1. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 Learning Outcomes Chapter 12 Marketing Channels  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 consumer and business-to- business products and discuss alternative channel arrangements  4. Define supply chain management and discuss its benefits  5. Discuss the issues that influence channel strategy  6. Explain channel leadership, conflict, and partnering  7. Describe the logistical components of the supply chain  8. Discuss new technology and emerging trends in supply chain management  9. Discuss channels and distribution decisions in global markets

2. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 2 LO 1 Marketing Channels A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer. Marketing Channels 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.

3. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 3 LO 1 Marketing Channel Functions Specialization and division of labor Overcoming discrepancies Providing contact efficiency

4. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 4 LO 1 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

5. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 5 LO 1 Overcoming Discrepancies Discrepancy of Quantity Discrepancy of Quantity Discrepancy of Assortment Discrepancy of 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. The lack of all the items a customer needs to receive full satisfaction from a product or products. Temporal Discrepancy Temporal Discrepancy Spatial Discrepancy Spatial Discrepancy 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. The difference between the location of a producer and the location of widely scattered markets.

6. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 6 LO 1 Providing Contact Efficiency

7. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 7 REVIEW LEARNING OUTCOME LO 1 Marketing Channels Providing Specialization and Division of Labor Providing Specialization and Division of Labor Overcoming Discrepancies Providing Contact Efficiency Marketing Channel Supply Chain

8. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 8 Types of Channel Intermediaries LO 2 Retailer A channel intermediary that sells mainly to customers. A channel intermediary that sells mainly to customers. Merchant Wholesaler Merchant Wholesaler An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Agents and Brokers Agents and Brokers Wholesaling intermediaries who facilitate the sale of a product by representing channel members.

9. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 9 Factors Suggesting Type of Wholesaling Intermediary to Use LO 2 FactorMerchant Wholesalers Agents/ Brokers Nature of productStandardNonstandard, custom Technicality of productComplexSimple Product’s gross marginHighLow Frequency of orderingFrequentInfrequent Time between order and receipt of shipment Shorter lead timeLonger lead time Number of customersManyFew Concentration of customersDispersedConcentrated

10. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 10 Channel Functions Performed by Intermediaries LO 2 Contacting/Promotion Negotiating Risk Taking Researching Financing Physically distributing Grading, Storing Sorting, & Assorting Facilitating Functions Transactional Functions Logistical Functions Logistical Functions

11. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 11 LO 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.

12. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 12 REVIEW LEARNING OUTCOME LO 2 Channel Intermediaries and Functions CHANNEL INTERMEDIARIES Retailers Wholesalers Agents and Brokers Retailers Wholesalers Agents and Brokers CHANNEL FUNCTIONS Transactional Logistical Facilitating Transactional Logistical Facilitating Perform

13. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 13 Channels Structures for Consumer Products LO 3 Producer Consumers Retailers Wholesalers Agents or BrokersWholesalerChannelRetailerChannelDirectChannelAgent/BrokerChannel

14. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 14 Channels for Business Products LO 3 Producer Industrial User DirectChannel Producer Govt. Buyer DirectChannel Producer Industrial User Industrial Distributor Agents or Brokers Agents or Brokers Agent/BrokerChannel Industrial Distributor Agent/Broker Industrial Channel

15. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 15 Business-to-Business Exchanges on the Internet LO 3 Agents link buyers and sellers Companies drop the intermediary from the supply chain “Private exchanges” with select suppliers automate the supply chain Online http://www.sherwinwilliams.com

16. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 16 Alternative Channel Arrangements LO 3 Multiple channels Strategic channel alliances Nontraditional channels

17. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 17 REVIEW LEARNING OUTCOME LO 3 Channel Structures CONSUMER CHANNELS  Direct  Retail  Wholesaler  Agent/broker  Direct  Retail  Wholesaler  Agent/broker BUSINESS CHANNELS  Direct  Industrial  Agent/broker  Agent/broker industrial  Direct  Industrial  Agent/broker  Agent/broker industrial ALTERNATIVE CHANNELS  Multiple  Nontraditional  Strategic alliances  Multiple  Nontraditional  Strategic alliances

18. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 18 LO 4 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.

19. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 19 LO 4 Role of Supply Chain Management Physical flow process that engineers the movement of goods Physical flow process that engineers the movement of goods Communicator of customer demand from point of sale to supplier

20. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 20 LO 4 Benefits of Supply Chain Management Means of differentiation Greater supply chain flexibility Improved customer service Higher revenues Reduced costs

21. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 21 Factors Influencing Channel Strategy Decisions LO 5 FactorsAffectingChannelChoiceFactorsAffectingChannelChoice Producer Factors Product Factors Market Factors Exclusive Distribution Selective Distribution Intensive Distribution Level of Distribution Intensity

22. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 22 Market Factors LO 5 Market Factors That Affect Channel Choices Market Factors That Affect Channel Choices Customer profiles Consumer or Industrial Customer Consumer or Industrial Customer Size of market Geographic location

23. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 23 Product Factors LO 5 Product Factors That Affect Channel Choices Product Factors That Affect Channel Choices Product Complexity Product Standardization Product Life Cycle Product Delicacy Product Price

24. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 24 Producer Factors LO 5 Producer Factors That Affect Channel Choices Producer Factors That Affect Channel Choices Producer Resources Number of Product Lines Desire for Channel Control

25. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 25 Levels of Distribution Intensity LO 5 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

26. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 26 Social Dimensions The Influence of Channel Strategy LO 6 Partnering Conflict Leadership Control Power

27. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 27 Channel Power, Control, and Leadership LO 6 6 Channel Power Channel Power A channel member’s capacity to control or influence the behavior of other channel members A channel member’s capacity to control or influence the behavior of other channel members Channel Control Channel Control A situation that occurs when one marketing channel member intentionally affects another member’s behavior A situation that occurs when one marketing channel member intentionally affects another member’s behavior Channel Leader or Captain A member of a marketing channel that exercises authority/power over the activities of other members A member of a marketing channel that exercises authority/power over the activities of other members Channel Conflict Channel Conflict A clash of goals and methods between distribution channel members A clash of goals and methods between distribution channel members Channel Partnering Channel Partnering The joint effort of all channel members to create a supply chain that serves customers & creates a competitive advantage The joint effort of all channel members to create a supply chain that serves customers & creates a competitive advantage

28. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 28 Channel Conflict LO 6 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

29. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 29 Logistical Components of the Supply Chain LO 7 Supply Chain Team 1.Sourcing & Procurement 2. Production Scheduling 3. Order Processing 4. Inventory Control 5. Warehouse & Materials Handling 6.Transportation Logistics Information System

30. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 30 1. Sourcing and Procurement LO 7  Plan purchasing strategies  Develop specifications  Select suppliers  Negotiate price and service levels  Reduce costs The Role of Purchasing:

31. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 31 2. Production Scheduling LO 7 Push / Pull Strategy Traditional Focus Push Start of Production Manufacturing Inventory- Based Mass Production Customer Focus Pull Customer-Order Based Mass Customization

32. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 32 Just-in-Time Manufacturing has become a big part of production scheduling LO 7 A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line. JIT

33. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 33 Benefits of JIT LO 7  Reduces raw material inventories  Shortens lead times  Creates better supplier relationships  Reduces production and storeroom costs  Reduces paperwork

34. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 34 JIT Requirements LO 7 Receive high-quality parts Meet supplier delivery commitments Have a crisis management plan

35. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 35 3. Order Processing LO 7 Information technology that replaces paper documents that accompany business transactions with electronic transmission of the information. Electronic Data Interchange http://www.walmartstores.com Online

36. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 36 Order Processing LO 7 A method of developing and maintaining an adequate assortment of materials or products to meet a manufacturer’s or a customer’s demand. Inventory Control System Inventory Control System

37. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 37 Order Processing LO 7 Materials Requirement Planning (MRP) Materials Requirement Planning (MRP) An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer. An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer. Distribution Resource Planning (DRP) Distribution Resource Planning (DRP) An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer. An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.

38. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 38 5. Materials Handling Functions LO 7 Receive goods into warehouse Dispatch the goods to temporary storage Recall, select, or pick the goods for shipment Identify, sort, and label goods

39. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 39 6. Transportation LO 7 Airways Water Pipelines Motor Carriers Railroads

40. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 40 Transportation Mode Choice LO 7  Cost  Transit time  Reliability  Capability  Accessibility  Traceability

41. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 41 Trends in Supply Chain Management LO 8 Electronic distribution Outsourcing of logistics functions Advanced computer technology

42. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 42 Learning Summary Outcomes for Chapter 12 Marketing Channels  1. A marketing channel is and why intermediaries are needed  2. The types of channel intermediaries and describe their functions and activities  3. Channel structures for consumer and business-to-business products and discuss alternative channel arrangements  4. Supply chain management and discuss its benefits  5. Issues that influence channel strategy  6. Channel leadership, conflict, and partnering  7. The logistical components of the supply chain  8. Technology and emerging trends in supply chain management  9. Channels and distribution decisions in global markets

43. Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 43 NOW  Go to www.mktg4me.comwww.mktg4me.com  Review the flash card for chapter 12  Take chapter 12 practice quiz  Explore other aspects of this site for chapter 12 as time permits  Take chapter12 quiz in allocated time located on WebCt for the course  Note: You might also take the extra credit quiz on chapter 12, ecquiz12  Good Luck