Post on 13-Jan-2016
15-1
Chapter ObjectivesChapter Objectives1. Introduce you to the Supply Chain2. Describe the roles that Distribution Channels
play in marketing strategy.3. Describe the various types of distribution
channels available to marketers.4. Outline the major channel strategy decisions.5. Identify and compare the major components of
logistics, the physical distribution system.6. Compare the major transportation alternatives
on the basis of speed, dependability, cost, frequency of shipments, availability & flexibility.
Copyright
2009 Pearso
n Educat
ion, Inc.
Publishing as Prentic
e Hall
15-2
Figure 15.3Figure 15.3Hewlett Packard’s Supply ChainHewlett Packard’s Supply Chain
Copyright
2009 Pearso
n Educat
ion, Inc.
Publishing as Prentic
e Hall
15-3
Links in the Supply ChainLinks in the Supply Chain
Supply chain linksThe supplier network provides raw
materials and parts to the manufacturerFirm manufactures a productProducts are distributed via the
Distribution Channel for resale to buyers
15-4
Distribution OverviewDistribution Overview
Distribution – moving goods and services from producers to consumers
Distribution channel (aka “marketing channel”) - system of marketing institutions that controls the physical flow of goods and services, along with ownership title, from producers to consumers or business users
15-5
Q. What distribution channels would you use for this product?
15-6
Distribution Channel FunctionsDistribution Channel Functions
Channels perform 5important functions:1. They serve as an intermediary to bring together large
companies with often small buyers (consumers)
2. They physically transport and store goods
3. They provide setup, repair, and maintenance services for products carried
4. They standardize payment terms, delivery schedules, prices, and purchase lots
5. They facilitate the exchange process by cutting the # of contacts necessary (for consumers & manufacturers) – see slide 6
Copyright
2009 Pearso
n Educat
ion, Inc.
Publishing as Prentic
e Hall
15-7
Figure 15.4Figure 15.4Reducing Transactions via IntermediariesReducing Transactions via Intermediaries
15-8
1. Direct Selling vs. 1. Direct Selling vs. Using IntermediariesUsing Intermediaries
Direct Selling: Direct Selling:
The producer does business directly with the final user, establishing a “contract”
Channel Strategy DecisionsChannel Strategy Decisions
Copyright
2009 Pearso
n Educat
ion, Inc.
Publishing as Prentic
e Hall
15-9
Distributing DirectDistributing Direct
Internet channels allow for global expansion (Salami.com) and mass customization
Vermont Teddy Bear
15-10
Direct Selling vs. Using IntermediariesDirect Selling vs. Using Intermediaries
Using Marketing Intermediaries: companies that operate between producers and consumers or business users (aka “middlemen”) Wholesaler: Marketing intermediary that
takes title to goods and then distributes these goods to another wholesaler or a retailer (aka “jobber” or “distributor”)
Retailer: Marketing intermediary that takes title to goods and then distributes these goods to the consumer
Broker/Agent: Marketing intermediary that doesn’t take title to goods
15-11
Types of Distribution Channels
Consumer Goods
Copyright
2009 Pearso
n Educat
ion, Inc.
Publishing as Prentic
e Hall
15-12
Figure 15.5, Part BFigure 15.5, Part BDifferent Types of Distribution Channels Different Types of Distribution Channels
Copyright
2009 Pearso
n Educat
ion, Inc.
Publishing as Prentic
e Hall
15-13
Figure 15.5, Part CFigure 15.5, Part CDifferent Types of Distribution Channels Different Types of Distribution Channels
15-14
Channel Strategy Decisions
2. Determining Distribution Intensity2. Determining Distribution IntensityDistribution intensity: the # of intermediaries
through which a manufacturer distributes its goods
15-15
Intensive Intensive distributiondistribution: channel policy in which a manufacturer of a product uses as many retailers as possible. Wrigley’s uses an
Intensive distribution strategy for its products
15-16
Selective distributionSelective distribution: channel policy in which a firm chooses only a limited number of retailers to handle its product line
15-17
Exclusive Exclusive distributiondistribution: channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products in a particular geographic areaThis Redken hair care
product made only available at its NYC outlet
15-18
Channel Strategy Decisions
3. Determining Who Should Perform Channel FunctionsEach function needs to be performed by either
the producer or an intermediary, such as:WarehousingTransportingFinancingCustomer service
*The goal is to transfer costs to the other company while ensuring your goals are being met!
Copyright
2009 Pearso
n Educat
ion, Inc.
Publishing as Prentic
e Hall
15-19
Traditional Channels are ChangingTraditional Channels are Changing
The new youth-oriented Scion gets delivered faster because Toyota’s streamlined distribution system lets buyers customize the car online
15-20
LogisticsLogistics
A company’s Logistics (physical distribution) system contains the following elements:
1. Transportation
2. Warehousing
3. Inventory Control
4. Order Processing
5. Protective packaging and materials handling
6. Customer Service The goal is to achieve specified customer
service levels while minimizing the total costs of distribution
15-21
Logistics Expenditures
Warehousing 22%
Administrative Costs 5%
Customer Service/Order Processing 6%
Inventory Control 25%
Transportation 42%
15-22
1. Transportation
Major ModesMajor ModesRailroads – largest mode. Most efficient way to
move bulky commodities long distancesMotor Carriers – Versatile and relatively fastWater Carriers – slow, but cheap. Most
international goodsPipelines – natural gas and oil productsAir Freight – fast, but expensiveIntermodal coordination – combination of two or
more modesInternet: services such as banking, news, and
entertainment
15-23
UPS: Offering a form of intermodal coordination between motor carriers and air carriers when speed is needed.
15-24
FedEx – another intermodal coordinator.
15-25
Comparison of Major Modes of Transport
Mode Speed Depend-ability in Meeting
Schedules
Frequency of
Shipments
Availabil-ity in
Different Locations
Flexibility in
Handling
Cost
Rail Average Average Low Low High Average
Water Very slow Average Very low Limited Very high Very low
Truck Fast High High Very extensive
Average High
Pipeline Slow High High Very limited
Very low Low
Air Very fast High Average Average Low Very high
15-26
2. Warehousing2. Warehousing
Storage Warehouse: warehouse that holds goods for moderate to long periods prior to shipment, usually to buffer seasonal demand
Distribution Warehouse: facility designed to assemble and then redistribute goods in a way that facilitates rapid movement to purchasers (usually holds goods <24 hours)
Locating Warehouses:Locating Warehouses:Cost factors – size, land, labor, shippingCustomer service factors – delivery time
15-27
3. Inventory Control Systems
“There’s only a one unit difference between too much inventory and not enough”
Some firms attempt to keep inventory levels under control by implementing just-in-time production (JIT).
15-28
4. Order Processing
Major ActivitiesMajor Activities
1.1. Conducting a credit checkConducting a credit check
2.2. Keeping a record of the saleKeeping a record of the sale
3.3. Making the right accounting entriesMaking the right accounting entries
4.4. Locating orders, shipping them, and adjusting Locating orders, shipping them, and adjusting inventory recordsinventory records
15-29
5. Protective Packaging & Materials Handling
Materials Handling: set of activities that move products within plants, warehouses, and transportation terminals
Unitizing: process of combining individual materials into large loads for easy handling (using pallets & strapping or shrink-wrapping usually)
Containerization: process of combining several unitized loads into a single, well-protected load= lower costs and less damage
15-30
6. Customer Service
Customer Service StandardsCustomer Service Standards - - Statement of goals and acceptable performance for the quality of service that a firm expects to deliver to its customers.
* Conclusion - Companies must find ways to meet Customer Service Standards while orchestrating the other 5 physical distribution methods at the lowest possible cost