1 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 and Supply Chain Management Marketing Channels 11 Canadian Adaptation prepared by Don Hill, Langara College

2 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 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

3 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objectives (continued) 3. Describe the channel structures for consumer and business products and discuss alternative channel arrangements 4.Define supply chain management and discuss its benefits 5. Discuss the issues that influence channel strategy

4 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objectives (continued) 6.Explain channel leadership, conflict, and partnering 7.Describe the logistical components of the supply chain 8.Discuss new technology and emerging trends in supply chain management

5 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objectives (continued) 9.Discuss channels and distribution decisions in global markets 10.Identify the special problems and opportunities associated with distribution in service organizations

6 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Explain what a marketing channel is and why intermediaries are needed On Line

7 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Marketing Channels Marketing Channel Marketing Channel Supply Chain Supply Chain A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer. The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics function. 1

8 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Marketing Channel Functions Specialization and division of labor Overcoming discrepancies Providing contact efficiency 1

9 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Specialization and Division of Labor Provides efficiency and cost savings Attains economies of scale Aids producers who lack resources to market directly Builds good relationships with customers 1

10 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Overcoming Discrepancies Discrepancy of Quantity Discrepancy of Quantity Discrepancy of Assortment Discrepancy of Assortment The difference between the amount of product produced and the amount an end user wants to buy. 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. The lack of all the items a customer needs to receive full satisfaction from a product or products. 1

11 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Overcoming Discrepancies Temporal Discrepancy Temporal Discrepancy Spatial Discrepancy Spatial Discrepancy A situation that occurs when a product is produced but a customer is not ready to buy it. 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. The difference between the location of a producer and the location of widely scattered markets. 1

12 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Contact Efficiency 1

13 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Define the types of channel intermediaries and describe their functions and activities 2 2 2

14 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channel Intermediaries Retailer Merchant Wholesaler Merchant Wholesaler Agents and Brokers Agents and Brokers A channel intermediary that sells mainly to customers. 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. 2

15 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channel Intermediaries Retailers Merchant Wholesalers Merchant Wholesalers Agents and Brokers Agents and Brokers Take Title to Goods Do NOT Take Title to Goods 2

16 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Factors Suggesting Type of Wholesaling Intermediary to Use 2 Product characteristics Buyer considerations Market characteristics

17 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Factors Suggesting Type of Wholesaling Intermediary to Use 2 FactorMerchant Wholesalers Agents/Brokers Nature of productStandardNonstandard, custom Technicality of productComplexSimple Product’s gross marginHighLow Frequency of orderingFrequentInfrequent Time between order and receipt of shipment Shorter lead timeLonger lead time Number of customersManyFew Concentration of customersDispersedConcentrated

18 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channel Functions Performed by Intermediaries Contacting/Promotion Negotiating Risk Taking Researching Financing Physically distributing Storing Sorting Facilitating Functions Transactional Functions Logistical Functions Logistical Functions 2

19 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11Logistics 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. 2

20 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Describe the channel structures for consumer and business products and discuss alternative channel arrangements 3 3 3

21 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Direct Channel A distribution channel in which producers sell directly to consumers. 3

22 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channels for Consumer Products Producer Consumers Retailers Wholesalers Agents or BrokersWholesalerChannelRetailerChannelDirectChannelAgent/BrokerChannel 3

23 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channels for Business Products Producer Industrial User DirectChannel Producer Govt. BuyerDirectChannel Producer Industrial User Industrial Distributor Agents or Brokers Agents or BrokersAgent/BrokerChannel Industrial Distributor Agent/Broker Industrial Channel 3

24 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Business-to-Business Exchanges on the Internet On Line 3 Linking buyers and sellers Dropping the middleman from the supply chain Creating “private exchanges” to automate the supply chain

25 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Alternative Channel Arrangements Multiple channels Strategic channel alliances Nontraditional channels 3

26 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Define supply chain management and discuss its benefits 4 4 4

27 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 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, resulting in enhanced customer and economic value. 4

28 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Supply Chain Process 4

29 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Role of Supply Chain Management Physical flow process that engineers the movement of goods Physical flow process that engineers the movement of goods Communicator of customer demand from point of sale to supplier 4

30 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Benefits of Supply Chain Management Greater supply chain flexibility Improved customer service Higher revenues Reduced costs 4 On Line

31 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Discuss the issues that influence channel strategy 5 5 5

32 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channel Strategy Decisions Producer Factors Product Factors Market Factors FactorsAffectingChannelChoiceFactorsAffectingChannelChoice Exclusive Distribution Selective Distribution Intensive Distribution Level of Distribution Intensity 5

33 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Market Factors Market Factors That Affect Channel Choices Market Factors That Affect Channel Choices Customer profiles Consumer or Industrial customer Consumer or Industrial customer Size of market Geographic location 5

34 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Product Factors 5 Product Factors That Affect Channel Choices Product Factors That Affect Channel Choices Product Complexity Product Standardization Product Life Cycle Product Delicacy Product Price

35 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Producer Factors Producer Factors That Affect Channel Choices Producer Factors That Affect Channel Choices Producer Resources Number of Product Lines Desire for Channel Control 5

36 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Levels of Distribution Intensity Intensive Selective Exclusive A form of distribution aimed at having a product available in every outlet A form of distribution achieved by screening dealers to eliminate all but a few in any single area A form of distribution achieved by screening dealers to eliminate all but a few in any single area A form of distribution that established one or a few dealers within a given area. On Line 5

37 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Levels of Distribution Intensity 5

38 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Explain channel leadership, conflict, and partnering 6 6 6

39 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Social Dimensions of Channels Channel partnering Channel conflict Channel leadership Channel control Channel power 6

40 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channel Power, Control, and Leadership Channel Power Channel Power Channel Control Channel Control Channel Leader A channel member’s capacity to control or influence the behaviour of other channel members A situation that occurs when one marketing channel member intentionally affects another member’s behaviour. A member of a marketing channel that exercises authority/power over the activities of other members. A member of a marketing channel that exercises authority/power over the activities of other members. 6

41 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 6 Channel Power, Control, and Leadership

42 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channel Conflict A clash of goals and methods between distribution channel members. 6  Horizontal conflict occurs on the same level  Vertical conflict occurs at different levels

43 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channel Partnering The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage. 6

44 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Describe the logistical components of the supply chain 7 7 7

45 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Integrated Logistical Components of the Supply Chain 7

46 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Role of Purchasing Departments Negotiate service levels Negotiate price Select suppliers Develop specifications Plan purchasing strategies 7

47 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Production Scheduling Push / Pull Strategy Strategy Traditional Focus Push Start of Production ManufacturingManufacturing Inventory-Based Mass Production Customer Focus Pull Customer-Order Based Mass Customization 7

48 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Just-in-Time Manufacturing JIT A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line. 7

49 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Benefits of JIT Reduces raw material inventories Shortens lead times Creates better supplier relationships Reduces production and storeroom costs Reduces paperwork 7

50 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 JIT Requirements Receive high-quality parts Meet supplier delivery commitments Have a crisis management plan 7

51 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Electronic Data Interchange On Line Information technology that replaces paper documents that accompany business transactions with electronic transmission of the information. 7

52 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 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. 7

53 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 MRP and DRP Materials Requirement Planning Materials Requirement Planning Distribution Resource Planning Distribution Resource Planning An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer. An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer. 7

54 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Materials Handling Functions Receive goods into warehouse Dispatch the goods to temporary storage Recall, select, or pick the goods for shipment Identify, sort, and label goods 7

55 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Transportation Mode Choice Cost Transit Time Reliability Capability Accessibility Traceability 7

56 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Criteria for Ranking Modes of Transportation Relative Cost Transit Time Reliability Capability Accessibility Traceability HighestLowest Air WaterPipeRailTruck WaterRailPipeTruckAir PipeTruckRailAirWater Truck RailTruckAirPipe RailAirWaterPipe AirTruckRailWaterPipe 7

57 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Discuss new technology and emerging trends in supply chain management 8 8 8

58 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Trends in Supply Chain Management 8

59 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Discuss channels and distribution decisions in global markets 9 9 9

60 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Channels and Distribution Decisions for Global Markets Global Channel Development Global Channel Development Channel structure and type differ Grey marketing channels On Line 9 Global Supply Chain Management Awareness of trade legalities Transportation Issues

61 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Learning Objective Identify the special problems and opportunities associated with distribution in service organizations 10

62 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 11 Focus Areas for Service Distribution Minimizing wait times Managing service capacity Improving service delivery 10