1. Delivering Value Through Supply Chain Management: Channels of Distribution and Logistics

2. Chapter Objectives value chain key elements in a supply chain
distribution channel
functions of distribution channels
wholesaling intermediaries
found in distribution channels

3. Chapter Objectives types of distribution channels
steps for distribution channel strategies
how supply chain uses logistics

4. Place: The Final Frontier
Value chain: a series of activities directed at designing, producing, marketing, delivering, and supporting any product.
Supply chain: Activities necessary to turn raw materials into a good or service and put it in the hands of the consumer:
LIDROCK.COM

5. Figure 15.2: The Generic Value Chain

6. Links in the Supply Chain
Supply chain management:
the management of flows
among the firms
in a supply chain
to maximize total profitability
UPS.COM

7. Links in the Supply Chain
Supply chain management:
physical movement of goods
sharing of information about goods
In-sourcing:
contracting with a specialist
that services the company’s supply chains
UPS.COM

8. Supply Chain vs. Channel of Distribution
facilitates movement of a product
from producer to final customer
Supply chain:
begins with raw materials

9. Figure 15.3: Supply Chain

10. The Importance of Distribution
You Can’t Sell What Isn’t There

11. The Importance of Distribution: You Can’t Sell What Isn’t There!
Direct channel:
a producer to a customer
Indirect channel:
one or more intermediaries

12. The Importance of Distribution: You Can’t Sell What Isn’t There!
intermediaries
wholesalers, agents,
brokers, retailers
they help move
product to consumer
or business user

13. Functions of Distribution Channels
To ease the flow of goods
from producer to customer
To provide time, place, and ownership utility
logistics or physical distribution functions

14. Functions of Distribution Channels
create efficiencies
by reducing number of transactions
Breaking bulk:
purchasing large quantities of goods to sell one/few at a time to customers
Creating assortments:
providing variety of products in one location

15. Figure 15.4: Reducing Transactions via Intermediaries

16. Functions of Distribution Channels
To make purchase process easier
To manage risk
To perform communication and transaction functions

17. The Internet in the Distribution Channel
Radical changes in distribution strategies
Disintermediation:
eliminating traditional intermediaries
Knowledge management:
sharing knowledge
with other supply chain members
DELL

18. Channel Composition: Types of Wholesaling Intermediaries
firms that handle the flow of products
from the manufacturer
to the retailer/business user

19. Independent Intermediaries
Merchant wholesalers:
buy goods
from manufacturers
sell to retailers
and other B2B customers

20. Independent Intermediaries
Merchant wholesalers:
Full-service merchant wholesalers
Limited-service merchant wholesalers
Cash-and-carry wholesalers
Truck jobbers
Drop shippers
Rack jobbers
Mail-order wholesalers

21. Independent Intermediaries
Merchandise Agents/Brokers:
provide services in exchange for commissions
Manufacturers’ agents/reps
Selling agents
Commission merchants
Merchandise brokers

22. Independent Intermediaries
Manufacturer-Owned Intermediaries
Sales branches
Sales offices
Manufacturers’ showrooms

23. Types of Distribution Channels
Consumer Channels
Direct channel:
producer sells directly to customers
Indirect channel:
producer uses one or more intermediaries
to reach consumers

24. Types of Distribution Channels (cont’d)
Business-to-business channels
Dual distribution systems
Hybrid marketing systems
MERCK.COM

25. Figure 15.6: Steps in Distribution Planning

26. Planning a Channel Strategy
Step 1:
Develop distribution objectives
that support the firm’s
overall marketing goals.

27. Planning a Channel Strategy
Step 2:
Evaluate internal and external environmental influences
to develop best channel structure.
ability to handle distribution functions
Channel intermediaries available
How competition distributes products

28. Planning a Channel Strategy (cont’d)
Step 3: Choose a distribution strategy
Channel relationships:
conventional, vertical, or horizontal system
Conventional marketing system:
members work independently of one another

29. Planning a Channel Strategy (cont’d)
Step 3: Choose a distribution strategy
Vertical marketing system (VMS):
formal cooperation among channel members
Administered VMS
Corporate VMS
Contractual VMS
Retailer cooperative
Franchise organizations
IGAINC.COM

30. Planning a Channel Strategy (cont’d)
Step 3: Choose a distribution strategy
Horizontal marketing system:
two or more firms
at the same channel level
agree to work together
to get their product to the customer

31. Planning a Channel Strategy (cont’d)
Step 3: Choose a distribution strategy
Distribution intensity
Exclusive distribution:
selling only through a single outlet in a region
Selective distribution:
using fewer outlets than intensive
but more than exclusive distribution
Intensive distribution:
selling through all suitable wholesalers or retailers

32. Planning a Channel Strategy (cont’d)
Step 4: distribution tactics
Selecting channel partners:
normally a long-term commitment
Managing the channel
Channel leader/captain:
dominant firm that controls the channel
(via economic, legitimate, reward/coercive power)

33. Distribution Channels and the Marketing Mix
Place decisions affect:
Pricing
Product and its positioning
ENTERPRISE
RENT-A-CAR

34. Logistics: Implementing the Supply Chain
the process of designing, managing, and improving the movement of products through the supply chain
Purchasing
Manufacturing
Storage
Transport

35. Logistics: Implementing the Supply Chain (cont’d)
Physical distribution:
the activities used to move finished goods
from manufacturers
to final customers

36. Logistics Functions
Order processing
Warehousing
Materials handling

37. Logistics Functions (cont’d)
Transportation:
mode by which
products move
among channel members

38. Logistics Functions Transportation modes differ in their--
Dependability
(safety and punctuality)
Cost
Speed of delivery
Accessibility
(different locations served)
Capability
(variety of products handled)
Traceability
(ability to locate goods in shipment)

39. Modes of Transportation
Railroads:
carry heavy, bulky items over long distances
Water:
carry large, bulky goods
(especially internationally)
Trucks:
carry consumer goods in short haul;
allow flexibility in locations

40. Modes of Transportation (cont’d)
Air:
carry high value-items;
fastest and most expensive mode
Pipelines:
carry petroleum/chemical products
Internet:
distribute services
such as banking, news, and entertainment

41. Logistics Functions (cont’d)
Inventory control:
activities to ensure foods are always available to meet customers’ demands
Radio frequency identification (RFID)
Just in time (JIT)

42. THE END

43. Real People, Real Choices
Darden Restaurants (Jim Lawrence)
Volatility in the foodservice supply chain
Darden needed to protect its foodservice supply
Option 1: develop a food distribution network owned and operated by Darden to support all its restaurants.
Option 2: work with third party logistics (3PL) providers.
Option 3: work with traditional systems distributors under a new operating model.

44. Real People, Real Choices
Darden Restaurants (Jim Lawrence)
Jim chose option 3: work with traditional systems distributors under a new operating model.
Restaurants experienced greater manager satisfaction and significant savings from collaborative efforts of all supply chain partners
DARDEN.COM

45. Marketing Plan Exercise
Dell Computer has used one simple supply chain system—direct sales over the Internet or by phone to both business and consumer users.
--If you were a marketing executive at Dell, what new supply chain options would you suggest?

46. Marketing in Action Case: You Make the Call
What is the decision facing Procter and Gamble?
What factors are important in understanding this decision situation?
What are the alternatives?
What decision(s) do you recommend?
What are some ways to implement your recommendation?

47. Keeping It Real: Fast-Forward to Next Class, Decision Time at Eskimo Joe’s
Meet Stan Clark, entrepreneur.
New law increased drinking age to 21, threatening the future of a college-town beer bar.
The decision: how to survive the new law?

48. Group Activity
Your group of marketers has been hired by a furniture manufacturer.
You feel marketing should have input into supplier selection, but the purchasing department disagrees.
--Explain the importance of the value chain perspective.

49. Discussion
The supply chain concept looks at both inputs and ways to move the product from manufacturer to consumer.
--Should marketers concern themselves with the total supply chain concept? Why or why not?

50. Discussion
Some say music, video, or textbook downloading, even if unauthorized, merely creates a more efficient supply chain by “cutting out the middleman.”
--Do you agree?
--Why or why not?

51. Group Activity
You’re responsible for direct marketing at a firm that sells its industrial cleaning products through manufacturers’ reps.
You’re considering adding a direct Internet channel to your distribution strategy, but you wonder about channel conflict.
--List the pros and cons of adding an Internet channel.
--What do you think is the best decision?

52. Discussion
You’ve probably heard someone say, “The reason products cost so much is all the intermediaries.”
--Do intermediaries increase the cost of products?
--Would consumers be better off or worse off without intermediaries?

53. Discussion
Many entrepreneurs choose to start a franchise business rather than “go it alone.”
--Do you think franchises offer the typical businessperson good opportunities?
--What are some positive and negative aspects of purchasing a franchise?

54. Discussion
Colleges and universities seeking better ways to satisfy their customers are increasingly looking at the distribution of their product – education.
--Describe your school’s channel(s) of distribution.
--What innovative distribution methods do you think your school could try?