Unit IV Logistics Management Promotion

8/13/2019 Unit IV Logistics Management Promotion

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Chapter 12

Distribution Channels and

Logistics Management


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What is the Nature

Of DistributionChannels?

How do ChannelFirms Interact andOrganize to do the

Work of theChannel?

Issues Concerning

Distribution Channels

What Problems doCompanies Face in

Designing andManaging Their

Channels?

What Role DoesPhysical Distribution

Play in Attractingand Satisfying

Customers?


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What is a Distribution

Channel?A set of interdependent organizations(intermediaries) involved in the process

of making a product or service availablefor use or consumption by the consumeror business user.

Marketing Channel decisions are amongthe most important decisions thatmanagement faces and will directly

affect every other marketing decision.


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Why are Marketing

Intermediaries Used?The use of intermediaries results from theirgreater efficiency in making goods available totarget markets.

Offer the firm more than it can achieve on itsown through the intermediaries:

Contacts,

Experience, Specialization,

Scale of operation.

Purpose: match supply from producers to demandfrom consumers.

k d


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How a Marketing IntermediaryReduces the Number of

Channel Transactions


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Contact

Financing

InformationRisk Taking

Promotion

MatchingNegotiation

PhysicalDistribution

These Functions Should be Assigned to the Channel Member Who CanPerform Them Most Efficiently and Effectively to Provide Satisfactory

Assortments of Goods and Services to Target Customers.

Distribution Channel

Functions

In this video clip, a D upont executive speaks about managing

the supply chain and the logistics process for two well-known

brands: Nomex and Kevlar.

Clicktoplay

li


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M W J R C

M W R C

M R C

M C

Channel 1

Channel 2

Channel 3

Channel 4

Channel Level - Each Layer of Marketing Intermediaries thatPerform Some Work in Bringing the Product and its Ownership

Closer to the Final Buyer.

Number of Channel Levels

(Fig. 12.2)

Direct Channel

Indirect Channel


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Channel Behavior & ConflictThe channel will be most effective when: each member is assigned tasks it can do best.

all members cooperate to attain overall channel goals

and satisfy the target market.When this doesnt happen, conflict occurs: Horizontal Conflict occurs among firms at the same

level of the channel, i.e retailer to retailer.

Vertical Conflict occurs between different levels of thesame channel, i.e. wholesaler to retailer.

For the channel to perform well, each channelmembers role must be specified and conflict must

be managed.


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Conventional Marketing ChannelVs. a Vertical Marketing System

(Fig. 12.3)ConventionalMarketingChannel

VerticalMarketingSystem

Manufacturer

Retailer

W

holesaler

Manufacturer

Wholesaler

Retailer

ConsumerConsumer


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CorporateCommon Ownership at DifferentLevels of the Channel i.e. Sears

ContractualContractual Agreements Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members i.e. Kraft

Degree ofDirect

Control

Types of Vertical Marketing

Systems


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ContractualVMS

RetailerCooperatives

Franchise

Organizations

Wholesaler Sponsored

Voluntary Chain

Service-Firm-Sponsored

Franchise System

Manufacturer-Sponsored Wholesaler

Franchise System

Manufacturer-Sponsored Retailer

Franchise System

Vertical MarketingSystems (VMS)

CorporateVMS

AdministeredVMS

Types of Vertical Marketing

Systems


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Innovations in Marketing

SystemsHorizontal Marketing

System

Two or More Companiesat One Channel Level

Join Together toFollow a New

Marketing Opportunity.

Example:

Banks in Grocery Stores

Hybrid MarketingSystem

A Single Firm Sets UpTwo or More MarketingChannels to Reach

One or More CustomerSegments.

Example:

Retailers, Catalogs,and Sales Force


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Discussion ConnectionsDescribe the kinds of horizontal andvertical channel conflict that might occur in

one of the following: Personal computer industry,

Automobile industry,

Music industry,

Clothing industry.

How would you remedy the problems youhave just described?


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Changing Channel

Organization

A Major Trend is TowardDisintermediation Which Means thatProduct and Service Producers are

Bypassing Intermediaries and Going

Directly to Final Buyers or That NewTypes of Channel Intermediaries areEmerging to Displace Traditional Ones.


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Analyzing Consumer Service Needs

Setting Channel Objectives & Constraints

Exclusive

Distribution

Selective

Distribution

Intensive

Distribution

Identifying Major Alternatives

Evaluating the Major Alternatives

Designing International Distribution Channels

Channel Design Decisions


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Nature and Importance of

Marketing LogisticsInvolves getting the right product to the rightcustomers in the right place at the right time.

Companies today place greater emphasis onlogistics because: customer service and satisfaction have become the

cornerstone of marketing strategy.

logistics is a major cost element for most companies.

the explosion in product variety has created a needfor improved logistics management.

Improvements in information technology has createdopportunities for major gains in distribution efficiency.


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Goals of the Logistics System

Lower Distribution Costs;Lower Customer Service

Levels

Higher Distribution Costs;Higher Customer Service

Levels

Goal:

To Provide a Targeted Level of Customer Service

at the Least Cost.


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InventoryWhen to order

How much to orderJust-in-time

CostsMinimize Costs of

Attaining Logistics

Objectives

WarehousingStorage

DistributionAutomated

Order ProcessingReceivedProcessedShipped

Logistics

FunctionsTransportation

Rail, Truck, Water,

Pipeline, Air,Intermodal

Major Logistics Functions


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RailNations largest carrier, cost-effectivefor shipping bulk products, piggyback

Truck

Flexible in routing & time schedules, efficientfor short-hauls of high value goodsWater

Low cost for shipping bulky, low-value,non perishable goods, slowest form

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

AirHigh cost, ideal when speed is needed or

distance markets have to be reached

Transportation Modes


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1. Speed2. Dependability

3. Availability

4. Costs

5. Others

Checklist for ChoosingTransportation Modes

Choosing Transportation

Modes

Third party logistics


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Concept Recognizes that Providing Better CustomerService and Trimming Distribution Costs Requires

Teamwork, Both Inside the Company and Among All theMarketing Channel Organizations.

Cross-Functional Teamwork inside the Company

Building Channel Partnerships

Third-Party Logistics

Integrated Logistics

Management

Many companies are

now outsourcing

logistics tasks to

companies like

Ryder Integrated

Logistics.

li .


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Review of Concept

ConnectionsExplain why companies use distribution channelsand discuss thee functions these channelsperform.

Discuss how channel members interact and howthey organize to perform the work of the channel.

Identify the major channel alternatives open to a

company.Discuss the nature and importance of physicaldistribution.

Analyze integrated logistics, including how it may

be achieved and its benefits to the company

Unit IV Logistics Management Promotion

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