes
%he impact of environmental forces is
a common reason for making
channel design decisions.
Economic
Sociocultural
Competitive
Technological Legal
ehavioraI 'ariabIes ehavioraI 'ariabIes
Develop congruent roles for channel members.
Attend to the influence of behavioral problems
that can distort communications.
Be aware of available power bases.