1. Logistics PPS9a Topic 6

2. Managing the Distribution Channel

3. Deregulation of trucking industry Smaller truck loads Smaller lot sizes for M Shorter lead times Competitive freight rates to distributors

4. Change in distribution structure – forces stronger and better management and coordination in distribution channel.

5. Channel management = managing an existing distribution channels/ running with what has been set up already

6. Channel design = setting up of the distribution channel

7. CHANNEL MANAGEMENT Is not channel design Securing the cooperation of channel members Distribution objectives aligned with organisation's overall marketing objectives Interorganisational evaluation of channel member performance

8. The process of designing, selecting and managing distribution systems and strategies Analyse consumer needs for service outputs Establish channel objectives in terms of delivering service outputs Evaluate distribution environment Identify alternative distribution systems and select appropriate members from available alternatives Determine channel leadership and control Ensure cooperation of channel members Evaluate and modify channel

9. 1. CHANNEL LEADERSHIP AND CONTROL Channel leader = that marketing channel institution that formulates marketing policies for other channel members and thus controls their marketing decisions Channel performance (overall & individual) = determined by level of control that some organisations have over other

10. Channel management by manufacturers or producers Pages 235 - 236 Channel management by wholesalers Pages 238-239 Channel management by retailers Pages 239-240 Channel management by logistical organisations Pages 241

11. Channel management by logistical organisations Why would it be interesting for logistical organisatios to assume channel management? Neutral relative to many of channel policies and activities

12. Channel management by logistical organisations Reduction in rates Special transport schedules Minimum weight requirements Specialised equipment Consulting services Providing information

13. WHO SHOULD LEAD THE DISTRIBUTION CHANNEL? Corporate vertical systems Jewellery Administered vertical systems Central Selling Organisation of De Beers Vertical contractual systems Retail-sponsored systems Wholesale-sponsored systems Franchising Manufacturer franchise M-to-Wholesaler franchise Service-sponsor franchise

14. Forward vertical integration – M ♥ R Reasons: Greater effectiveness and efficiency Gaining control over distribution activities Allowing suppliers to access to other marketing channels

15. Backward vertical integration – R ♥ M Reasons: Assure self of continuous supply of consistent quality-merchandise Effective & efficient flows of physical goods, information and transactions Resellers often acquire their sources of supply as a competitive move

16. = when intermediaries on same level of distribution channel are part of same group or form part of same management Why do you think it could work so well?

17. Complementary skills and resources … Could take form of strategic alliances and joint ventures even

18. Who will be the leader? Institution/ agency within the system using its power bases to aid in overcoming the natural variability of individual channel member behaviour and adding resources within this system to enhance the system’s viability.

19. Conflict will inevitably arise when … Performance in the channel is weak. How could one ensure strong channel performance then?

20. Strong channel performance … Specify roles and responsibilities clearly Ensure cross-member evaluation and regulation Leadership to: - correct use of power base & resources - recognition of dependency on system - actual USE of power (not just talky talky) - exercising of tolerance for control among channel members - desire on part of channel member to influence others - effective cooperation

21. Strong channel performance … Specify roles and responsibilities clearly Ensure cross-member evaluation and regulation Leadership to: - correct use of power base & resources - recognition of dependency on system - actual USE of power (not just talky talky) - exercising of tolerance for control among channel members - desire on part of channel member to influence others - effective cooperation

22. COORDINATION IN THE DISTRIBUTION PROCESS Long-run objective of channel management Long-run objective of channel management = to, AT A REASONABLE COST, achieve greatest possible IMPACT at end-user level so that individual channel members can get a satisfactory RETURN.

23. Steps in the coordination process Achieve successful channel performance Deal with channel conflict Enhance channel cooperation Use power or leadership to ensure that the services are properly delivered Identify the necessary tasks and institutions needed to perform those tasks Determine channel service leads

24. Step 1 Looking at SERVICE OUTPUTS demanded by end-users of commercial channel i.e. LOT SIZE DELIVERY/ WAITING TIME MARKET DECENTRALISATION (convenient locations) BREATH/ DEPTH OF P/S ASSORTMENT (product variety) SERVICE BACKUP Looking at SERVICE OUTPUTS demanded by end-users of commercial channel i.e. LOT SIZE DELIVERY/ WAITING TIME MARKET DECENTRALISATION (convenient locations) BREATH/ DEPTH OF P/S ASSORTMENT (product variety) SERVICE BACKUP

25. Step 2 Which marketing task undertaken to generate requisite service outputs & Which channel members employed to form a delivery system with tasks like: PHYSICAL PROCESSION OWNERSHIP PROMOTION FINANCING RISKING ORDERING PAYMENT Which marketing task undertaken to generate requisite service outputs & Which channel members employed to form a delivery system with tasks like: PHYSICAL PROCESSION OWNERSHIP PROMOTION FINANCING RISKING ORDERING PAYMENT

26. Step 3 Determine exactly which influence strategies used to accomplish hoped-for results Power to be used in marketing channel to specify tasks – tasks which are: COMPLEMENTARY GAIN COOPERATION ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM Determine exactly which influence strategies used to accomplish hoped-for results Power to be used in marketing channel to specify tasks – tasks which are: COMPLEMENTARY GAIN COOPERATION ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM

27. Step 3 Determine exactly which influence strategies used to accomplish hoped-for results Power to be used in marketing channel to specify tasks – tasks which are: COMPLEMENTARY GAIN COOPERATION ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM Determine exactly which influence strategies used to accomplish hoped-for results Power to be used in marketing channel to specify tasks – tasks which are: COMPLEMENTARY GAIN COOPERATION ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM

28. Step 3 Rewards Punishments Expertise Identification Legitimacy Information Rewards Punishments Expertise Identification Legitimacy Information

29. Step 4 Channel cooperation = joint striving of channel members towards individual and mutual goals i.e. JOINT PROMOTIONAL PROGRAMMES JOINT INVENTORY MANAGEMENT ASSISTANCE EXCLUSIVE PRODUCTS INFORMATION SHARING Channel cooperation = joint striving of channel members towards individual and mutual goals i.e. JOINT PROMOTIONAL PROGRAMMES JOINT INVENTORY MANAGEMENT ASSISTANCE EXCLUSIVE PRODUCTS INFORMATION SHARING

30. If play nicely together, lead to CHANNEL SATISFACTION -Social interaction (between intermediary and M) - Product dimensions (demand for and quality of M’s product) - Financial dimensions (intermediary margins & ROI) - Co-op advertising initiatives and allowances - Assistance from M to intermediary re consumer promotions, promotional support and POP displays -Social interaction (between intermediary and M) - Product dimensions (demand for and quality of M’s product) - Financial dimensions (intermediary margins & ROI) - Co-op advertising initiatives and allowances - Assistance from M to intermediary re consumer promotions, promotional support and POP displays

31. Step 5 Setting up mechanisms to deal with conflict issues which WILL arise NB that continues to provide desired service outputs … CONFLICT DUE TO DISPARITY IN GOALS: Sellers = M & PRODUCERS – HIGHEST PRICE Buyers = R – PAY LOWEST PRICE TO MAX THEIR PROFITS Setting up mechanisms to deal with conflict issues which WILL arise NB that continues to provide desired service outputs … CONFLICT DUE TO DISPARITY IN GOALS: Sellers = M & PRODUCERS – HIGHEST PRICE Buyers = R – PAY LOWEST PRICE TO MAX THEIR PROFITS

32. Step 6 Channel performance REGULAR EVALUATION BY MARKETING MANAGEMENT EXERCISE CONTROL OVER PERFORMANCE OF CHANNELS MAINTAIN EFFECTIVE DISTRIBUTION Channel performance REGULAR EVALUATION BY MARKETING MANAGEMENT EXERCISE CONTROL OVER PERFORMANCE OF CHANNELS MAINTAIN EFFECTIVE DISTRIBUTION