Supply Chain Logistics Management Chapter 4 MarketDistribution Strategy

Supply Chain Logistics Management Chapter 4: Market-Distribution Strategy Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Marketing Functions Performed by Channel Arrangements Group Function Exchange Selling Buying Logistics Transportation Storage Facilitation Financing Standardization Risk Market Information Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Principle of Minimum Transactions No Intermediaries Manufacturer Retailer Manufacturer Retailer Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Principle of Minimum Transactions One Intermediary Manufacturer Wholesaler Retailer Retailer Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Logistical And Marketing Separation Logistical Channel (2) (4) Marketing Channel (1) Factory warehouse General sales office (1) (3) Regional warehouse Direct sales office (2) (5) Public warehouse Distributor (3) (6) Local delivery Retailer (4) Company truck Common carrier (7) Consumer (5) Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Generic Channels Of Distribution Manufacturers Farms and Raw Materials Wholesalers Retailers Consumers, Government, and Industrial Users Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Typical Channel Structure Manufacturer Agents/ Brokers Wholesaler/ Distributor Retailer/ Dealer Consumer/ Enduser Direct Indirect Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Three Dimensions of Channel Structure • Number of levels present in the channel – Channel length – “Direct Vs indirect” • Number of intermediaries at each level – intensive – exclusive – selective • Types of intermediaries at each level – agents/merchants – specialized/general – wholesalers/retailers Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Channel Mapping A channel map is a picture of current channels used to reach all enduser segments. Completing a channel map requires: 1. identification of all enduser segments served. 2. isolating the paths used to reach segment. 3. specifying the functions/processes performed in each path. 4. specifying how the functions/processes are performed by the firm and external organizations. 5. specifying the economics at each stage in each path (volumes, revenues, margins, discounts, costs) Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Channel Map: Food Processor Manufacturer Brokers/agents Natl. . . Accts. Sales Company sales force Military distributors Foodservice Distributors Full-service wholesalers Cash & Carry wholesalers Military Installations Retail chains and stores Hospitals Restaurants Schools Consumers Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Lessons Learned • Not all tasks need to be performed by a given channel • A given channel doesn’t necessarily best serve all the needs of a given segment. • Tasks to be performed drive appropriate structure, not the other way around. Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Channel Map - Food Processor Manufacturer Brokers/Agents National Account Sales Company Sales Force Military Distributors Military Installations Foodservice Distributors Full-service Wholesalers Cash & Carry Wholesalers Super markets, mass merchants, etc. Hospitals Restaurants Schools Consumers Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Matrix Approach Demand Generation Tasks Sources Lead Generation Qualifying Sales Direct Sales Presales Closing Post-Sales Service Large Lot-Size Telemarketing All Customers Direct Mail Distributors All Customers Small Lot-Size Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Classification of Channel Relationships Based On Acknowledged Dependency Transactional Structure Relational Voluntary Arrangements Single Conventional Transaction Administered Partnerships and Alliances Contractual Joint Venture Dependency Increased Formalization, information-sharing and connectivity Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Empowered Consumers Look At Manufacturers as Retailers “When in the purchase process are you likely to visit a manufacturer's web site? ” When not buying their products When researching a product After deciding what to buy and where to buy it To make a purchase After deciding what to buy, but not where to buy it After buying, to find out about repair and service options After buying, for help installing and configuring a product After buying, to register a warranty Awareness Consideration Preference Purchase 45% 75% 16% 27% 42% 25% Post-sale 31% 40% Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

Empowered Consumers Look At Manufacturers as Retailers “What kind of information have you looked for on the manufacturer’s site within the last 6 months? ” New product developments 37% Product information 79% Warranty and guarantee information 35% Product prices 79% Installation and configuration info. 31% Where to buy specific products General company information 31% 49% How to connect with people Customer support 44% with similar interests 4% Accessory information about Based on surveys from 8, 842 online consumers. Data from Forrester’s Technographics Online Retail& Media 2000 a product I already own 42% Field study (Forrester Research, Inc. , Report: Channel Conflict Crumbles, March 2000, p. 2) Supply Chain Logistics Management, First Edition , Bowersox, Closs, and Cooper Copyright© 2002 by The Mc. Graw-Hill Companies, Inc. All rights reserved.