0. Managing Marketing Channels and Supply Chains
Jamie Bute
Caroline Mutonyi
Lisa Schoborg
Morgan Wortham
January 12, 2015

1. Agenda Marketing Channels Vertical Marketing Systems
Marketing Channel Choice Management
Marketing Logistics & Supply Chain Management
Distribution Channel Choice Management
Types of Distribution Strategies

2. Marketing Channel
Marketing Channel: the transfer of the ownership of goods from production to consumption
Channel Partners (distributors, wholesalers, and retailers) offer Three Functions:
Transactional
Work as an intermediary between the producer and the customer
Hold onto inventory at their location
Enhance your image by supply the goods to customers in a timely manner
Logistical
Store the products
Provide transportation
Buy in bulk and then split into smaller shipments
Combine product with other products to sell to consumer
Facilitating
Deal with customers
Negotiate Sales
Provide Customer Service

3. Consumer Product Channels
Direct: Producer sells directly to the end customer
Indirect
Retailers
Wholesalers – Retailers
Agents – Wholesalers – Retailers
Agent or Broker – Any intermediary with legal authority to act on behalf of the manufacturer
Wholesaler – An intermediary who sells to other intermediaries, usually to retailers; term usually applies to consumer markets
Retailer – An intermediary who sells to consumers
Distributor – an imprecise term, usually used to describe intermediaries who perform a variety of distribution functions, including selling, maintaining inventories, extending credit, and so on; a more common term in business markets but may also be used to refer to wholesalers

4. Business Product Channels
Direct: Producer sells directly to the end customer
Indirect
Industrial Distributor
Agents
Agents – Industrial Distributor

5. Electronic Marketing Channels
Radio
Television
Computer
Telephone and Cell Phone
Fax Machine
RSS
Electronic messaging

6. Direct Marketing Channels

7. Multichannel Marketing
The practice of interacting with customers using a combination of indirect and direct communication channels – websites, retail stores, mail order catalogs, direct mail, , mobile, etc. – and enabling customers to take action in response – preferably to buy your product or service – using the channel of their choice. In the most simplistic terms, multichannel marketing is all about choice.

8. Dual Distribution
Involves an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product.

9. Vertical Marketing Systems
In normal systems, each piece of the distribution channel operates on its own for profit
Channel arrangement to bring together parts of the distribution channel for their mutual benefit
Combine resources
Three systems: Corporate, Contractual, and Administrated

10. Corporate Systems
A company purchases pieces of the distribution channel
Forward integration
Purchase the next level down in the channel
Backward integration
Purchase the previous level in the channel
Pro: more control
Con: takes a lot of capital

11. *Contractual Systems
Companies enter into contracts with pieces of the distribution channel
Wholesaler-sponsored voluntary
Retailer-sponsored cooperatives
Franchising

12. Administrated Systems
The company does not own or have contracts with pieces of the distribution channel, but controls activities of the other pieces with power of size or influence.

13. Factors Affecting Channel Choice and Management
Which channel and intermediaries will provide the best coverage of the target market?
Which channel and intermediaries will best satisfy the buying requirements of the target market?
Which channel and intermediaries will be the most profitable?

14. Marketing Channel Choice & Management
Intensive distribution
Place products/services in as many outlets as possible
Exclusive distribution
Place products/services in one retailer at specific geographic area
*Selective distribution
Place products/services in a few retailers in a specific geographic area

15. Market Logistics
The process of planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit.

16. Supply Chain
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, that perform or support the LOGISTICS function.
A supply chain is the system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer.

17. Logistics of Supply Chain
Supply Chain Team
Sourcing & Procurement
Production Scheduling
Order Processing
Inventory Control
Warehouse & Materials Handling
Transportation
Logistics Information System
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.

18. Supply Chain Process

19. Supply Chain Process Example

20. Supply Chain Partners
The supply chain consists of two types of partners:
Upstream partners include raw material suppliers, components, parts, information, finances, and expertise to create a product or service
Downstream partners include the marketing channels or distribution channels that look toward the customer

21. 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, resulting in enhanced customer and economic value.
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.
supply chain distribution accounts for 50 cents of every dollar spent
promotion accounts for only 2 cents!

22. Role of Supply Chain Management
Communicator of customer demand from point of sale to supplier.
Physical flow process that engineers the movement of goods.
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.

23. Benefits of Supply Chain Management
Means of differentiation
Reduced costs
Greater supply chain flexibility
Improved customer service
Higher revenues
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.

24. Distribution Channel Choice Management
A marketing channel consists of individuals and firms involved in the process of making products or services available for use or consumption by consumers or industrial use.
Distribution is one of the key elements in the entire marketing strategy as they help expand your reach and grow revenue.

25. Distribution
Distribution is a vitally important activity that focuses on how to reach your target market and the:
location of your business
location of your target market
how to reach your target market
warehousing of your stock
transportation of your stock

26. Two Types of Distribution Strategies/Channels of Distribution
Direct Shipment Distribution Strategies
Intermediate Inventory Storage Point

27. Direct Shipment Distribution Strategies
Advantages:
The retailer avoids the expenses of operating a distribution center
Lead times are reduced
Disadvantages:
Risk-pooling effects are negated
Manufacturer and distributor transportation costs increase
Commonly used scenarios:
Prevalent in the grocery industry
Lead times are critical because of perishable goods
Retail store requires fully loaded trucks
Often mandated by powerful retailers
Manufacturer may be reluctant but may have no choice

28. Intermediate Inventory Storage Point Strategies
Traditional warehousing strategy
Distribution centers and warehouses hold stock inventory
Provide their downstream customers with inventory as needed
Cross-docking strategy
Warehouses and distribution centers serve as transfer points for inventory
No inventory is held at these transfer points
Centralized pooling and transshipment strategies
May be useful when there is a large variety of different products

29. Centralized vs. Decentralized Management
Centralized system
Decisions are made at a central location for the entire supply network.
Typical objective: minimize the total cost of the system subject to satisfying some service-level requirements.
Centralized control leads to global optimization.
At least as effective as the decentralized system.
Allow use of coordinated strategies.
Decentralized system
Each facility identifies its most effective strategy without considering the impact on the other facilities in the supply chain.
Leads to local optimization.

30. Central vs. Local Facilities
Centralized facilities
Employ both fewer warehouses and distribution centers.
Facilities are located further from customers.
Other factors
Safety stock: Lower safety stock levels with centralized facilities.
Overhead: Lower total overhead cost with centralized facilities.
Economies of scale: Greater economies of scale with centralized facilities.
Lead time: Lead time to market reduced with local facilities.
Service
Utilization of risk pooling better with centralized
Shipping times better with local
Transportation costs
Costs between production facilities and warehouses higher with local
Costs from warehouses to retailers lower with local

31. Cross-Docking
Warehouse functions as inventory coordination points rather than as inventory storage points.
Goods arriving at warehouse from the manufacturer:
- are transferred to vehicles serving the retailers
- are delivered to the retailers as rapidly as possible
Goods spend very little time in storage at the warehouse
Often less than 12 hours
Limits inventory costs and decreases lead times

32. Conclusion
Managing marketing channels and supply chains is a critical element of marketing – after all, marketing is about getting the right product, in the right quantity, to the right place, at the right time.

33. Questions?