1. 12 MKTG CHAPTER Lamb, Hair, McDaniel 2008-2009
Chapter 12 Marketing Channels and Supply Chain Management
MKTG
Lamb, Hair, McDaniel 12
Marketing Channels and Supply Chain Management
CHAPTER
Designed by
Amy McGuire, B-books, Ltd.
Prepared by
Deborah Baker, Texas Christian University

2. Learning Outcomes LO1 LO2 LO3 Explain what a marketing channel is
Chapter 12 Marketing Channels and Supply Chain Management
Learning Outcomes
Explain what a marketing channel is
and why intermediaries are needed
Define the types of channel intermediaries and describe their functions and activities
Describe the channel structures for consumer and business products and discuss alternative channel arrangements
LO1
LO2
LO3

3. Learning Outcomes LO4 LO5 LO6 LO7
Chapter 12 Marketing Channels and Supply Chain Management
Learning Outcomes
Define supply chain management and discuss its benefits
Discuss the issues that influence channel strategy
Explain channel leadership, conflict, and partnering
Describe the logistical components of the supply chain
LO4
LO5
LO6
LO7

4. Learning Outcomes LO8 LO9
Chapter 12 Marketing Channels and Supply Chain Management
Learning Outcomes
Discuss new technology and emerging trends in supply chain management
Discuss channels and distribution decisions in global markets
LO8
LO9

5. Explain what a marketing channel is and why intermediaries are needed
Chapter 12 Marketing Channels and Supply Chain Management
Marketing Channels
LO1
Explain what a marketing channel is and why intermediaries are needed
Notes:
The term channel is derived from the Latin word, canalis, which means canal.

6. Marketing Channels LO1 Marketing Channels
Chapter 12 Marketing Channels and Supply Chain Management
Marketing Channels
Marketing
Channels
A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer.
Notes:
A marketing channel can be viewed as a large pipeline through which products, their ownership, communication, financing and payment, and accompanying risk flow to the consumer.
An important aspect of marketing channels is the joint effort of all channel members to create a continuous and seamless supply chain.
Marketing channels facilitate the physical flow of goods through the supply chain, representing “place” or distribution in the marketing mix.
LO1

7. Marketing Channels LO1 Supply Chain
Chapter 12 Marketing Channels and Supply Chain Management
Marketing Channels
Supply Chain
The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics function.
Notes:
Many different types of organizations participate in marketing channels. Channel members negotiate with one another, buy and sell products, and facilitate the change of ownership between buyer and seller in the course of moving the product. The supply chain connects the business entities.
Discussion/Team Activity:
Name products purchased recently. Describe the supply chain required from the beginning of the product to the student’s purchase of the product.
LO1

8. Marketing Channel Functions
Chapter 12 Marketing Channels and Supply Chain Management
Marketing Channel Functions
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
Notes:
As products move through the supply chain, channel members facilitate the distribution process by providing:
Specialization and division of labor: Breaking a complex task into smaller, simpler ones creates greater efficiency and lower production costs.
Overcoming discrepancies of quantity, assortment, time, and space.
Providing contact efficiency by cutting the number of transactions required to get products to consumers and making an assortment of goods available in one location.
LO1

9. Specialization and Division of Labor
Chapter 12 Marketing Channels and Supply Chain Management
Specialization and Division of Labor
Creates greater efficiency
Provides lower costs
Achieves economies of scale
Aids producers who lack resources to market directly
Builds good relationships with customers
Notes:
Specialized expertise of channel members enhances the overall performance of the channel.
LO1

10. Overcoming Discrepancies
Chapter 12 Marketing Channels and Supply Chain Management
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.
Notes:
Marketing channels help overcome discrepancies of quantity, assortment, time, and space created by economies of scale in production.
Discrepancy of Quantity: Efficient production for lower unit costs creates a much larger quantity produced than the end user wants to buy. Marketing channels store and distribute the product in appropriate amounts, and make the products available in quantities that consumers desire.
Discrepancy of Assortment: Marketing channels assemble in one place many of the products necessary for a consumer’s needed assortment.
LO1

11. Overcoming Discrepancies
Chapter 12 Marketing Channels and Supply Chain Management
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.
Notes:
Temporal Discrepancy: Marketing channels overcome temporal discrepancies by maintaining inventories in anticipation of demand. This is particularly true of seasonal/holiday merchandise.
Spatial Discrepancy: Marketing channels overcome spatial discrepancies by making products available in locations convenient to consumers. For example, automobile manufacturers franchise dealerships close to consumers.
LO1

12. Providing Contact Efficiency
Chapter 12 Marketing Channels and Supply Chain Management
Providing Contact Efficiency
Notes:
Exhibit 12.1 demonstrates the purchase of a television set by four consumers. Without a retail intermediary like Circuit City, the individual television manufacturers would have to make four contacts to reach the four buyers. With Circuit City as an intermediary, each producer only has to make one contact, and the consumer buys from one retailer instead of five producers.
LO1

13. REVIEW LEARNING OUTCOME
Chapter 12 Marketing Channels and Supply Chain Management
REVIEW LEARNING OUTCOME
LO1
Marketing Channels
Providing Specialization
and Division of Labor
Overcoming Discrepancies
Providing Contact Efficiency
Marketing Channel
Supply Chain

14. Channel Intermediaries
Chapter 12 Marketing Channels and Supply Chain Management
Channel Intermediaries
LO2
Define the types of channel intermediaries and describe their functions and activities

15. Channel Intermediaries
Chapter 12 Marketing Channels and Supply Chain Management
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 channel members.
Notes:
Intermediaries in a channel negotiate with one another, facilitate the change of ownership between buyers and sellers, and physically move products from the manufacturer to the final end user.
LO2

16. Channel Intermediaries
Chapter 12 Marketing Channels and Supply Chain Management
Channel Intermediaries
Retailers
Merchant
Wholesalers
Agents
and
Brokers
Take Title to Goods
Do NOT Take Title to Goods
Notes:
The most prominent difference separating intermediaries is whether or not they take title to the product. Taking title means they own the merchandise and control the terms of the sale.
Agents and brokers do not take title to goods.
LO2

17. Factors Suggesting Type of Wholesaling Intermediary to Use
Chapter 12 Marketing Channels and Supply Chain Management
Factors Suggesting Type of Wholesaling Intermediary to Use
Product characteristics
Buyer considerations
Market characteristics
Notes:
Product characteristics, buyer considerations, and market conditions determine the type of intermediary the manufacturer should use.
LO2

18. Factors Suggesting Type of Wholesaling Intermediary to Use
Chapter 12 Marketing Channels and Supply Chain Management
Factors Suggesting Type of Wholesaling Intermediary to Use
Factor
Merchant Wholesalers
Agents/ Brokers
Nature of product
Standard
Nonstandard, custom
Technicality of product
Complex
Simple
Product’s gross margin
High
Low
Frequency of ordering
Frequent
Infrequent
Time between order and receipt of shipment
Shorter lead time
Longer lead time
Number of customers
Many
Few
Concentration of customers
Dispersed
Concentrated
Notes:
This slide shows the factors determining the type of wholesaling intermediary.
LO2

19. Channel Functions Performed by Intermediaries
Chapter 12 Marketing Channels and Supply Chain Management
Channel Functions Performed by Intermediaries
Contacting/Promotion
Negotiating
Risk Taking
Researching
Financing
Physically distributing
Storing
Sorting
Facilitating Functions
Transactional Functions
Logistical
Functions
Notes:
The three basic functions—transactional, logistical, and facilitating--performed by intermediaries are shown in Exhibit 12.2.
LO2

20. Logistics LO2 Logistics
Chapter 12 Marketing Channels and Supply Chain Management
Logistics
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.
LO2

21. REVIEW LEARNING OUTCOME
Chapter 12 Marketing Channels and Supply Chain Management
REVIEW LEARNING OUTCOME
LO2
Channel Intermediaries and Functions
CHANNEL INTERMEDIARIES
Retailers
Wholesalers
Agents and Brokers
CHANNEL FUNCTIONS
Transactional
Logistical
Facilitating
Perform

22. Chapter 12 Marketing Channels and Supply Chain Management
Channel Structures
LO3
Describe the channel structures for consumer and business products and discuss alternative channel arrangements

23. Channels for Consumer Products
Chapter 12 Marketing Channels and Supply Chain Management
LO3
Direct
Channel
A distribution channel in which producers sell directly to consumers.

24. Channels for Consumer Products
Chapter 12 Marketing Channels and Supply Chain Management
LO3
Producer
Consumers
Retailers
Wholesalers
Agents or Brokers
Wholesaler
Channel
Retailer
Direct
Agent/Broker
Notes:
Exhibit 12.3 illustrates the four ways manufacturers can route products to consumers.
Direct channel is used to sell products directly to consumers. No intermediaries are used. Examples are telemarketing, catalog shopping, on-line shopping, and television shopping networks.
At the other end of the spectrum, an agent/broker channel may be used in markets with small manufacturers/retailers that lack the resources to find each other. The agents or brokers bring the manufacturers and wholesalers together for negotiations, but they do not take title to merchandise.
Most consumer products are sold through distribution channels similar to the retailer channel and the wholesaler channel.
Discussion/Team Activity:
Identify various products and discuss the channel for distribution utilized by each.

25. Channels for Business Products
Chapter 12 Marketing Channels and Supply Chain Management
LO3
Producer
Industrial User
Direct
Channel
Govt. Buyer
Industrial Distributor
Agents or
Brokers
Agent/Broker
Industrial Channel
Notes:
Exhibit 12.4 illustrates the five channel structures common in business and industrial markets.
Direct channels are typical in business and industrial markets. Manufacturers buy large quantities of raw materials, major equipment, and supplies directly from other manufacturers, particularly if detailed technical specifications are required. The channel from producer to government is also a direct channel.
Companies selling standardized items of moderate/low value often rely on industrial distributors. Industrial distributors are wholesalers and channel members that buy and take title to products.

26. Business-to-Business Exchanges on the Internet
Chapter 12 Marketing Channels and Supply Chain Management
LO3
Agents link buyers and sellers
Companies drop the intermediary from the supply chain
“Private exchanges” with select suppliers automate the supply chain
On Line
Sherwin-Williams
Visit Sherwin-Williams’s home page to see how and where it sells its products. Are there different channels for its consumer products and its business products?
Notes:
The traditional industrial distributor is facing many challenges. Manufacturers are getting bigger due to growth, mergers, and consolidation. Technology is making access to information available to manufacturers and customers. Consequently, many are bypassing distributors and going direct, often via the Internet.
More companies are using the Internet to create more efficient business-to-business channels. Three forms include: * New Internet companies that serve as paid agents to link buyers and sellers * Existing companies dropping intermediaries from the supply chain * Private exchanges sharing information only with select suppliers
Online

27. Alternative Channel Arrangements
Chapter 12 Marketing Channels and Supply Chain Management
LO3
Multiple channels
Strategic channel alliances
Nontraditional channels
Notes:
Usually a producer employs several different or alternative channels, which includes multiple channels, nontraditional channels, and strategic channel alliances.
Multiple channels: Two or more channels selected is called multiple or dual distribution.
Nontraditional channels: Nontraditional channels, including the Internet and mail-order channels, help differentiate a firm’s product from the competition.
Strategic channel alliances: Producers use another manufacturer’s already-established channel.

28. Chapter 12 Marketing Channels and Supply Chain Management
Biz Flix
Casino
LO3

29. REVIEW LEARNING OUTCOME
Chapter 12 Marketing Channels and Supply Chain Management
REVIEW LEARNING OUTCOME
LO3
Channel Structures
CONSUMER CHANNELS
Direct
Retail
Wholesaler
Agent/broker
BUSINESS CHANNELS
Industrial
Agent/broker industrial
ALTERNATIVE CHANNELS
Multiple
Nontraditional
Strategic alliances

30. Supply Chain Management
Chapter 12 Marketing Channels and Supply Chain Management
Supply Chain Management
LO4
Define supply chain management and discuss its benefits

31. Supply Chain Management
Chapter 12 Marketing Channels and Supply Chain Management
Supply Chain Management
Supply Chain
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, resulting in enhanced customer and economic value.
Notes:
Supply chain management helps companies achieve competitive advantage. By visualizing the entire supply chain, supply chain managers can maximize strengths and efficiencies at each level of the process to create a highly competitive, customer-driven supply system that is able to respond immediately to changes in supply and demand.
In mass production, standardized products were “pushed” down the supply chain to the consumer. In contrast, in today’s marketplace, products are being driven or “pulled” by customers who expect products configured to their unique needs. Supply chain management allows companies to respond with the unique product configuration and mix of services demanded by the customer.
LO4

32. Role of Supply Chain Management
Chapter 12 Marketing Channels and Supply Chain Management
Role of Supply Chain Management
Communicator of customer demand from point of sale to supplier
Physical flow process that engineers the
movement of goods
Notes:
Today, supply chain management plays a dual role.
Supply chain management acts as a communicator of customer demand that extends from the point of sale back to the supplier, and second, as a physical flow process that engineers the movement of goods throughout the entire supply pipeline.
Supply chain managers are responsible for making channel strategy decisions, coordinating the sourcing and procurement of raw materials, scheduling production, processing orders, managing inventory, transporting and storing supplies and finished goods, and coordinating customer service activities. Additionally, supply chain managers are responsible for managing the information that flows through the supply chain.
LO4

33. Responsibilities of Supply Chain Managers
Chapter 12 Marketing Channels and Supply Chain Management
Responsibilities of Supply Chain Managers
Channel strategy decisions
Sourcing and procurement of raw materials
Production schedules
Order processing
Inventory management
Finished goods/supplies transportation and storage
Customer service coordination
Supply chain information flow management
Partner relationships
Notes:
Supply chain managers are responsible for ensuring the success of the critical functions shown on this slide.
LO4

34. The Supply Chain Process
Chapter 12 Marketing Channels and Supply Chain Management
The Supply Chain Process
LO4

35. Benefits of Supply Chain Management
Chapter 12 Marketing Channels and Supply Chain Management
Benefits of Supply Chain Management
Means of differentiation
Greater supply chain flexibility
Improved customer service
Higher revenues
Reduced costs
Notes:
Supply chain management is a key means of differentiation for a firm and a critical component in marketing and corporate strategy.
Research has shown a clear relationship between supply chain performance and profitability. Leaders in supply chain management report a 20 percent improvement in cash flow, a more than 50 percent increase in flexibility of supply chain activities, and a reduction of 5 to 10 percent in supply chain costs.
LO4

36. REVIEW LEARNING OUTCOME
Chapter 12 Marketing Channels and Supply Chain Management
REVIEW LEARNING OUTCOME
LO4
Supply Chain Management

37. Making Channel Strategy Decisions
Chapter 12 Marketing Channels and Supply Chain Management
Making Channel Strategy Decisions
LO5
Discuss the issues
that influence
channel strategy

38. Channel Strategy Decisions
Chapter 12 Marketing Channels and Supply Chain Management
LO5
Factors
Affecting
Channel
Choice
Producer Factors
Product Factors
Market Factors
Exclusive Distribution
Selective Distribution
Intensive Distribution
Level of Distribution Intensity
Notes:
Before choosing a marketing channel, supply chain managers must analyze several factors, which often interact. These factors can be grouped as market factors, product factors, and producer factors. An explanation follows.

39. Consumer or Industrial
Market Factors
Chapter 12 Marketing Channels and Supply Chain Management
LO5
Market Factors That Affect
Channel Choices
Customer profiles
Consumer or Industrial
Customer
Size of market
Geographic location
Notes:
Market factors include the target customer considerations, such as these questions: Who are the potential customers? What/where/when/how do they buy?
Also important to channel selection is the distinction between consumer or industrial customers. Consumers buy in small quantities and don’t require much service, whereas industrial customers purchase in larger quantities and require more customer service.
If the target market is concentrated in specific areas, direct selling is appropriate. If widely dispersed, intermediaries would be less expensive.
In general, a large market requires more intermediaries.

40. Product Standardization
Product Factors
Chapter 12 Marketing Channels and Supply Chain Management
LO5
Product Factors That Affect
Channel Choices
Product Complexity
Product Standardization
Product Life Cycle
Product Delicacy
Product Price
Notes:
Products that are more complex, customized, and expensive benefit from shorter and more direct marketing channels and through a direct sales force. Standardized products can be sold through longer distribution channels with greater numbers of intermediaries.
The choice of channel may change over the life of the product. As products become more common, producers turn from a direct channel to more alternative channels.
Perishable items and fragile products require fairly short marketing channels and a minimum amount of handling.

41. Number of Product Lines Desire for Channel Control
Product Factors
Chapter 12 Marketing Channels and Supply Chain Management
LO5
Producer Factors That Affect
Channel Choices
Producer Resources
Number of Product Lines
Desire for Channel Control
Notes:
Producers with larger financial, managerial, and marketing resources are able to use more direct channels. These producers can maintain their own sales force, warehouse their own goods, and extend credit to customers.
Producers with several products in a related area choose channels that are more direct, and sales expenses can be spread over more products.
A producer’s desire to control pricing, positioning, brand image, and customer support may avoid channels in which discount retailers are present. Furthermore, manufacturers of upscale products may sell only in expensive stores to maintain an image of exclusivity.

42. Levels of Distribution Intensity
Chapter 12 Marketing Channels and Supply Chain Management
LO5
Intensive
A form of distribution aimed at having a product available in
every outlet
Selective
A form of distribution achieved
by screening dealers to eliminate all but a few in any single area
Exclusive
A form of distribution that
established one or a few dealers within a given area

43. Levels of Distribution Intensity
Chapter 12 Marketing Channels and Supply Chain Management
LO5
Intensive
Achieve mass market selling.
Convenience goods.
Many
Selective
Exclusive
Work with selected
intermediaries.
Shopping and some
specialty goods.
Work with single intermediary. Specialty goods and industrial
equipment.
Several
One
Intensity Level
Objective
Number of Intermediaries
Notes:
This slide compares the three options for intensity of distribution.
Discussion/Team Activity:
Discuss product examples in each of the intensity levels, and in which stores the products are stocked.

44. REVIEW LEARNING OUTCOME
Chapter 12 Marketing Channels and Supply Chain Management
REVIEW LEARNING OUTCOME
LO5
Issues Influencing Channel Strategy

45. Managing Channel Relationships
Chapter 12 Marketing Channels and Supply Chain Management
Managing Channel Relationships
LO6
Discuss the issues
that influence
channel strategy

46. Social Dimensions of Channels
Chapter 12 Marketing Channels and Supply Chain Management
Social Dimensions of Channels
Partnering
Conflict
Leadership
Control
Power
Notes:
Social relationships play an important role in building unity among channel members. An aspect of supply chain management is managing the social relationships among channel members to achieve synergy.
The basic social dimensions are shown on this slide and defined on the following slides.
LO6

47. Channel Power, Control, and Leadership
Chapter 12 Marketing Channels and Supply Chain Management
Channel Power, Control, and Leadership
Channel
Power
A channel member’s capacity to control or
influence the behavior of other channel members
Control
A situation that occurs when one marketing
channel member intentionally affects another member’s behavior
Channel Leader
A member of a marketing channel that exercises
authority/power over the activities of other members
LO6

48. Channel Conflict and Partnering
Chapter 12 Marketing Channels and Supply Chain Management
Channel Conflict and Partnering
Channel
Conflict
A clash of goals and methods between distribution channel members
Partnering
The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage
Notes:
Inequitable channel relationships often lead to channel conflict. In a broad context, conflict may not be bad: if traditional members refuse to keep pace with the times, removing an outdated intermediary may reduce costs for the supply chain.
Channel partnering is vital if each member gains something from the other members. Cooperation speeds up inventory replenishment, improves customer service, and reduces the total costs of the marketing channel.
LO6

49. Channel Conflict Conflicts may occur if channel members: LO6
Chapter 12 Marketing Channels and Supply Chain Management
Channel Conflict
Conflicts may occur if channel members:
Have conflicting goals
Fail to fulfill expectations of other channel members
Have ideological differences
Have different perceptions of reality
Notes:
Conflicts arise because channel members have conflicting goals, or when channel members fail to fulfill expectations of other channel members.
Further, different perceptions of reality can cause conflict among members. For instance, retailers may have a liberal return policy, whereas wholesalers
LO6

50. Channel Partnering LO6 Transaction-Based Partnership-Based
Chapter 12 Marketing Channels and Supply Chain Management
Channel Partnering
Supplier / Manufacturer Relationships
Short-term
Adversarial
Independent
Price important
Long-term
Cooperative
Dependent
Value-added services
Number of Suppliers
Many
Few
Transaction-Based
Partnership-Based
Information Sharing
Minimal
High
Investment Required
Notes:
This table compares companies that approach the marketplace unilaterally and those that engage in channel cooperation and form partnerships.
LO6

51. REVIEW LEARNING OUTCOME
Chapter 12 Marketing Channels and Supply Chain Management
REVIEW LEARNING OUTCOME
LO6
Channel Leadership, Conflict, & Partnering
Channel Relationship
Synergy
Channel Conflict
Horizontal
Vertical
Channel Power, Control, Leadership
Channel Partnering

52. Global Issues in Services Marketing
Chapter 12 Marketing Channels and Supply Chain Management
Global Issues in Services Marketing
LO7
Discuss global issues in services marketing

53. Logistical Components of the Supply Chain
Chapter 12 Marketing Channels and Supply Chain Management
Logistical Components of the Supply Chain
Supply Chain Team
Sourcing & Procurement
Production Scheduling
Order Processing
Inventory Control
Warehouse & Materials Handling
Transportation
Logistics Information System
Notes:
The supply chain consists of several interrelated and integrated logistical components, as shown on this slide.
Integrating and linking all of the components is the logistics information system.
The supply chain team orchestrates the movement of goods from the source to the consumer. The team cuts across organization boundaries and communicates/coordinates/cooperates extensively.
The best supply chain teams move beyond the organization to include external participants, such as suppliers, transportation carriers, and third-party logistics suppliers.
LO7

54. Sourcing and Procurement
Chapter 12 Marketing Channels and Supply Chain Management
Sourcing and Procurement
The Role of Purchasing:
Plan purchasing strategies
Develop specifications
Select suppliers
Negotiate price and service levels
Reduce costs
Notes:
One of the most important links in the supply chain is that between the manufacturer and the supplier. Purchasing professionals are on the front lines planning purchasing strategies, developing specifications, selecting suppliers, and negotiating price and service levels.
The goal of most activities is to reduce the costs of raw materials and supplies. Instead of tough negotiations to get the best possible price, purchasing helps establish and cooperative relationships with vendors.
LO7

55. Production Scheduling
Chapter 12 Marketing Channels and Supply Chain Management
Production Scheduling
Push / Pull
Strategy
Traditional Focus
Push
Start of Production
Manufacturing
Inventory- Based
Mass Production
Customer Focus
Pull
Customer-Order Based
Mass Customization
Notes:
In a traditional mass-marketing manufacturing, production begins when forecasts call for additional products to be made or inventory is low.
In a customer-focused “pull” manufacturing environment, production of goods is not started until an order is placed by the customer specifying the desired configuration, also known as mass customization or build-to-order.
In this environment of customer demand and mass customization, supply chains need to be flexible and be able to shift production based on demand.
LO7

56. Just-in-Time Manufacturing
Chapter 12 Marketing Channels and Supply Chain Management
Just-in-Time Manufacturing
JIT
A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line.
Notes:
JIT, or lean production, was borrowed from the Japanese. Manufacturers work with suppliers to get necessary items to the assembly line at the precise time they are needed for production.
For the manufacturer, JIT means that raw materials arrive at the assembly line “just in time” to be installed.
For the supplier, JIT means supplying customers with products in just a few days rather than weeks.
For the consumer, JIT means lower costs, shorter lead times, and products that closely meet the consumer’s needs.
LO7

57. Benefits of JIT LO7 Reduces raw material inventories
Chapter 12 Marketing Channels and Supply Chain Management
Benefits of JIT
Reduces raw material inventories
Shortens lead times
Creates better supplier relationships
Reduces production and storeroom costs
Reduces paperwork
Notes:
Benefits of JIT to the manufacturer are shown on this slide.
LO7

58. JIT Requirements LO7 Receive high-quality parts
Chapter 12 Marketing Channels and Supply Chain Management
JIT Requirements
Receive high-quality parts
Meet supplier delivery commitments
Have a crisis management plan
Notes:
Because there is little safety stock and no margin for error, it is important that manufacturers receive high-quality parts from vendors, be confident that the supplier will meet all delivery commitments, and have a crisis management plan to handle any disruptions.
The need for a crisis management plan became evident following the terrorist attacks of September 11 and Hurricane Katrina.
LO7

59. Electronic Data Interchange
Chapter 12 Marketing Channels and Supply Chain Management
Order Processing
Electronic Data Interchange
Information technology that replaces paper documents that accompany business transactions with electronic transmission of the information.
On Line: Wal-Mart
Is EDI a requirement for Wal-Mart suppliers? Go to Wal-mart’s Web site and read the “Supplier Information” pages. Does selling to Wal-Mart seem worth the effort? Why or why not?
Notes:
The order is often the step that sets the supply chain in motion, especially in build-to-order environments such as Dell Computer. The order processing system processes the requirements of the customer and sends the information into the supply chain.
As the order enters the system, management monitors the flow of goods and the flow of information.
Order processing is becoming more automated through the use of electronic data interchange computer technology. This information can be read and processed by computers.
Online
LO7

60. Order Processing LO7 Inventory Control System
Chapter 12 Marketing Channels and Supply Chain Management
Order Processing
Inventory
Control System
A method of developing and maintaining an adequate assortment of materials or products to meet a manufacturer’s or a customer’s demand.
Notes:
The inventory control system helps balance having excess inventory and having too few products on hand.
The goal of inventory management is to keep inventory levels as low as possible, while maintaining an adequate supply of goods to meet customer demand.
Consider, for example, negative sales forecasts during recent Christmas buying seasons that caused retailers to cut back on orders. As a result, many companies lost sales due to inventory shortages on popular items.
LO7

61. Order Processing LO7 Materials Requirement Planning (MRP) Distribution
Chapter 12 Marketing Channels and Supply Chain Management
Order Processing
Materials
Requirement
Planning (MRP)
An inventory control system that manages
the replenishment of raw materials,
supplies, and components from the
supplier to the manufacturer.
Distribution
Resource
Planning
(DRP)
the replenishment of goods from the
manufacturer to the final consumer.
Notes:
Managing inventory from the supplier to the manufacturer is called materials requirement planning (MRP) or materials management.
Managing finished goods inventory from manufacturer to end user is referred to as distribution resource planning (DRP).
Both inventory systems use inputs such as sales forecasts and available inventory to determine what actions must be taken to replenish goods in the supply chain. Demand is collected at each level in the supply chain, and with the use of EDI, the information can be transmitted to meet the quick-response needs of competitive markets.
LO7

62. Materials Handling Functions
Chapter 12 Marketing Channels and Supply Chain Management
Materials Handling Functions
Receive goods into
warehouse
Dispatch the goods to
temporary storage
Recall, select, or pick the goods for shipment
Identify, sort, and label
goods
Notes:
Although JIT may eliminate the need to warehouse many materials, manufacturers keep some safety stock on hand in the event of an emergency. Additionally, inventory may be stored for seasonally-demand products.
Storage helps manufacturers manage supply and demand.
A materials-handling system moves inventory into, within, and out of the warehouse, performing the functions shown on this slide.
LO7

63. Transportation LO7 Airways Water Pipelines Motor Carriers Railroads
Chapter 12 Marketing Channels and Supply Chain Management
Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
Notes:
Supply chain logisticians must decide which mode of transportation to use to move products from supplier to producer and from producer to buyer. These decisions are related to other logistics decisions.
LO7

64. Transportation Mode Choice
Chapter 12 Marketing Channels and Supply Chain Management
Transportation Mode Choice
Cost
Transit time
Reliability
Capability
Accessibility
Traceability
Notes:
Transportation accounts for between 5 to 10 percent of the price of goods.
Supply chain managers choose a mode of transportation on the basis of the criteria shown on this slide.
LO7

65. Criteria for Ranking Modes of Transportation
Chapter 12 Marketing Channels and Supply Chain Management
Criteria for Ranking Modes of Transportation
Relative
Cost
Transit
Time
Reliability
Capability
Accessibility
Traceability
Highest
Lowest
Air
Water
Pipe
Rail
Truck
Notes:
Exhibit 12.5 compares the basic modes of transportation based on the six criteria.
LO7

66. Trends in Supply Chain Management
Chapter 12 Marketing Channels and Supply Chain Management
Trends in Supply Chain Management
LO8
Discuss new technology and emerging trends in supply chain management

67. Trends in Supply Chain Management
Chapter 12 Marketing Channels and Supply Chain Management
Trends in Supply Chain Management
Electronic distribution
Outsourcing of logistics functions
Advanced computer technology
Notes:
Several technological trends are affecting the job of the supply chain manager:
Advanced computer technology has boosted the efficiency of logistics with tools such as automatic ID systems, radio frequency technology, and supply chain software systems.
Outsourcing of logistics functions is a rapidly growing segment in which a manufacturer or supplier turns over the entire or partial function of supply chain management to an independent third party.
Electronic distribution includes any kind of product or service that can be distributed electronically. For instance, computer software can be purchased and downloaded electronically.
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68. Advanced Computer Technology
Chapter 12 Marketing Channels and Supply Chain Management
Advanced Computer Technology
Automatic identification systems
- Bar coding
- Radio frequency technology
Communications technology
Supply chain software systems
Notes:
One of the major goals of technology is to bring up-to-date information to the supply chain manager’s desk. Systems, such as those shown above, are now in place that help track freight, monitor speed and location of carriers, and make routing decisions. Each package can be tracked from receipt to delivery.
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69. Outsourcing Logistics Functions
Chapter 12 Marketing Channels and Supply Chain Management
Outsourcing Logistics Functions
Outsourcing Benefits
Reduce inventories
Locate stock at fewer plants and distribution centers
Provide same or better levels of service
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70. Channels and Distribution Decisions for Global Markets
Chapter 12 Marketing Channels and Supply Chain Management
Channels and Distribution Decisions for Global Markets
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Discuss channels and distribution decisions in global markets

71. Channels and Distribution Decisions for Global Markets
Chapter 12 Marketing Channels and Supply Chain Management
Channels and Distribution
Decisions for Global Markets
Global Channel
Development
Channel structure and type differ
Gray marketing channels
Global Supply Chain Management
Awareness of trade legalities
Transportation Issues
Notes:
With the popularity of free-trade agreements such as the European Union and the North American Free Trade Agreement, global marketing channels have become important to U.S. corporations.
When designing marketing channels for foreign markets, the type of channel structure must be considered.
The more highly developed a nation is economically, the more specialized its channel types.
Marketers must be aware of gray marketing channels, in which products are distributed through unauthorized channel intermediaries. Sales of counterfeit luxury items, for example, is estimated at $2 billion a year. The Internet has proved a way for pirates to circumvent authorized distribution channels.
One of the most critical global logistics issues for importers is coping with the legalities of trade in other countries.
Transportation can be a major issue because of poor infrastructure and complications from government regulations.
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72. REVIEW LEARNING OUTCOME
Chapter 12 Marketing Channels and Supply Chain Management
REVIEW LEARNING OUTCOME
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Global Market Channel & Distribution Decisions
Distribute directly or through foreign partners
Different channel structures than in
domestic markets
Illegitimate “gray” marketing channels
Legal and infrastructure differences

73. Beyond the Book Channels and Distribution Decisions for Services
Chapter 12 Marketing Channels and Supply Chain Management
Identify the special problems and opportunities associated with distribution in service organizations
Beyond the Book
NOTE: Supplemental content – not in book.

74. Managing service capacity Improving service delivery
Channels and Distribution Decisions for Services
Chapter 12 Marketing Channels and Supply Chain Management
Minimizing wait times
Managing service capacity
Improving service delivery
Beyond the Book
Notes:
The fastest-growing part of our economy is the service sector. Customer service is a priority, with service distribution focused on three major areas:
Minimizing wait times
Managing service capacity.
Improving service delivery
Discussion/Team Activity:
Does your bank deliver any of its services online? Visit its Web site to find out. Which online services would you be inclined to use? Are there any that you would definitely not use? Why not?
NOTE: Supplemental content – not in book.

75. Beyond the Book Distribution in Service Organizations
Chapter 12 Marketing Channels and Supply Chain Management
Distribution in Service Organizations
Beyond the Book
NOTE: Supplemental content – not in book.