Chapter 8 Marketing channels and logistics decisions

Lesson 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 Describe the channel structures for consume and business-to-business products and discuss alternative channel arrangements

Lesson objectives (cont.) 4 Discuss the issues that influence channel strategy 5 Explain channel leadership,conflict and partnering 6 Discuss logistics and supply chain management and their evolution into distribution practice 7 Discuss the concept of balancing logistics service and cost

Lesson objectives (cont.) 8 Describe the integrated functions of the supply chain 9 Discuss new technology and emerging trends in logistics 10 Identify the special problems and opportunities associated with distribution in service organisations 11 Discuss channel structure and logistics issues in global markets

Define the term marketing Learning objective 1 Explain what a marketing channel is and why intermediaries are needed Define the term marketing

Marketing channels 1 Marketing channel Supply chain A set of interdependent organisations 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.

Marketing channel functions 1 Marketing channel functions Channels fulfill three important functions: specialisation and division of labour overcoming discrepancies providing contact efficiency.

Specialisation and division of labour 1 Specialisation and division of labour Provides economies of scale Aids producers who lack resources to market directly Builds good relationships with customers

Overcoming discrepancies 1 Overcoming discrepancies Discrepancy of quantity assortment 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.

Overcoming discrepancies 1 Overcoming discrepancies Temporal discrepancy Spatial 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.

Contact efficiency 1 LG Sony Sharp Toshiba LG Sony Sharp Toshiba Harvey Norman

Describe four marketing management philosophies. Learning objective 2 Define the types of channel intermediaries and describe their functions and activities Describe four marketing management philosophies.

Channel intermediaries 2 Channel intermediaries Retailer A channel intermediary that sells mainly to customers. Merchant wholesaler An institution that buys goods from manufacturers, takes title to goods, stores them and resells and ships them. Agents and brokers Wholesaling intermediaries who facilitate the sale of a product by representing a channel member.

Channel intermediaries (cont.) 2 Channel intermediaries (cont.) Retailers Take title to goods Merchant wholesalers Agents and brokers Do not take title to goods

Channel functions performed by intermediaries 2 Channel functions performed by intermediaries Contacting/promotion Transactional functions Negotiating Risk-taking Physically distributing Logistical functions Storing Sorting Facilitating function Researching Financing

2 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.

Describe four marketing management philosophies. Learning objective 3 Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements Describe four marketing management philosophies.

3 Direct channel A distribution channel in which producers sell directly to consumers.

Channels for consumer products 3 Channels for consumer products Direct channel Retailer channel Wholesaler channel Agent/broker channel Producer Producer Producer Producer Agents or brokers Wholesalers Wholesalers Retailers Retailers Retailers Consumers Consumers Consumers Consumers

Channels for business-to-business products 3 Channels for business-to-business products Agent/broker industrial channel Direct channel Industrial distributor Agent/broker channel Direct channel Producer Producer Producer Producer Producer Agents or brokers Agents or brokers Industrial distributor Industrial distributor Industrial user Industrial user Industrial user Industrial user Government buyer

Alternative channel arrangements 3 Alternative channel arrangements Multiple channels Non-traditional channels Adaptive channels Strategic channel alliances

Learning objective 4 Discuss the issues that influence channel strategy

Supply chain management 4 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.

Supply chain management (cont.) 4 Supply chain management (cont.) Results of supply chain management: focus on innovative solutions competitive with focus on customer satisfaction sychronised flow customer value.

Role of supply chain management 4 Role of supply chain management Communicator of customer demand from point of sale to supplier Physical flow process that engineers the movement of goods

Supply chain management activities 4 Supply chain management activities Determine channel strategy and level of distribution intensity Manage relationships in the supply chain Manage the logistical components of the supply chain Balance the costs of the supply chain with the service level demanded by customer

Benefits of supply chain management 4 Benefits of supply chain management Reduced costs Improved service Enhanced revenues

Learning objective 5 Explain channel leadership, conflict and partnering

Channel strategy decisions 5 Channel strategy decisions Issues that influence channel strategy Factors affecting channel choice Levels of distribution intensity Market factors Intensive distribution Product factors Selective distribution Producer factors Exclusive distribution

Market factors 5 Customer profiles Consumer or industrial customer Size of market Geographic location

Product factors 5 Product complexity Product price Product life cycle Product delicacy

Producer factors 5 Producer resources Number of product lines Desire for channel control

Levels of distribution intensity 5 Levels of distribution intensity Intensity level Objective Number of intermediaries Intensive Achieve mass-market selling. Convenience goods. Many Selective Work with selected intermediaries. Shopping and some specialty goods. Several Exclusive Work with single intermediary. Specialty goods and industrial equipment. One

Managing channel relationships 5 Managing channel relationships Social dimensions of channels Channel power Channel control Channel leadership Channel conflict Channel partnering

Channel power, control and leadership 5 Channel power, control and leadership Channel power 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.

5 Channel conflict A clash of goals and methods between distribution channel members. Horizontal conflict Occurs among channel members on the same level. Vertical conflict Occurs among channel members at different levels.

5 Channel partnering The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage.

Learning objective 6 Discuss logistics and supply chain management and their evolution into distribution practice

Supply chain management 6 Supply chain management Management system that coordinates all of the activities performed by supply chain members from source to the point of consumption that results in enhanced customer and economic value.

Supply chain activities 6 Supply chain activities Managing the movement of information and customer requirements up and down the supply chain. Managing the movement and storage of raw materials and parts from their sources to the production site. Managing the movement of raw materials, semi-manufactured products and finished products within and among plants, warehouses and distribution centres.

Supply chain activities (cont.) 6 Supply chain activities (cont.) Planning production in response to consumer demand. Planning and coordinating the physical distribution of finished goods to intermediaries and final buyers. Cultivating and coordinating strategic partnerships with supply chain members.

Learning objective 7 Discuss the concept of balancing logistics service and costs

Customers want … 7 availability timeliness quality undamaged goods minimal order effort consistent delivery … balanced with costs

Learning objective 8 Describe the integrated functions of the supply chain

Integrated logistical components of the supply chain 8 Integrated logistical components of the supply chain Sourcing & procurement Production scheduling Supply chain team Order processing & customer service Logistics information system Inventory control Warehouse & materials handling Transportation

Sourcing and procurement 8 Sourcing and procurement Role of purchasing departments Plan purchasing strategies Develop specifications Select suppliers Negotiate price Negotiate service levels

Just-in-time (JIT) manufacturing 8 Just-in-time (JIT) manufacturing A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line.

Benefits of JIT 8 Reduces raw material inventories Shortens lead times Creates better supplier relationships Reduces production and storeroom costs Reduces paperwork

Electronic data interchange 8 Electronic data interchange Information technology that replaces paper documents that accompany business transactions.

8 Stock control system A method of developing and maintaining an adequate assortment of materials or products to meet customer’s demand.

Materials requirement planning Stock control system that manages the replenishment of raw materials, supplies and components from the supplier to the manufacturer.

Distribution resource planning Stock control system that manages the replenishment of goods from the manufacturer to the final consumer.

Warehouse and materials-handling 8 Warehouse and materials-handling Functions of materials handling Receive goods into warehouse Identify, sort and label goods Dispatch the goods to temporary storage Recall, select or pick the goods for shipment

Criteria for transportation mode choice 8 Transportation Criteria for transportation mode choice Cost Transit time Reliability Capability Accessibility Traceability

Criteria for ranking modes of transportation 8 Criteria for ranking modes of transportation Highest Lowest Relative cost Air Truck Rail Pipe Water Transit time Water Rail Pipe Truck Air Reliability Pipe Truck Rail Air Water Capability Water Rail Truck Air Pipe Accessibility Truck Rail Air Water Pipe Traceability Air Truck Rail Water Pipe

Learning objective 9 Discuss new technology and emerging trends in logistics

Trends in supply chain management 9 Trends in supply chain management Advanced computer technology Outsourcing of logistics functions Electronic distribution

Learning objective 10 Identify the special problems and opportunities associated with distribution in service organisations

Channels and distribution decisions for services 10 Channels and distribution decisions for services Areas of focus for service distribution Minimising wait times Managing service capacity Improving delivery through new channels

Learning objective 11 Discuss channel structure and logistics issues in global markets

Channels and distribution decisions for global markets 11 Channels and distribution decisions for global markets Channel structure differs Global channel development Channel types differ ‘Grey’ marketing channels Awareness of trade legalities Global supply chain management Transportation infrastructure