Marketing Channels and Supply Chain Management: Prepared by Deborah Baker Texas Christian University

Marketing Channels and Supply Chain Management
12
chapter
Prepared by Deborah Baker Texas Christian University

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Chapter 12 Version 6e
Learning Objectives
1. Explain what a marketing channel is and why intermediaries are needed.
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2. Define the types of channel intermediaries and describe their functions and activities.
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Learning Objectives (continued)

3. Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements. 4. Define supply chain management and discuss its benefits.
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chapter
5. Discuss the issues that influence channel strategy.


6. Explain channel leadership, conflict, and partnering.
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7. Describe the logistical components of the supply chain. 8. Discuss the concept of balancing logistics service and cost.
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9. Discuss new technology and emerging trends in supply chain management.
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10. Discuss channels and distribution decisions in global markets. 11. Identify the special problems and opportunities associated with distribution in service organizations.
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Learning Objective
Explain what a marketing channel is and why intermediaries are needed.
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Marketing Channels
Marketing Channel
A set of interdependent organizations that ease the transfer of ownership as products move from producer to business user or consumer.
Supply Chain
The connected chain of all the business entities, both internal and external to the company, that perform or support the logistics function.
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Marketing Channel Functions
Specialization and Division of Labor
Channels Fulfill Three Important Functions
Overcoming Discrepancies
Providing Contact Efficiency

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Specialization and Division of Labor

Provides economies of scale
Aids producers who lack resources to market directly Builds good relationships with customers
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Discrepancy of Quantity Discrepancy of Assortment
The difference between the amount of product produced and the amount an end user wants to buy. The lack of all the items a customer needs to receive full satisfaction from a product or products.
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Temporal Discrepancy
A situation that occurs when a product is produced but a customer is not ready to buy it. The difference between the location of a producer and the location of widely scattered markets.
Spatial Discrepancy
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Contact Efficiency
Zenith Sony RCA Toshiba
Zenith
Sony
RCA
Toshiba
Circuit City
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Learning Objective
Define the types of channel intermediaries and describe their functions and activities.
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Channel Intermediaries
Retailer
A channel intermediary that sells mainly to customers. An institution that buys goods from manufacturers, takes title to goods, stores them, and resells and ships them. Wholesaling intermediaries who facilitate the sale of a product by representing channel member.
Merchant Wholesaler
Agents and Brokers

2
Channel Intermediaries
Retailers Merchant Wholesalers Agents and Brokers
Take Title to Goods
Take Title to Goods
Do NOT Take Title to Goods

Channel Functions Performed by Intermediaries

Contacting/Promotion
Transactional Functions
Negotiating Risk Taking
Physically distributing
Logistical Functions
Storing Sorting
Facilitating Function
Researching
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Financing
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2
Logistics
The process of strategically managing the efficient flow and storage of raw materials, in-process inventory, and finished goods from point of origin to point of consumption.
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3
Learning Objective
Describe the channel structures for consumer and business-to-business products and discuss alternative channel arrangements.
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3
Direct Channel
A distribution channel in which producers sell directly to consumers.
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3
Channels for Consumer Products
Direct Channel Producer
Retailer Channel Producer Wholesaler Agent/Broker Channel Channel Producer Producer
Agents or Brokers
Wholesalers Retailers Retailers Wholesalers Retailers
Consumers 6eConsumers South-Western Consumers Chapter 12 Version 2002
Consumers 20
Channels for Business-toBusiness Products

Direct Channel
Producer
Industrial Agent/Broker Agent/Broker Direct Distributor Channel Channel Industrial Channel Producer Producer Producer Producer
Agents or Brokers Industrial Distributor Industrial Industrial User 12 Version 6e User Chapter
Agents or Brokers Industrial Distributor
Industrial Government Industrial User User Buyer 2002 South-Western 21
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Alternative Channel Arrangements
Multiple Channels
Different Channels May be Used
Nontraditional Channels Adaptive Channels
Strategic Channel Alliances

Learning Objective
Define supply chain management and discuss its benefits.
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Supply Chain Management
A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption.
Supply Chain Management

Focus on Innovative Solutions
Competitive with focus on Customer Satisfaction
Results of Supply Chain Management

Synchronized Flow Customer Value

Role of Supply Chain Management

Communicator of customer demand from point of sale to supplier
Role of Supply Chain Management
Physical flow process that engineers the movement of goods
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Supply Chain Management Activities

Determine channel strategy and level of distribution intensity Manage relationships in the supply chain
Manage the logistical components of the supply chain

Balance the costs of the supply chain with the service level demanded by customer
Benefits of Supply Chain Management

Reduced Costs
Improved Service Common Benefits of Supply Chain Management

Enhanced Revenues
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Learning Objective
Discuss the issues that influence channel strategy.
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Channel Strategy Decisions

Issues that Influence Channel Strategy Factors Affecting Channel Choice Market Factors Levels of Distribution Intensity Intensive Distribution
Product Factors
Producer Factors
Selective Distribution
Exclusive Distribution
Market Factors
Customer Profiles Consumer or Industrial Customer Size of Market
Market Factors That Affect Channel Choices

Geographic Location
Product Factors
Product Complexity
Product Price
Product Factors That Affect Channel Choices

Product Life Cycle
Product Delicacy
Producer Factors
Producer Resources
Number of Product Lines

Producer Factors That Affect Channel Choices
Desire for Channel Control
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Levels of Distribution Intensity

Intensity Level Intensive Objective
Achieve mass market selling. Convenience goods. Work with selected intermediaries. Shopping and some specialty goods. Work with single intermediary. Specialty goods and industrial equipment.
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Number of Intermediaries
Many
Selective
Several
Exclusive
One
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Learning Objective
Explain channel leadership, conflict, and partnering.
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Managing Channel Relationships

Channel Power Channel Control
Social Dimensions of Channels
Channel Leadership Channel Conflict Channel Partnering
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Channel Power, Control, and Leadership

Channel Power
Channel Control
A channel members capacity to control or influence the behavior of other channel members A situation that occurs when one marketing channel member intentionally affects another members behavior.
Channel Leader
A member of a marketing channel that exercises authority/power over the activities of other members.
Channel Conflict
A clash of goals and methods between distribution channel members.

Horizontal Conflict
Occurs among channel members on the same level Occurs among channel members at different levels
Vertical Conflict
Channel Partnering
The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage.
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Transaction- vs. Partnership-Based Firms

Transaction-Based
Short-term relationships Multiple suppliers Adversarial relationships Price dominates Minimal supplier investment Minimal information sharing Firms are independent Minimal functional area interaction
Partnership-Based
Long-term relationships Few suppliers Cooperative partnerships Value-added services dominate High supplier/buyer investment Extensive information sharing Firms are interdependent Extensive functional area interaction
Learning Objective
Describe the logistical components of the supply chain.
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Integrated Logistical Components of the Supply Chain

Sourcing & Procurement Logistics Information System Production Scheduling
Supply Chain Team
Order Processing & Customer Service Inventory Control Warehouse & Materials Handling Transportation
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Sourcing and Procurement
Plan Purchasing Strategies
Role of Purchasing Departments
Develop Specifications Select Suppliers

Negotiate Price Negotiate Service Levels
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Production Scheduling
Traditional Focus Customer Focus

Push/Pull Strategy Start of Production Manufacturing
Push
Inventory-Based
Pull
Customer-Order Based
Mass Production Mass Customization
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Just-in-Time Manufacturing
A process that redefines and simplifies manufacturing by reducing inventory levels and delivering raw materials just when they are needed on the production line.
Benefits of JIT
Reduces raw material inventories
Shortens lead times Creates better supplier relationships
Reduces production and storeroom costs Reduces paperwork
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Electronic Data Interchange
Information technology that replaces paper documents that accompany business transactions.
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Inventory Control System
A method of developing and maintaining an adequate assortment of materials or products to meet a manufacturers or a customers demand.
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Warehouse and Materials-Handling

Receive goods into warehouse Identify, sort and label goods Dispatch the goods to temporary storage
Functions of Materials Handling
Recall, select, or pick the goods for shipment

Transportation
Cost
Transit Time
Reliability
Criteria for Transportation Mode Choice

Capability Accessibility Traceability

Criteria for Ranking Modes of Transportation

Highest
Relative Cost Transit Time Reliability
Air Water Pipe Water Truck Air
7
Lowest
Truck
Rail Truck Rail Rail Truck
Rail
Pipe Rail Truck Air Rail
Pipe
Truck Air Air Water Water
Water
Air Water Pipe Pipe Pipe
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Capability
Accessibility Traceability
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Learning Objective
Discuss the concept of balancing logistics service and cost.
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Logistics Service
Interrelated activities performed by a member of the supply chain to ensure that the right product is in the right place at the right time.
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Logistical Competencies
Devise logistics service strategies as a means of competitive differentiation Integrate members of supply chain to achieve operating excellence Respond quickly to changing logistical requirements
Constantly monitor all aspects of the supply chain

Learning Objective
Discuss new technology and emerging trends in supply chain management.
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Trends in Supply Chain Management

Trends Affecting the Logistics Industry
Advanced Computer Technology
Outsourcing of Logistics Functions Electronic Distribution
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Learning Objective
10
Discuss channels and distribution decisions in global markets.
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Channels and Distribution Decisions for Global Markets

Channel structure differs
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Global Channel Development
Channel types differ Gray marketing channels Awareness of trade legalities
Global Supply Chain Management

Transportation Infrastructure
Learning Objective
11
Identify the special problems and opportunities associated with distribution in service organizations.
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Channels and Distribution Decisions for Services

Minimizing wait times
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Managing service capacity
Areas of Focus for Service Distribution
Improving delivery through new channels
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Marketing Channels and Supply Chain Management: Prepared by Deborah Baker Texas Christian University

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Marketing Channels and Supply Chain Management: Prepared by Deborah Baker Texas Christian University

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Marketing Channels and Supply Chain Management

Prepared by Deborah Baker Texas Christian University

Learning Objectives (continued)

5. Discuss the issues that influence channel strategy.

Learning Objectives (continued)

Learning Objectives (continued)

Explain what a marketing channel is and why intermediaries are needed.

Channels Fulfill Three Important Functions

Providing Contact Efficiency

Specialization and Division of Labor

Agents and Brokers

Take Title to Goods

Take Title to Goods

Do NOT Take Title to Goods

Channel Functions Performed by Intermediaries

Negotiating Risk Taking

A distribution channel in which producers sell directly to consumers.

Consumers 6eConsumers South-Western Consumers Chapter 12 Version 2002

Channels for Business-toBusiness Products

Agents or Brokers Industrial Distributor

Industrial Government Industrial User User Buyer 2002 South-Western 21

Different Channels May be Used

Nontraditional Channels Adaptive Channels

Strategic Channel Alliances

Supply Chain Management

Supply Chain Management

Results of Supply Chain Management

Synchronized Flow Customer Value

Role of Supply Chain Management

Role of Supply Chain Management

Physical flow process that engineers the movement of goods

Supply Chain Management Activities

Manage the logistical components of the supply chain

Benefits of Supply Chain Management

Improved Service Common Benefits of Supply Chain Management

Channel Strategy Decisions

Market Factors That Affect Channel Choices

Product Factors That Affect Channel Choices

Product Life Cycle

Number of Product Lines

Desire for Channel Control

Levels of Distribution Intensity

Explain channel leadership, conflict, and partnering.

Managing Channel Relationships

Social Dimensions of Channels

Channel Leadership Channel Conflict Channel Partnering

Channel Power, Control, and Leadership

A clash of goals and methods between distribution channel members.

Transaction- vs. Partnership-Based Firms

Describe the logistical components of the supply chain.

Integrated Logistical Components of the Supply Chain

Supply Chain Team

Sourcing and Procurement

Plan Purchasing Strategies

Role of Purchasing Departments

Develop Specifications Select Suppliers

Traditional Focus Customer Focus

Mass Production Mass Customization

Reduces production and storeroom costs Reduces paperwork

Electronic Data Interchange

Inventory Control System

Warehouse and Materials-Handling