Marketing Channels and Supply Chain Management chapter 10

Marketing Channels and Supply Chain Management chapter 10 Prepared by Deborah Baker Texas Christian University © 2003 South-Western 1

Learning Objectives 1. Explain what a marketing channel is and why intermediaries are needed. 2. Define the types of channel intermediaries and describe their functions and activities. chapter 10 Chapter 10 Version 3 e © 2003 South-Western 2

Learning Objectives (continued) chapter 10 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. 5. Discuss the issues that influence channel strategy. Chapter 10 Version 3 e © 2003 South-Western 3

Learning Objectives (continued) 6. Explain channel leadership, conflict, and partnering. chapter 10 7. Describe the logistical components of the supply chain. 8. Discuss the concept of balancing logistics service and cost. Chapter 10 Version 3 e © 2003 South-Western 4

Learning Objectives (continued) 10 10. Discuss channels and distribution decisions in global markets. chapter 9. Discuss new technology and emerging trends in supply chain management. 11. Identify the special problems and opportunities associated with distribution in service organizations. Chapter 10 Version 3 e © 2003 South-Western 5

Learning Objective 1 Explain what a marketing channel is and why intermediaries are needed. Chapter 10 Version 3 e © 2003 South-Western 6

Marketing Channels 1 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. Chapter 10 Version 3 e © 2003 South-Western 7

Marketing Channel Functions 1 Specialization and Division of Labor Channels Fulfill Three Important Functions Overcoming Discrepancies Providing Contact Efficiency Chapter 10 Version 3 e © 2003 South-Western 8

Specialization and Division of Labor 1 u Provides economies of scale u Aids producers who lack resources to market directly u Builds good relationships with customers Chapter 10 Version 3 e © 2003 South-Western 9

Overcoming Discrepancies Discrepancy of Quantity Discrepancy of Assortment Chapter 10 Version 3 e 1 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. © 2003 South-Western 10

1 Overcoming Discrepancies Temporal Discrepancy A situation that occurs when a product is produced but a customer is not ready to buy it. Spatial Discrepancy The difference between the location of a producer and the location of widely scattered markets. Chapter 10 Version 3 e © 2003 South-Western 11

1 Contact Efficiency Zenith Sony RCA Toshiba Circuit City Chapter 10 Version 3 e © 2003 South-Western 12

Learning Objective 2 Define the types of channel intermediaries and describe their functions and activities. Chapter 10 Version 3 e © 2003 South-Western 13

2 Channel Intermediaries Retailer A channel intermediary that sells mainly to customers. Merchant Wholesaler An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Agents and Brokers Wholesaling intermediaries who facilitate the sale of a product by representing channel member. Chapter 10 Version 3 e © 2003 South-Western 14

Channel Intermediaries Retailers 2 Take Title to Goods Merchant Wholesalers Take Title to Goods Agents and Brokers Do NOT Take Title to Goods Chapter 10 Version 3 e © 2003 South-Western 15

Channel Functions Performed by Intermediaries Transactional Functions Logistical Functions Facilitating Function Chapter 10 Version 3 e 2 Contacting/Promotion Negotiating Risk Taking Physically distributing Storing Sorting Researching © 2003 South-Western Financing 16

2 Logistics The process of strategically managing the efficient flow and storage of raw materials, in-process inventory, and finished goods from point of origin to point of consumption. Chapter 10 Version 3 e © 2003 South-Western 17

3 Learning Objective Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements. Chapter 10 Version 3 e © 2003 South-Western 18

3 Direct Channel A distribution channel in which producers sell directly to consumers. Chapter 10 Version 3 e © 2003 South-Western 19

Channels for Consumer Products Direct Channel Producer Retailer Channel Producer 3 Wholesaler Agent/Broker Channel Producer Agents or Brokers Retailers Wholesalers Retailers Consumers Chapter 10 Version 3 e © 2003 South-Western Consumers 20

Channels for Business-to. Business Products Direct Channel Producer 3 Industrial Agent/Broker Direct Distributor Channel Industrial Channel Producer Agents or Brokers Industrial Distributor Industrial User Chapter 10 Version 3 e Agents or Brokers Industrial Distributor Industrial Government Industrial User Buyer © 2003 South-Western 21

Alternative Channel Arrangements Multiple Channels Different Channels May be Used Chapter 10 Version 3 e Nontraditional Channels Adaptive Channels Strategic Channel Alliances © 2003 South-Western 22 3

4 Learning Objective Define supply chain management and discuss its benefits. Chapter 10 Version 3 e © 2003 South-Western 23

4 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. Chapter 10 Version 3 e © 2003 South-Western 24

4 Supply Chain Management Focus on Innovative Solutions Competitive with focus on Customer Satisfaction Results of Supply Chain Management Chapter 10 Version 3 e Synchronized Flow Customer Value © 2003 South-Western 25

Role of Supply Chain Management Communicator of customer demand from point of sale to supplier Physical flow process that engineers the movement of goods Chapter 10 Version 3 e © 2003 South-Western 26 4

Supply Chain Management Activities 4 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 Chapter 10 Version 3 e © 2003 South-Western 27

Benefits of Supply Chain Management 4 Reduced Costs Improved Service Common Benefits of Supply Chain Management Chapter 10 Version 3 e Enhanced Revenues © 2003 South-Western 28

5 Learning Objective Discuss the issues that influence channel strategy. Chapter 10 Version 3 e © 2003 South-Western 29

5 Channel Strategy Decisions Issues that Influence Channel Strategy Factors Affecting Channel Choice Levels of Distribution Intensity Market Factors Intensive Distribution Product Factors Selective Distribution Producer Factors Exclusive Distribution Chapter 10 Version 3 e © 2003 South-Western 30

5 Market Factors Customer Profiles Consumer or Industrial Customer Market Factors That Affect Channel Choices Chapter 10 Version 3 e Size of Market Geographic Location © 2003 South-Western 31

5 Product Factors Product Complexity Product Price Product Factors That Affect Channel Choices Chapter 10 Version 3 e Product Life Cycle Product Delicacy © 2003 South-Western 32

5 Producer Factors Producer Resources Number of Product Lines Producer Factors That Affect Channel Choices Chapter 10 Version 3 e Desire for Channel Control © 2003 South-Western 33

5 Levels of Distribution Intensity Level Objective Number of Intermediaries Intensive Achieve mass market selling. Convenience goods. Many Selective Work with selected intermediaries. Shopping and some specialty goods. Several Exclusive Work with single intermediary. Specialty goods and industrial equipment. One Chapter 10 Version 3 e © 2003 South-Western 34

6 Learning Objective Explain channel leadership, conflict, and partnering. Chapter 10 Version 3 e © 2003 South-Western 35

6 Managing Channel Relationships Channel Power Social Dimensions of Channels Channel Control Channel Leadership Channel Conflict Channel Partnering Chapter 10 Version 3 e © 2003 South-Western 36

Channel Power, Control, and Leadership 6 Channel Power A channel member’s capacity to control or influence the behavior of other channel members Channel Control A situation that occurs when one marketing channel member intentionally affects another member’s behavior. Channel Leader A member of a marketing channel that exercises authority/power over the activities of other members. Chapter 10 Version 3 e © 2003 South-Western 37

6 Channel Conflict A clash of goals and methods between distribution channel members. Horizontal Conflict Occurs among channel members on the same level Vertical Conflict Occurs among channel members at different levels Chapter 10 Version 3 e © 2003 South-Western 38

6 Channel Partnering The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage. Chapter 10 Version 3 e © 2003 South-Western 39

Transaction- vs. Partnership-Based Firms Transaction-Based 6 Partnership-Based Short-term relationships Long-term relationships Multiple suppliers Few suppliers Adversarial relationships Cooperative partnerships Price dominates Value-added services dominate Minimal supplier investment High supplier/buyer investment Minimal information sharing Extensive information sharing Firms are independent Firms are interdependent Minimal functional area interaction Extensive functional area interaction Chapter 10 Version 3 e © 2003 South-Western 40

7 Learning Objective Describe the logistical components of the supply chain. Chapter 10 Version 3 e © 2003 South-Western 41

Integrated Logistical Components of the Supply Chain 7 Supply Chain Team Logistics Information System Sourcing & Procurement Production Scheduling Order Processing & Customer Service Inventory Control Warehouse & Materials Handling Transportation Chapter 10 Version 3 e © 2003 South-Western 42

7 Sourcing and Procurement Plan Purchasing Strategies Develop Specifications Role of Purchasing Departments Select Suppliers Negotiate Price Negotiate Service Levels Chapter 10 Version 3 e © 2003 South-Western 43

7 Production Scheduling Traditional Focus Customer Focus Push/Pull Strategy Push Pull Start of Production Inventory-Based Customer-Order Based Manufacturing Mass Production Mass Customization Chapter 10 Version 3 e © 2003 South-Western 44

7 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. Chapter 10 Version 3 e © 2003 South-Western 45

7 Benefits of JIT u Reduces raw material inventories u Shortens lead times u Creates better supplier relationships u Reduces production and storeroom costs u Reduces paperwork Chapter 10 Version 3 e © 2003 South-Western 46

7 Electronic Data Interchange Information technology that replaces paper documents that accompany business transactions. Chapter 10 Version 3 e © 2003 South-Western 47

7 Inventory Control System A method of developing and maintaining an adequate assortment of materials or products to meet a manufacturer’s or a customer’s demand. Chapter 10 Version 3 e © 2003 South-Western 48

Warehouse and Materials-Handling 7 Receive goods into warehouse Functions of Materials Handling Identify, sort and label goods Dispatch the goods to temporary storage Recall, select, or pick the goods for shipment Chapter 10 Version 3 e © 2003 South-Western 49

7 Transportation Cost Transit Time Reliability Criteria for Transportation Mode Choice Chapter 10 Version 3 e Capability Accessibility Traceability © 2003 South-Western 50

Criteria for Ranking Modes of Transportation 7 Lowest Highest Relative Cost Air Truck Rail Pipe Water Transit Time Water Rail Pipe Truck Air Reliability Pipe Truck Rail Air Water Capability Water Rail Truck Air Pipe Accessibility Truck Rail Air Water Pipe Traceability Air Truck Rail Water Pipe Chapter 10 Version 3 e © 2003 South-Western 51

8 Learning Objective Discuss the concept of balancing logistics service and cost. Chapter 10 Version 3 e © 2003 South-Western 52

8 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. Chapter 10 Version 3 e © 2003 South-Western 53

8 Logistical Competencies u Devise logistics service strategies as a means of competitive differentiation u Integrate members of supply chain to achieve operating excellence u Respond quickly to changing logistical requirements u Constantly monitor all aspects of the supply chain Chapter 10 Version 3 e © 2003 South-Western 54

9 Learning Objective Discuss new technology and emerging trends in supply chain management. Chapter 10 Version 3 e © 2003 South-Western 55

Trends in Supply Chain Management Trends Affecting the Logistics Industry 9 Advanced Computer Technology Outsourcing of Logistics Functions Electronic Distribution Chapter 10 Version 3 e © 2003 South-Western 56

Learning Objective 10 Discuss channels and distribution decisions in global markets. Chapter 10 Version 3 e © 2003 South-Western 57

Channels and Distribution Decisions for Global Markets 10 Channel structure differs Global Channel Development Channel types differ “Gray” marketing channels Awareness of trade legalities Global Supply Chain Management Transportation Infrastructure Chapter 10 Version 3 e © 2003 South-Western 58

Learning Objective 11 Identify the special problems and opportunities associated with distribution in service organizations. Chapter 10 Version 3 e © 2003 South-Western 59

Channels and Distribution Decisions for Services 11 Minimizing wait times Managing service capacity Areas of Focus for Service Distribution Chapter 10 Version 3 e Improving delivery through new channels © 2003 South-Western 60