Supply Chain, Channel, and Category Management Unit 5 Supply Chain, Channel, and Category Management

What is a “supply chain” The sequences and processes of producing and distributing a product or service Involves those inside and outside a firm! (Operations + Suppliers) + Logistics + (Marketing + Intermediaries)

A sample supply chain process from NPD to End Design Order processing Purchasing Materials management Production Inventory management Quality testing Storage or Distribution Return logistics Scrap rework or redesign

Information flow from NPD to End Consumer feedback (or needs analysis) Customer forecasting Supplier relationships and discounts Inbound logistics Scheduling and customer prioritization Stock levels Customer inspection Logistics integration Customer feedback Market feedback

Distribution channels and strategy “Channel”: means the path finished good takes from finished inventory to end consumer “Distribution channel” = “Marketing channel” = “Channels to market” “Channel strategy” means both how it gets there and who is involved

Channels Intermediary type Characteristics Value added Wholesaler (“merchant wholesaler”) Takes title to goods Buys, breaks bulk Market information (demand, preferences, buying behaviour) Promotion Finding buyers and negotiating prices and terms Finance distribution and sales (trade credit) Product assortments Transportation and warehousing Agents & brokers Does not take title to goods Often limited to matching buyers and sellers

Channels Intermediary type Characteristics Value added Retailer Brings together many product lines and suppliers Showcase products Differentiate value Consumer convenience Occasion Product assortments Transportation and warehousing Non-store retailing No physical store Convenience Comparison shopping personal selling door to door or in a home kiosks or vending machines direct mai home shopping Internet

POPCO’s EU channel strategy could be… EU Grocery channel Sales Accounts Tesco Carrefour Metro Regional store managers POPCO Global accounts Toys ‘R Us Walmart End consumer POPCO Independent retail sales agents in EU countries EU country wholesalers EU toy retailers End consumer

Distribution strategy Intensive: sell everywhere Selective: sell in specific places (by product type, occasion, customer segment) Exclusive: sell in only a few places (brand-specific, reputation-specific)

Products Product identification = SKU Product line = similar products differ in minor way Product extension = + to line (flavour, design, occasion) Product format = same product but different delivery format (packaging) Product depth = many products in each line Product range = many lines Product family = lines related by customer experience Product mix = all the different product lines sold by one company (suggesting different lines, families) Product portfolio = same as product mix, but usually refers to brands sold by the company

Managing Product Line/Mix Product Mix …a group of similar products that differ only in relatively minor characteristics. …all the products a firm offers for sale.

Managing Product Line/Mix Ways to improve Change existing product (modification) Delete a product Develop a new product

Coca cola: one brand, many products The company operates a franchised distribution system dating from 1889 where The Coca-Cola Company only produces syrup concentrate which is then sold to various bottlers throughout the world who hold an exclusive territory.

Coca Cola: wide range in beverage

Category management Turnover & profitability of category Role in store for category or sub categories Compete for space, promotion, profile Targets, retail strategies, promotion activities Know buying behavior! Negotiate based on price, advertising support, reputation, sales promotion support of competitive market information for a producer’s sales team and for sales agents.

The rise of packaging

Packaging Functions Protects Product Adds Consumer Convenience Regulatory compliance PROMOTES THE PRODUCT DIFFERENTIATES THE PRODUCT Design Considerations Cost Single/multiple units Product Family packaging: consistency Needs of intermediary Environmental responsibility Regulations

The rise of packaging

Systems that support the supply chain Objective: rely less on human knowledge & experience Order processing and fulfillment Computer Automated Design (CAD) -> computer-aided design Computer-Aided Manufacturing (CAM) -> computer-controlled machine process Computer-Aided Process Planning (CAPP) -> computer-assisted process planning: routing and step by step work instructions, assembly drawings Computer-Integrated Manufacturing (CIM) -> all of the above for production

ERP Systems Enterprise Resource Planning (ERP) -> for every aspect – Finance, Operations, Sales & Marketing Supports the full supply chain, inside the company and outside, integrated Strive for 100% efficiency (optimized) ERP I - tracks all resources (grey) Labor Cash Raw materials Capacity ERP II – enables communication (green)

ERP Examples: SAP, Oractle, SAP, Sage, Microsoft Financial accounting: General ledger, fixed asset, payables, receivables, cash management, financial consolidation Management accounting: Budgeting, costing, cost management, activity based costing Customer relationship management: Sales and marketing, commissions, service, customer contact, call center support Manufacturing: Engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, manufacturing process, manufacturing projects, manufacturing flow, product life cycle management Supply chain management: Supply chain planning, supplier scheduling, order to cash, purchasing, inventory, product configurator, claim processing Project management: Project planning, resource planning, project costing, work break down structure, billing, time and expense, performance units, activity management Human resources: Recruiting, training, payroll, benefits, 401K, diversity management, retirement

Systems and the supply chain Modular approach Still requires human input Training is essential Integration cost is high “Lights out” factory?