Marketing Channels & SCM

Learning Objectives
1. Explain what a marketing channel is and why intermediaries are needed.

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2. Define the types of channel intermediaries and describe their functions and activities.

Learning Objectives (continued)

3. Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements. 4. Define supply chain management and discuss its benefits.

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chapter

5. Discuss the issues that influence channel strategy.

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Learning Objectives (continued)

6. Explain channel leadership, conflict, and partnering.

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7. Describe the logistical components of the supply chain. 8. Discuss the concept of balancing logistics service and cost.

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Learning Objectives (continued)

9. Discuss new technology and emerging trends in supply chain management.

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10. Discuss channels and distribution decisions in global markets. 11. Identify the special problems and opportunities associated with distribution in service organizations.
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chapter

Learning Objective

Explain what a marketing channel is and why intermediaries are needed.

Marketing Channels
Marketing Channel

A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer.

Supply Chain

The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics function.

1 Marketing Channel Functions

Specialization and Division of Labor

Channels Fulfill Three Important Functions

Overcoming Discrepancies

Providing Contact Efficiency

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Specialization and Division of Labor

Provides economies of scale
Aids producers who lack resources to market directly Builds good relationships with customers

Overcoming Discrepancies
Discrepancy of Quantity Discrepancy of Assortment

The difference between the amount of product produced and the amount an end user wants to buy. The lack of all the items a customer needs to receive full satisfaction from a product or products.

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Overcoming Discrepancies
Temporal Discrepancy
A situation that occurs when a product is produced but a customer is not ready to buy it. The difference between the location of a producer and the location of widely scattered markets.

Spatial Discrepancy

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Contact Efficiency
Zenith Sony RCA Toshiba

Zenith

Sony

RCA

Toshiba

Circuit City

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Learning Objective
Define the types of channel intermediaries and describe their functions and activities.

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Channel Intermediaries
Retailer
A channel intermediary that sells mainly to customers. An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Wholesaling intermediaries who facilitate the sale of a product by representing channel member.

Merchant Wholesaler Agents and Brokers

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Channel Intermediaries
Retailers Merchant Wholesalers Agents and Brokers Take Title to Goods

Take Title to Goods

Do NOT Take Title to Goods

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Channel Functions 2 Performed by Intermediaries

Contacting/Promotion

Transactional Functions

Negotiating Risk Taking

Physically distributing

Logistical Functions

Storing Sorting

Facilitating Function

Researching Financing
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Logistics

The process of strategically managing the efficient flow and storage of raw materials, inprocess inventory, and finished goods from point of origin to point of consumption.

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Learning Objective
Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements.

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Direct Channel

A distribution channel in which producers sell directly to consumers.

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Channels for Consumer Products 3

Direct Channel Producer
Retailer Channel Producer Wholesaler Agent/Broker Channel Channel Producer Producer
Agents or Brokers
Wholesalers Retailers Consumers Consumers Retailers Consumers Wholesalers Retailers

Consumers
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Channels for Business-to-Business3 Products

Direct Channel

Producer

Industrial Agent/Broker Agent/Broker Direct Distributor Channel Channel Industrial Channel Producer Producer Producer Producer

Agents or Brokers Industrial Distributor Industrial User Industrial User Industrial User

Agents or Brokers Industrial Distributor Industrial Government User Buyer 21

Alternative Channel Arrangements3

Multiple Channels

Different Channels May be Used

Nontraditional Channels Adaptive Channels

Strategic Channel Alliances

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Learning Objective
Define supply chain management and discuss its benefits.

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Supply Chain Management

A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption.

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Supply Chain Management

Focus on Innovative Solutions
Competitive with focus on Customer Satisfaction

Results of Supply Chain Management

Synchronized Flow Customer Value

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Role of Supply Chain Management4

Communicator of customer demand from point of sale to supplier

Role of Supply Chain Management

Physical flow process that engineers the movement of goods

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Supply Chain Management Activities

Determine channel strategy and level of distribution intensity Manage relationships in the supply chain

Manage the logistical components of the supply chain

Balance the costs of the supply chain with the service level demanded by customer
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Benefits of Supply Chain Management

Reduced Costs

Improved Service Common Benefits of Supply Chain Management

Enhanced Revenues

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Learning Objective
Discuss the issues that influence channel strategy.

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Channel Strategy Decisions

Issues that Influence Channel Strategy
Factors Affecting Channel Choice Market Factors Product Factors Producer Factors Levels of Distribution Intensity Intensive Distribution Selective Distribution Exclusive Distribution

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Market Factors
Customer Profiles Consumer or Industrial Customer Size of Market

Market Factors That Affect Channel Choices

Geographic Location
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Product Factors
Product Complexity

Product Price

Product Factors That Affect Channel Choices

Product Life Cycle

Product Delicacy

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Producer Factors
Producer Resources

Number of Product Lines Producer Factors That Affect Channel Choices

Desire for Channel Control

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Levels of Distribution Intensity 5

Intensity Level Intensive Objective
Achieve mass market selling. Convenience goods. Work with selected intermediaries. Shopping and some specialty goods. Work with single intermediary. Specialty goods and industrial equipment.

Number of Intermediaries
Many

Selective

Several

Exclusive

One

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Learning Objective

Explain channel leadership, conflict, and partnering.

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Managing Channel Relationships 6

Channel Power Channel Control

Social Dimensions of Channels

Channel Leadership Channel Conflict Channel Partnering

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Channel Power, Control, and Leadership

Channel Power Channel Control Channel Leader
A channel members capacity to control or influence the behavior of other channel members A situation that occurs when one marketing channel member intentionally affects another members behavior.

A member of a marketing channel that exercises authority/power over the activities of other members.
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Channel Conflict
A clash of goals and methods between distribution channel members.
Horizontal Conflict
Occurs among channel members on the same level Occurs among channel members at different levels

Vertical Conflict

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Channel Partnering

The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage.

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Transaction- vs. Partnership-Based Firms

Transaction-Based
Short-term relationships Multiple suppliers Adversarial relationships Price dominates Minimal supplier investment Minimal information sharing Firms are independent

Partnership-Based
Long-term relationships Few suppliers Cooperative partnerships Value-added services dominate High supplier/buyer investment Extensive information sharing Firms are interdependent

Minimal functional area interaction

Extensive functional area interaction

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Learning Objective

Describe the logistical components of the supply chain.

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Integrated Logistical 7 Components of the Supply Chain

Sourcing & Procurement Logistics Information System Production Scheduling Order Processing & Customer Service Inventory Control Warehouse & Materials Handling Transportation
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Supply Chain Team

Sourcing and Procurement

Plan Purchasing Strategies

Role of Purchasing Departments

Develop Specifications Select Suppliers

Negotiate Price Negotiate Service Levels
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Production Scheduling

Traditional Focus Customer Focus

Push/Pull Strategy Start of Production Manufacturing

Push Inventory-Based

Pull
Customer-Order Based

Mass Production Mass Customization

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Just-in-Time Manufacturing

A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line.

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Benefits of JIT
Reduces raw material inventories
Shortens lead times Creates better supplier relationships Reduces production and storeroom costs Reduces paperwork

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Electronic Data Interchange

Information technology that replaces paper documents that accompany business transactions.

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Inventory Control System

A method of developing and maintaining an adequate assortment of materials or products to meet a manufacturers or a customers demand.

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Warehouse and Materials-Handling

Receive goods into warehouse Identify, sort and label goods Dispatch the goods to temporary storage

Functions of Materials Handling

Recall, select, or pick the goods for shipment

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Transportation
Cost

Transit Time
Reliability

Criteria for Transportation Mode Choice

Capability Accessibility Traceability

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Criteria for Ranking Modes of Transportation

Highest
Relative Cost Transit Time Reliability
Air Water Pipe Water Truck Air

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Lowest

Truck
Rail Truck Rail Rail Truck

Rail
Pipe Rail Truck Air Rail

Pipe
Truck Air Air Water Water

Water
Air Water Pipe Pipe Pipe
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Capability
Accessibility Traceability

Learning Objective

Discuss the concept of balancing logistics service and cost.

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Logistics Service

Interrelated activities performed by a member of the supply chain to ensure that the right product is in the right place at the right time.

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Logistical Competencies
Devise logistics service strategies as a means of competitive differentiation
Integrate members of supply chain to achieve operating excellence

Respond quickly to changing logistical requirements Constantly monitor all aspects of the supply chain
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Learning Objective

Discuss new technology and emerging trends in supply chain management.

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Trends in Supply Chain Management

Trends Affecting the Logistics Industry
Advanced Computer Technology
Outsourcing of Logistics Functions Electronic Distribution

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Learning Objective

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Discuss channels and distribution decisions in global markets.

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Channels and Distribution 10 Decisions for Global Markets

Channel structure differs

Global Channel Development

Channel types differ

Gray marketing channels Awareness of trade legalities

Global Supply Chain Management

Transportation Infrastructure
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Learning Objective

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Identify the special problems and opportunities associated with distribution in service organizations.

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Channels and Distribution Decisions for Services

Minimizing wait times

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Managing service capacity

Areas of Focus for Service Distribution

Improving delivery through new channels

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