2. Chapter 16 Wholesaling And Physical Distribution

3. 16 | 3Copyright © Houghton Mifflin Company. All rights reserved. Objectives Understand nature of wholesaling in marketing channel Explain wholesalers’ functions Understand how wholesalers are classified Recognize how physical distribution activities are integrated into channels and overall strategies Discuss major objectives of physical distribution Examine physical distribution functions of order processing, warehousing, and transportation Discuss strategic implications of physical distribution systems

4. 16 | 4Copyright © Houghton Mifflin Company. All rights reserved. Major Wholesaling Functions

5. 16 | 5Copyright © Houghton Mifflin Company. All rights reserved. Service Provided By Wholesalers Initiate sales contracts and sell diverse products Financial assistance Source of working capital Information conduits in channel Closer contact with retailer Spread sales costs over many products Help retailer select inventory

6. 16 | 6Copyright © Houghton Mifflin Company. All rights reserved. Types Of Wholesalers

7. 16 | 7Copyright © Houghton Mifflin Company. All rights reserved. Merchant Wholesalers Useful For: Market coverage Make sales contacts Store inventory Handle orders Collect market information Furnish customer support

8. 16 | 8Copyright © Houghton Mifflin Company. All rights reserved. Full-Service Wholesaler A merchant wholesaler that performs the widest range of wholesaling functions.

9. 16 | 9Copyright © Houghton Mifflin Company. All rights reserved. Customers Rely On Full-Service Wholesalers For: Product availability Suitable assortments Breaking large quantities into small lots Financial assistance Technical advice/service

10. 16 | 10Copyright © Houghton Mifflin Company. All rights reserved. What are the potential advantages of using this company’s services? Reprinted with permission of MindShare Strategies, Inc.

11. 16 | 11Copyright © Houghton Mifflin Company. All rights reserved. General-Merchandise Wholesaler A full-service wholesaler with a wide product mix but limited depth within product lines

12. 16 | 12Copyright © Houghton Mifflin Company. All rights reserved. Products Of General-Merchandise Wholesalers Drugs Nonperishable foods Cosmetics Detergents Tobacco

13. 16 | 13Copyright © Houghton Mifflin Company. All rights reserved. General-Line Wholesaler A full-service wholesaler that carries only a few product lines but many products within those lines.

14. 16 | 14Copyright © Houghton Mifflin Company. All rights reserved. Specialty-Line Wholesaler A full-service wholesaler that carries only a single product line or a few items within a product line

15. 16 | 15Copyright © Houghton Mifflin Company. All rights reserved. Rack Jobbers A type of specialty-line wholesalers that own and maintain display racks in supermarkets, drugstores, and discount and variety stores

16. 16 | 16Copyright © Houghton Mifflin Company. All rights reserved. Limited-Service Wholesaler A merchant wholesaler that provides some services and specializes in a few functions

17. 16 | 17Copyright © Houghton Mifflin Company. All rights reserved. Services Provided By Limited-Service Wholesalers

18. 16 | 18Copyright © Houghton Mifflin Company. All rights reserved. Cash-And-Carry Wholesaler A limited-service wholesaler whose customers pay cash and furnish transportation

19. 16 | 19Copyright © Houghton Mifflin Company. All rights reserved. Truck Wholesaler A limited-service wholesaler that transports products directly to customers for inspection and selection

20. 16 | 20Copyright © Houghton Mifflin Company. All rights reserved. Drop Shipper A limited-service wholesaler that takes title to goods and negotiates sales but never actually takes possession of products

21. 16 | 21Copyright © Houghton Mifflin Company. All rights reserved. Mail-Order Wholesaler A wholesaler who uses catalogs instead of a sales force to sell products to retail and business buyers

22. 16 | 22Copyright © Houghton Mifflin Company. All rights reserved. What type of wholesale is Premium Ingredients International Reprinted with permission of Premium Ingredients International

23. 16 | 23Copyright © Houghton Mifflin Company. All rights reserved. Agents And Brokers Agent- intermediary that represents either buyers or sellers on a permanent basis Broker- intermediary that brings buyers and sellers together temporarily

24. 16 | 24Copyright © Houghton Mifflin Company. All rights reserved. Types Of Agents And Brokers

25. 16 | 25Copyright © Houghton Mifflin Company. All rights reserved. Services Agents And Brokers Provide

26. 16 | 26Copyright © Houghton Mifflin Company. All rights reserved. Agents Manufacturers’- independent that represents 2+ sellers and usually offers complete product lines Selling- markets a whole product line or a manufacturer’s entire output Commission merchant- receives foods on consignment from local sellers and negotiates sales in large, central markets

27. 16 | 27Copyright © Houghton Mifflin Company. All rights reserved. Manufacturers’ Sales Branches And Offices Sales Branch- manufacturer-owned intermediary that sells products and provides support services to the manufacturer’s sales force Sales Office- manufacturer-owned operation that provides services normally associated with agents

28. 16 | 28Copyright © Houghton Mifflin Company. All rights reserved. The Nature of Physical Distribution Physical Distribution – Activities used to move products from producers to consumers and other end users

29. 16 | 29Copyright © Houghton Mifflin Company. All rights reserved. Goal Of Physical Distribution Right Goods Right Place Right Time Right Quantity Right Support Services © Microsoft Power Point Clip Art

30. 16 | 30Copyright © Houghton Mifflin Company. All rights reserved. Outsourcing Contracting physical distribution tasks to third parties that do not have managerial authority within the marketing channel. News Article On Outsourcing

31. 16 | 31Copyright © Houghton Mifflin Company. All rights reserved. Physical Distribution Objectives Meeting Customer Service Standards Reducing Total Distribution Costs Reducing Cycle Time

32. 16 | 32Copyright © Houghton Mifflin Company. All rights reserved. Proportional Cost of Each Physical Distribution Function From Davis Database, 2005. Reprinted by permission of Establish Inc./Herbert W. Davis and Company.

33. 16 | 33Copyright © Houghton Mifflin Company. All rights reserved. Cycle Time The time needed to complete a process.

34. 16 | 34Copyright © Houghton Mifflin Company. All rights reserved. Order Processing Tasks –Order entry –Order handling –Order delivery Electronic Data Interchange- computer integrated order processing with production, inventory, accounting, and transportation

35. 16 | 35Copyright © Houghton Mifflin Company. All rights reserved. Many organizations provide hardware and software to make order processing more accurate and efficient Reprinted with permission of Siemens L&A, Jonathan Stein

36. 16 | 36Copyright © Houghton Mifflin Company. All rights reserved. Inventory Management Determining When To Order –Reorder point –Order lead time –Usage rate –Safety stock Just-in-time – approach in which supplies arrive just when needed for production or resale

37. 16 | 37Copyright © Houghton Mifflin Company. All rights reserved. Materials Handling Unit loading – one or more boxes placed on a pallet or skid Containerization – consolidation of many items into a single large container Containerization

38. 16 | 38Copyright © Houghton Mifflin Company. All rights reserved. Types Of Warehousing Private- company-operated facility Public- business leases storage space and related physical distribution facilities to other firms Distribution centers- large, centralized warehouse that focuses on moving rather than storing goodsDistribution centers- Overstock.com

39. 16 | 39Copyright © Houghton Mifflin Company. All rights reserved. Transportation Modes Railroads Trucks Waterways Air transport Pipelines © Microsoft Power Point Clip Art

40. 16 | 40Copyright © Houghton Mifflin Company. All rights reserved. Proportion Of Intercity Freight Carried By Various Transportation Modes U.S. Bureau of the Census, Statistical Abstract of the United States, 2006 (Washington, DC: Government Printing Office, 2006)

41. 16 | 41Copyright © Houghton Mifflin Company. All rights reserved. Typical Transportation Modes For Various Products

42. 16 | 42Copyright © Houghton Mifflin Company. All rights reserved. Factors Considered In Choosing Transportation Mode Cost Speed Dependability Load Flexibility Accessibility Frequency © Microsoft Power Point Clip Art

43. 16 | 43Copyright © Houghton Mifflin Company. All rights reserved. Relative Ratings Of Transportation Modes By Selection Criteria

44. 16 | 44Copyright © Houghton Mifflin Company. All rights reserved. Coordinating Transportation Intermodal- two or more modes used in combination Freight forwarder- organization that consolidates shipments from several firms into lot sizes Megacarrier- freight transportation firm that provides several modes of shipment

45. 16 | 45Copyright © Houghton Mifflin Company. All rights reserved. Odyssey meets customer needs by offering transportation options Reprinted with permission of Odyssey Logistics & Technology Corporation

46. 16 | 46Copyright © Houghton Mifflin Company. All rights reserved. Strategic Issues In Physical Distribution Evident in all elements of marketing mix Closes gap with customers Must be integrated Balances supply and demand in defined time period No single system ideal Changing customer needs and preferences