1 Unit 2 -- Distribution. 2 Unit Objectives b Define channels of distribution. b Identify channel...
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Transcript of 1 Unit 2 -- Distribution. 2 Unit Objectives b Define channels of distribution. b Identify channel...
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Unit 2 -- DistributionUnit 2 -- Distribution
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Unit ObjectivesUnit Objectives
Define channels of distribution.Define channels of distribution. Identify channel members.Identify channel members. Describe merchant intermediaries.Describe merchant intermediaries. List and explain distribution intensitiesList and explain distribution intensities Define physical distribution.Define physical distribution. Evaluate available distribution options.Evaluate available distribution options. Discuss warehousing and purchasing.Discuss warehousing and purchasing. Illustrate purchasing situations.Illustrate purchasing situations. Explore the steps of the purchasing process.Explore the steps of the purchasing process.
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Channel of DistributionChannel of Distribution
Path a product takes from producer or manufacturer to final user.
A new channel of distribution begins when the product changes form or is used by the purchaser.
Direct Channels Indirect Channels
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Channel MembersChannel Members
Industrial Market - products purchased for business use.
Consumer Market - products purchased for personal use.
Intermediaries - channel members that move the product through the channel (middlemen)
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Merchant IntermediariesMerchant Intermediaries
Wholesalers - Purchase large quantities of goods from manufacturers, store the goods, and resell them to other businesses
retailers institutions
electronic retail outlets governments
vending services manufacturers
professional users other wholesalers
commercial users
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Merchant IntermediariesMerchant Intermediaries
Agents - Participants in the marketing channel who negotiate the sale of products between other channel members
Do not take title to the products distributed
Manufacturer’s Agents and Brokers - Work independently running their own businesses
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Distribution IntensityDistribution Intensity
Intensive• using all suitable outlets for a product
• complete market coverage Selective
• limited number of outlets in a given geographic area
• maintains some control over product movement Exclusive
• total right to sell a product within an identified geographic location
• prestige, image, channel control Integrated Distribution
• Manufacturer acts as wholesaler and retailer for its own products
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Physical Distribution Physical Distribution
The process of transporting, storing, and handling goods to make them available to customers
Third largest expense for most businesses Includes:
freight transportation order processing
warehouse site selection warehousing
materials handling customer service
protective packaging inventory control
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TruckingTrucking
Advantages• convenient• less protective packaging• rapid deliveries• reduces inventory costs
Disadvantages• possible shipment delays• long distances - costly
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TruckingTrucking
Common CarriersContract CarriersPrivate CarriersExempt Carriers
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RailwaysRailways
Advantages
• large quantities - lower costs
• few delays
Disadvantages
• lack of flexibility
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RailwaysRailways
Piggyback ServiceFishyback ServiceSpecialized ServicePackage CarsDiversion-in-transitProcessing-in-transit
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WaterwaysWaterways
Advantages• low cost
Disadvantages• slow
• lack of flexibility
• weather delays
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WaterwaysWaterways
Internal Waterways
Intracoastal Waterways
International Waterways
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PipelinesPipelines
Advantages• lower long-term costs
• dependable
Disadvantages• high initial costs
• risk of breakage or leaking
• costs for any damages
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Air TransportationAir Transportation
Advantages• speed• reduction of storage & inventory expenses
Disadvantages• costs• delays
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Other CarriersOther Carriers
U.S. Postal ServiceU.S. Postal ServiceExpress CarriersExpress CarriersBus Package CarriersBus Package CarriersFreight ForwardersFreight Forwarders
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Warehousing or StorageWarehousing or Storage
Holding goods until they are sold Reasons for Storing Goods
• sell to customers• surplus of goods• stabilize prices• obtain discounts• faster delivery
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WarehousingWarehousing
Private WarehousesPublic WarehousesDistribution CentersBonded Warehouses
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PurchasingPurchasing
Determining what to buy & making arrangements with sources regarding final price, delivery, services expected, and method of payment.
Sometimes called “buying” Refers to industrial use
• consumption• production• distribution (resale buying)
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Purchasing SituationsPurchasing Situations
New Task Purchase
Modified Rebuy
Straight Rebuy
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Purchasing ProcessPurchasing Process
Selection of products Selection of suppliers Negotiating terms of agreement Placing the order Payment Evaluation of process
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Product SelectionProduct Selection
Planning• merchandise plan
– planned sales– beginning-of-the-month inventory– planned reductions– planned purchases
Analyze customer wants and needs Decide on goods and quantities
• basic stock list• model stock list • never -out list
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Selecting SuppliersSelecting Suppliers
Production Capabilities Past Experiences Product & Buying Arrangements
• Consignment buying
• Memorandum buying
Special Services• UPC Codes
• Peg man
• merchandising services
• bonuses & gifts
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Negotiating TermsNegotiating Terms
Discounts Dating terms
• advance dating• extra dating• end-of-month dating• receipt-of-goods dating
Delivery Arrangements• FOB destination• FOB shipping point• FOB factory freight prepaid• FOB destination charges reversed
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Placing the Order & PaymentPlacing the Order & Payment
Purchase Order• legal contract between the buyer and the
supplier that specifies the terms of the agreement
Invoice• the bill that is usually sent along with the
merchandise - it requests payment - should look very similar to the purchase order
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EvaluationEvaluation
Rate of SaleRate of Sale• identify “keepers”identify “keepers”
Stock TurnoverStock Turnover• number of times the average stock has number of times the average stock has
been sold and replaced in a given time been sold and replaced in a given time periodperiod
Review Supplier ResponsibilitiesReview Supplier Responsibilities