Making and Delivering Value

Generic Value Chain

Supply Chain Management Software programs help to manage the supply chain

Supply Chain Management The supply chain includes all the firms that engage in activities that are necessary to convert raw materials into a good or service and put it in the hands of the consumer or business customer Supply chain management is the management of flows among the firms in a supply chain to maximize total profitability

Supply Chain

What is a Distribution Channel? Series of firms or individuals that facilitate the movement of a product from the producer to the final customer Direct Indirect

Functions of Distribution Channels Time, place, and ownership utilities Logistics functions Transportation and storage functions Efficiency creation Facilitating functions Repair and maintenance functions Risk-taking Communications and transaction functions

Supermarkets as Channel Members

Creating Efficiencies Breaking bulk - channel members purchase large quantities from manufacturers and sell smaller quantities to many different customers Creating assortments - channel members provide a variety of products in one location

Reducing Transactions

The Internet Even small firms with limited resources can enjoy competitive advantages by making products available to customers around the globe at a very low cost Disintermediation - process by which traditional intermediaries are eliminated as companies question the value added by layers in the distribution channel

Types of Wholesaling Intermediaries Wholesaling intermediaries are firms that handle the flow of products from the manufacturer to retailer or business user Independent Manufacturer owned

Independent Intermediaries Merchant wholesalers Full-service Limited-service Cash-and-carry wholesalers Truck jobbers Drop shippers Mail-order wholesalers Rack jobbers Merchandise Agents or Brokers Manufacturers’ agents Selling agents Commission merchants Merchandise brokers

Rack Jobbers

Wholesalers

Manufacturer-Owned Intermediaries Sales Branches Sales Offices Manufacturers’ Showrooms

Independent Intermediaries

Types of Distribution Channels

Types of Distribution Channels Consumer channels Direct Manufacturer-retailer-consumer Manufacturer-wholesaler-retailer-consumer Business-to-business channels Manufacturer-industrial distributor-business customer

Consumer Channels

B2B Channels

Dual Distribution Systems Multiple channel usage Example: pharmaceutical industry sells to hospitals, clinics, and organizational customers directly and to consumers indirectly through drug retailers

Dual Distribution Systems

Steps in Distribution Planning

Vertical System

Vertical Marketing Systems Administered Corporate Contractual

Contractual VMS Wholesaler-Sponsored Retailer-Cooperative Franchise Organizations

Distribution Intensity Decision Factors: Company, Customers, Channels, Constraints, and Competition Intensive, Exclusive, or Selective Distribution

Exclusive Distribution

Selective Distribution

Selective Distribution

Intensive Distribution

Managing the Channel Selecting channel partners Managing the channel of distribution Channel leader is the dominant firm that controls the channel Channel leaders have some form of power relative to other members Economic Reward Legitimate

Logistics Process of designing, managing, and improving the movement of products through the supply chain purchasing manufacturing storage transport

Logistics and Customer Satisfaction Traditionally, logistics was thought of as physical distribution order processing, warehousing, materials handling, transportation, and inventory control objective to deliver product at lowest cost Now, customers’ goals become the logistics provider’s goals

Logistics Functions Order Processing Materials Warehousing Handling Inventory Control Transportation

Transportation Mode Considerations Dependability Cost Speed of Delivery Accessibility Capability Traceability

Modes of Transportation Water Internet Pipeline Truck Rail Air

Water Transportation Water transportation is best for large, bulky, nonperishable goods