1 Unit 2 -- Distribution

2 Unit Objectives b Define channels of distribution. b Identify channel members. b Describe merchant intermediaries. b List and explain distribution intensities b Define physical distribution. b Evaluate available distribution options. b Discuss warehousing and purchasing. b Illustrate purchasing situations. b Explore the steps of the purchasing process.

3 Channel of Distribution b b Path a product takes from producer or manufacturer to final user. b b A new channel of distribution begins when the product changes form or is used by the purchaser. b b Direct Channels b b Indirect Channels

4 Channel Members b b ___________ - products purchased for business use. b b ____________ - products purchased for personal use. b b _____________- channel members that move the product through the channel (middlemen)

5 Merchant Intermediaries b b Wholesalers - Purchase large quantities of goods from manufacturers, store the goods, and resell them to other businesses __________ institutions electronic retail outlets______________ vending servicesmanufacturers ________________other wholesalers commercial users

6 Merchant Intermediaries b b _________ - Participants in the marketing channel who negotiate the sale of products between other channel members b b Do not take title to the products distributed b b Manufacturer’s ________ and _________ - Work independently running their own businesses

7 Distribution Intensity b b _____________ using all suitable outlets for a product complete market coverage b b ____________ limited number of outlets in a given geographic area maintains some control over product movement b b _______________ total right to sell a product within an identified geographic location prestige, image, channel control b b _____________ Manufacturer acts as wholesaler and retailer for its own products

8 Physical Distribution b b The process of transporting, storing, and handling goods to make them available to customers b b Third largest expense for most businesses b b Includes: _________________order processing warehouse site selection_______________ ________________customer service protective packaging______________

9 Trucking b b Advantages _____________ less protective packaging __________________ reduces inventory costs b b Disadvantages ______________________ long distances - costly

10 Trucking b b Common Carriers b b ______________ b b Private Carriers b b Exempt Carriers

11 Railways b b Advantages large quantities - lower costs __________________ b b Disadvantages lack of flexibility

12 Railways b b Piggyback Service b b ___________________ b b Specialized Service b b Package Cars b b _____________________ b b Processing-in-transit

13 Waterways b b Advantages low cost b b Disadvantages _______________ lack of flexibility ___________________

14 Waterways b b Internal Waterways b b ____________________ b b International Waterways

15 Pipelines b b Advantages lower long-term costs _______________ b b Disadvantages ________________ risk of breakage or leaking costs for any damages

16 Air Transportation b b Advantages _____________ reduction of storage & inventory expenses b b Disadvantages __________ delays

17 Other Carriers b U.S. Postal Service b ________________ b Bus Package Carriers b Freight Forwarders

18 Warehousing or Storage b b Holding goods until they are sold b b Reasons for Storing Goods sell to customers ________________ stabilize prices obtain discounts faster delivery

19 Warehousing b b Private Warehouses b b Public Warehouses b b _________________ b b Bonded Warehouses

20 Purchasing b b Determining what to buy & making arrangements with sources regarding final price, delivery, services expected, and method of payment. b b Sometimes called “_________” b b Refers to industrial use consumption _______________ distribution (resale buying)

21 Purchasing Situations b b New Task Purchase b b _________________ b b Straight Rebuy

22 Purchasing Process b b Selection of products b b ______________________ b b Negotiating terms of agreement b b Placing the order b b ______________ b b Evaluation of process

23 Product Selection b b Planning ________________ – –planned sales – –beginning-of-the-month inventory – –planned reductions – –_______________ b b Analyze customer wants and needs b b ____________________________ basic stock list model stock list never -out list

24 Selecting Suppliers b b Production Capabilities b b _____________________ b b Product & Buying Arrangements Consignment buying ____________________________ b b Special Services UPC Codes Peg man merchandising services _________________

25 Negotiating Terms b b _________________ b b Dating terms advance dating _________________ end-of-month dating ______________________ b b Delivery Arrangements FOB destination ______________________ FOB factory freight prepaid _______________________________

26 Placing the Order & Payment b b ___________________ legal contract between the buyer and the supplier that specifies the terms of the agreement b b _________ the bill that is usually sent along with the merchandise - it requests payment - should look very similar to the purchase order

27 Evaluation b ___________ identify “keepers”identify “keepers” b _________________ number of times the average stock has been sold and replaced in a given time periodnumber of times the average stock has been sold and replaced in a given time period b ________________________