Marketing Channels and Supply Chain Management 10

10-2 Marketing or Distribution Channel A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user.

10-3 How Channel Members Add Value The use of intermediaries results from their greater efficiency in making goods available to target markets. The use of intermediaries results from their greater efficiency in making goods available to target markets. Offers the firm more than it can achieve on its own through the intermediaries: Offers the firm more than it can achieve on its own through the intermediaries: –Contacts –Experience –Specialization –Scale of operation

10-4 How a Distributor Reduces the Number of Channel Transactions

10-5 Information Risk Taking Promotion Matching Physical Distribution Physical Distribution These functions should be assigned to the channel member who can add the most value for the cost Channel Functions

10-6 Consumer and Business Channels

10-7 Channel Behavior The channel will be most effective when: The channel will be most effective when: –each member is assigned tasks it can do best. –all members cooperate to attain overall channel goals. If this does not happen, conflict occurs: If this does not happen, conflict occurs: –Horizontal Conflict occurs among firms at the same level of the channel. –Vertical Conflict occurs between different levels of the same channel Some conflict can be healthy competition. Some conflict can be healthy competition.

10-8 Conventional vs. Vertical Marketing System

10-9 Vertical Marketing System (VMS) A distribution channel structure in which producers, wholesalers, and retailers act as a unified system A distribution channel structure in which producers, wholesalers, and retailers act as a unified system One channel member owns the other, has contracts with them, or has so much power that they all cooperate. One channel member owns the other, has contracts with them, or has so much power that they all cooperate.

10-10 Corporate VMS Common Ownership at Different Levels of the Channel Contractual VMS Contractual Agreements Among Channel Members Administered VMS Leadership is Assumed by One or a Few Dominant Members Types of Vertical Marketing Systems Control High Low

10-11 Franchise Organization Manufacturer-Sponsored Retailer Franchise System Manufacturer-Sponsored Retailer Franchise System –Ford and its independent franchised dealers Manufacturer-Sponsored Wholesaler Franchise System Manufacturer-Sponsored Wholesaler Franchise System Service-Firm Sponsored Retailer Franchise System Service-Firm Sponsored Retailer Franchise System

10-12 Innovations in Marketing Systems Two or more companies at one channel level join together to follow a new marketing opportunity. A single firm sets up two or more marketing channels to reach one or more customer segments. A single firm sets up two or more marketing channels to reach one or more customer segments. Horizontal Marketing System Hybrid Marketing System

10-13 Hybrid Marketing Channel

10-14 Changing Channel Organization Disintermediation means that more and more, product and service producers are bypassing intermediaries and going directly to final buyers, or that radically new types of channel intermediaries are emerging to displace traditional ones. Disintermediation means that more and more, product and service producers are bypassing intermediaries and going directly to final buyers, or that radically new types of channel intermediaries are emerging to displace traditional ones.

10-15 Channel Design Decisions Analyzing Consumer Needs Analyzing Consumer Needs Setting Channel Objectives Setting Channel Objectives Identifying Major Alternatives Identifying Major Alternatives –Types of intermediaries –Number of intermediaries –Responsibilities of intermediaries

10-16 Types of Intermediaries Company sales force Company sales force Manufacturer’s agency Manufacturer’s agency Industrial distributors Industrial distributors

10-17 Number of Intermediaries Intensive distribution Intensive distribution Exclusive distribution Exclusive distribution Selective distribution Selective distribution

10-18 Evaluating the Major Alternatives Economic Criteria: Economic Criteria: –A company compares the likely sales, costs, and profitability of different channel alternatives. Control Issues: Control Issues: –How and to whom should control be given? Adaptive Criteria: Adaptive Criteria:

10-19 Selecting Channel Members Managing & Motivating Channel Members Evaluating Channel Members Channel Management Decisions

10-20 Public Policy and Distribution Decisions Exclusive distribution Exclusive distribution Exclusive dealing Exclusive dealing Exclusive territorial agreements Exclusive territorial agreements Tying agreements Tying agreements

10-21 Logistics and Supply Chain Management Planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit. Planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet customer requirements at a profit. Includes: Includes: –Outbound distribution –Inbound distribution

10-22 Supply Chain Management

10-23 Major Logistics Functions Warehousing Warehousing Inventory management Inventory management Transportation Transportation Logistics information management Logistics information management

10-24 Warehousing How many, what types, and where? How many, what types, and where? Storage warehouses Storage warehouses Distribution centers Distribution centers Automated warehouses Automated warehouses

10-25 Inventory Management Must balance between too much and too little inventory. Must balance between too much and too little inventory. Just-in-time logistics systems Just-in-time logistics systems RFID, AutoID, or Smart Tag technology RFID, AutoID, or Smart Tag technology

10-26 Transportation Trucks Trucks Railroads Railroads Water carriers Water carriers Pipelines Pipelines Air Air Internet Internet Intermodal transportation Intermodal transportation

10-27 Rail Nation’s second largest carrier, cost-effective for shipping bulk products, Rail Nation’s second largest carrier, cost-effective for shipping bulk products, Largest carrier Flexible in routing & time schedules, Efficient for short-hauls of high value goods Largest carrier Flexible in routing & time schedules, Efficient for short-hauls of high value goods Water Low cost for shipping bulky, low-value, non-perishable goods, slowest form Water Low cost for shipping bulky, low-value, non-perishable goods, slowest form Pipeline Ship petroleum, natural gas, and chemicals from sources to markets Pipeline Ship petroleum, natural gas, and chemicals from sources to markets High cost, ideal when speed is needed or distance markets have to be reached High cost, ideal when speed is needed or distance markets have to be reached Transportation Modes

10-28 Intermodal Transportation

10-29 Intermodal Transportation

10-30 Intermodal Transportation

10-31 Intermodal Transportation

10-32 Intermodal Transportation

10-33 Integrated Logistics Management The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system. The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system. Involves: Involves: –Cross-functional teamwork inside the company –Building logistics partnerships

10-34 Third Party Logistics Many companies are now outsourcing logistics tasks to companies like Ryder Integrated Logistics. Here, Ryder describes a system it designed to keep Friendly’s refrigerated trucks on the road. “Thanks to Ryder, Friendly’s doesn’t have to worry about breakdowns. Or meltdowns.”