11-1 © 2006 by Nelson, a division of Thomson Canada Limited 2/20/2016 Slides developed by: Peter Yannopoulos Chapter 11 Distribution and Supply Chain Strategy

11-2 © 2006 by Nelson, a division of Thomson Canada Limited Channels of Distribution A distribution channel is made up of market intermediaries that facilitate the flow of goods and services to customers together with support services needed to make the sale more convenient to buyers

11-3 © 2006 by Nelson, a division of Thomson Canada Limited Supply chain management encompasses all activities associated with the creation of raw materials to the delivery and consumption of the finished goods Supply Chain Management

11-4 © 2006 by Nelson, a division of Thomson Canada Limited Main Objective of Supply Chain Management To manage the flow of information, materials, and money in the most efficient way

11-5 © 2006 by Nelson, a division of Thomson Canada Limited Components of a Supply Chain Management System ManufacturingDistributionCustomer Service Procurement

11-6 © 2006 by Nelson, a division of Thomson Canada Limited Barriers to entry Increase profitability Help build a desired image Improve customer satisfaction Increase market coverage Exploit competitor weaknesses Strategic Advantages of Distribution Strategic Advantages of Distribution

11-7 © 2006 by Nelson, a division of Thomson Canada Limited Direct distribution Corporate stores Indirect distribution E-commerce Multiple channels Channel of Distribution Methods Piggybacking

11-8 © 2006 by Nelson, a division of Thomson Canada Limited Channel Strategy Consumer analysis Channel length Channel intensity Selection of channel partners Managing channel change Managing channel relationships

11-9 © 2006 by Nelson, a division of Thomson Canada Limited Consumer Analysis The channel design process begins with identifying the channel service requirements of each customer segment

11-10 © 2006 by Nelson, a division of Thomson Canada Limited The purpose of consumer analysis is to: Segment the market into groups of end- users according to each group’s service demands Differences among consumers make the use of multiple channels necessary Segment the market into groups of end- users according to each group’s service demands Differences among consumers make the use of multiple channels necessary

11-11 © 2006 by Nelson, a division of Thomson Canada Limited Channel Objectives Channel objectives are derived on the basis of the buying requirements of target segment members

11-12 © 2006 by Nelson, a division of Thomson Canada Limited Examples of channel objectives Product delivery within a certain number of hours from taking the order Service level requirements Credit provision to other resellers or customers Inventory and other space requirements Product return allowance

11-13 © 2006 by Nelson, a division of Thomson Canada Limited Factors Determining Channel Length Market factors Product factors Channel factors Company factors Factors Determining Channel Length

11-14 © 2006 by Nelson, a division of Thomson Canada Limited Channel Intensity Exclusive Intensive Selective Channel Intensity

11-15 © 2006 by Nelson, a division of Thomson Canada Limited Factors Influencing the Selection of Channel Members Performance Reputation Control Experience Cost Image Selection of ChannelMembers

11-16 © 2006 by Nelson, a division of Thomson Canada Limited Clarify the role of each channel member Increase channel power Create a vertical marketing system Increase advertising to the final consumer Offer incentives Methods for Managing Channel Relationships Grant exclusive distribution

11-17 © 2006 by Nelson, a division of Thomson Canada Limited Managing Channel Change Channel arrangements change over time in response to changing market conditions Channel members must constantly evaluate the performance of their channels

11-18 © 2006 by Nelson, a division of Thomson Canada Limited As markets mature…. Firms often change their distribution strategy from a selective to a more intensive one Mature markets splinter into many diverse segments We are witnessing a proliferation of marketing channels

11-19 © 2006 by Nelson, a division of Thomson Canada Limited Examples of New Distribution Developments Cross-docking Customized Distribution Customized Distribution Backhauling Distribution Developments Distribution Developments