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Marketing Channels & SCM

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Learning Objectives

1212

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

2. Define the types of channel intermediaries and describe their functions and activities.

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chapter

Learning Objectives (continued)

1212

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.

5. Discuss the issues that influence channel strategy.

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chapter

Learning Objectives (continued)

1212

6. Explain channel leadership, conflict, and partnering.

7. Describe the logistical components of the supply chain.

8. Discuss the concept of balancing logistics service and cost.

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chapter

Learning Objectives (continued)

1212

9. Discuss new technology and emerging trends in supply chain management.

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 11

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

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Marketing Channels 11

MarketingChannel

MarketingChannel

SupplyChain

SupplyChain

A set of interdependent organizations that ease the transfer of ownership as

products move from producer to business user or consumer.

A set of interdependent organizations that ease the transfer of ownership as

products move from producer to business user or consumer.

The connected chain of all the business entities, both internal and external to the

company, that perform or support the logistics function.

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 andDivision of Labor

Specialization andDivision of Labor

ChannelsFulfillThree

ImportantFunctions

ChannelsFulfillThree

ImportantFunctions

OvercomingDiscrepanciesOvercoming

Discrepancies

Providing ContactEfficiency

Providing ContactEfficiency

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9

Specialization and Division of Labor

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Provides economies of scale

Aids producers who lack resources to market directly

Builds good relationships with customers

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Overcoming Discrepancies

Discrepancyof

Quantity

Discrepancyof

Quantity

Discrepancyof

Assortment

Discrepancyof

Assortment

The difference between the amount of product produced and the

amount an end user wants to buy.

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.

The lack of all the items a customer needs to receive full satisfaction from a product or

products.

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11

Overcoming Discrepancies

TemporalDiscrepancy

TemporalDiscrepancy

SpatialDiscrepancy

SpatialDiscrepancy

A situation that occurs when a product is produced but a

customer is not ready to buy it.

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.

The difference between the location of a producer and the

location of widely scattered markets.

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Contact Efficiency

ZenithZenith SonySony RCARCA ToshibaToshiba

ZenithZenith SonySony RCARCA ToshibaToshiba

Circuit CityCircuit City

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Learning Objective 22

Define the types of channel intermediaries and describe their

functions and activities.

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Channel Intermediaries

RetailerRetailer

MerchantWholesalerMerchant

Wholesaler

Agents andBrokers

Agents andBrokers

A channel intermediary that sells mainly to customers.

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.

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.

Wholesaling intermediaries who facilitate the sale of a product by representing channel member.

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Channel Intermediaries

RetailersRetailers

Merchant WholesalersMerchant

Wholesalers

Agents and

Brokers

Agents and

Brokers

Take Title to GoodsTake Title to Goods

Take Title to GoodsTake Title to Goods

Do NOT Take Title to GoodsDo NOT Take Title to Goods

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Channel Functions Performed by Intermediaries

Contacting/Promotion

Negotiating

Risk Taking

FacilitatingFunction

FacilitatingFunction

TransactionalFunctions

TransactionalFunctions

Logistical Functions

Logistical Functions

Researching

Financing

Physically distributing

Storing

Sorting

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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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Learning Objective

Describe the channel structures for consumer and

business-to-business products and discuss alternative channel arrangements.

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Direct Channel

A distribution channel in which

producers sell directly to

consumers.

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Channels for Consumer Products

Producer Producer Producer Producer

Consumers Consumers Consumers Consumers

Retailers Retailers Retailers

Wholesalers Wholesalers

Agents orBrokers

WholesalerChannel

RetailerChannel

DirectChannel

Agent/BrokerChannel

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Channels for Business-to-Business Products

Producer Producer Producer Producer

IndustrialUser

IndustrialUser

IndustrialUser

IndustrialUser

IndustrialDistributor

IndustrialDistributor

Agents orBrokers

Agents orBrokers

Agent/BrokerChannel

IndustrialDistributor

DirectChannel

Producer

GovernmentBuyer

DirectChannel

Agent/BrokerIndustrialChannel

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Alternative Channel Arrangements

DifferentChannels

May be Used

Multiple Channels

Adaptive Channels

Strategic ChannelAlliances

NontraditionalChannels

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23

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.

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Supply Chain Management

Resultsof

Supply ChainManagement

Resultsof

Supply ChainManagement

Focus on Innovative SolutionsFocus on Innovative Solutions

Competitive with focus onCustomer Satisfaction

Competitive with focus onCustomer Satisfaction

Synchronized FlowSynchronized Flow

Customer ValueCustomer Value

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Physical flow process that engineers the

movement of goods

Physical flow process that engineers the

movement of goods

Communicator of customer demand frompoint of sale to supplier

Communicator of customer demand frompoint of sale to supplier

Role of Supply ChainManagement

Role of Supply ChainManagement

Role of Supply Chain Management44

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Supply Chain Management Activities

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Manage relationships in the supply chain

Manage relationships in the supply chain

Manage the logistical components of the supply chain

Manage the logistical components of the supply chain

Determine channel strategy and level of distribution intensity

Determine channel strategy and level of distribution intensity

Balance the costs of the supply chainwith the service level demanded by customer

Balance the costs of the supply chainwith the service level demanded by customer

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Benefits of Supply Chain Management

Common Benefitsof Supply Chain

Management

Common Benefitsof Supply Chain

Management

Reduced Costs Reduced Costs

Improved ServiceImproved Service

Enhanced RevenuesEnhanced Revenues

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Learning Objective

Discuss the issues that influence channel strategy.

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Channel Strategy Decisions

Issues that InfluenceChannel Strategy

Issues that InfluenceChannel Strategy

Producer FactorsProducer Factors

Product FactorsProduct Factors

Market FactorsMarket Factors

Factors Affecting Channel Choice

Factors Affecting Channel Choice

Exclusive DistributionExclusive Distribution

Selective DistributionSelective Distribution

Intensive DistributionIntensive Distribution

Levels ofDistribution

Intensity

Levels ofDistribution

Intensity

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Market Factors

Market FactorsThat Affect

ChannelChoices

Market FactorsThat Affect

ChannelChoices

Customer ProfilesCustomer Profiles

Consumer or IndustrialCustomer

Consumer or IndustrialCustomer

Size of MarketSize of Market

Geographic Location

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Product Factors

Product FactorsThat Affect

ChannelChoices

Product FactorsThat Affect

ChannelChoices

Product Complexity Product Complexity

Product PriceProduct Price

Product Life CycleProduct Life Cycle

Product DelicacyProduct Delicacy

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Producer Factors

Producer FactorsThat Affect

ChannelChoices

Producer FactorsThat Affect

ChannelChoices

Producer Resources Producer Resources

Number of Product LinesNumber of Product Lines

Desire for Channel ControlDesire for Channel Control

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Levels of Distribution Intensity 55

Intensity LevelIntensity Level ObjectiveObjective Number of Intermediaries

Number of Intermediaries

IntensiveIntensive

SelectiveSelective

ExclusiveExclusive

Achieve mass marketselling.

Convenience goods.

Achieve mass marketselling.

Convenience goods.

Work with selected intermediaries.

Shopping and some specialty goods.

Work with selected intermediaries.

Shopping and some specialty goods.

Work with singleintermediary. Specialty

goods and industrial equipment.

Work with singleintermediary. Specialty

goods and industrial equipment.

ManyMany

SeveralSeveral

OneOne

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Learning Objective 66

Explain channel leadership, conflict, and partnering.

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Managing Channel Relationships

Channel PartneringChannel Partnering

Channel ConflictChannel Conflict

Channel LeadershipChannel Leadership

Channel ControlChannel Control

Channel PowerChannel Power

Social Dimensions of Channels

Social Dimensions of Channels

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Channel Power, Control, and Leadership

ChannelPower

ChannelPower

ChannelControl

ChannelControl

Channel Leader

Channel Leader

A channel member’s capacity to control or influence the behavior

of other channel members

A channel member’s capacity to control or influence the behavior

of other channel members

A situation that occurs when one marketing channel member intentionally affects another

member’s behavior.

A situation that occurs when one marketing channel member intentionally affects another

member’s behavior.

A member of a marketing channelthat exercises authority/power over

the activities of other members.

A member of a marketing channelthat exercises authority/power over

the activities of other members.

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Channel Conflict

A clash of goals and methods between

distribution channel members.

HorizontalConflict

HorizontalConflict

Occurs among channel members on the same level

Occurs among channel members on the same level

VerticalConflictVerticalConflict

Occurs among channel members at different levels

Occurs among channel members at different levels

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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 Transaction-Based

Short-term relationshipsShort-term relationships

Multiple suppliersMultiple suppliers

Adversarial relationshipsAdversarial relationships

Price dominatesPrice dominates

Minimal supplier investmentMinimal supplier investment

Minimal information sharingMinimal information sharing

Firms are independent Firms are independent

Minimal functional area interaction Minimal functional area interaction

Partnership-Based Partnership-Based

Long-term relationshipsLong-term relationships

Few suppliersFew suppliers

Cooperative partnerships Cooperative partnerships

Value-added services dominateValue-added services dominate

High supplier/buyer investmentHigh supplier/buyer investment

Extensive information sharingExtensive information sharing

Firms are interdependent Firms are interdependent

Extensive functionalarea interactionExtensive functionalarea interaction

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Learning Objective

Describe the logistical components of the supply chain.

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Integrated Logistical Components of the Supply Chain

Sourcing & ProcurementSourcing & Procurement

Production SchedulingProduction Scheduling

Order Processing & Customer ServiceOrder Processing & Customer Service

Inventory ControlInventory Control

SupplyChainTeam

SupplyChainTeam

Warehouse & Materials HandlingWarehouse & Materials Handling

TransportationTransportation

Lo

gis

tics

Info

rma

tio

n S

yste

mL

og

isti

cs In

form

ati

on

Sys

tem

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Sourcing and Procurement

NegotiateService Levels

NegotiateService Levels

NegotiatePrice

NegotiatePrice

SelectSuppliers

SelectSuppliers

DevelopSpecifications

DevelopSpecifications

Plan Purchasing Strategies

Plan Purchasing Strategies

Role ofPurchasing

Departments

Role ofPurchasing

Departments

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Production Scheduling

Push/Pull Strategy Push/Pull Strategy

Traditional Focus Traditional Focus

PushPush

Start of ProductionStart of Production

ManufacturingManufacturing

Inventory-BasedInventory-Based

Mass ProductionMass Production

Customer Focus Customer Focus

PullPull

Customer-Order Based

Customer-Order Based

Mass CustomizationMass Customization

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Just-in-Time Manufacturing 77

A process that redefines and

simplifies manufacturing by

reducing inventory levels and

delivering raw materials just

when they are needed on the

production line.

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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 77

Information technology that

replaces paper documents that

accompany business

transactions.

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Inventory Control System 77

A method of developing and

maintaining an adequate

assortment of materials or

products to meet a

manufacturer’s or a customer’s

demand.

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Warehouse and Materials-Handling

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Functionsof

Materials Handling

Receive goods into warehouse

Dispatch the goods totemporary storage

Recall, select, or pick the goods for shipment

Identify, sort and label goods

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Transportation

CostCost

Transit TimeTransit Time

ReliabilityReliability

CapabilityCapability

AccessibilityAccessibility

TraceabilityTraceability

Criteria for

Transportation Mode

Choice

Criteria for

Transportation Mode

Choice

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Criteria for RankingModes of Transportation

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Relative Cost

TransitTime

Reliability

Capability

Accessibility

Traceability

Highest Lowest

Air WaterPipeRailTruck

Water Rail Pipe Truck Air

Pipe Truck Rail Air Water

Water

Truck

Rail Truck Air Pipe

Rail Air Water Pipe

Air Truck Rail Water Pipe

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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 88

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

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Learning Objective

Discuss new technology and emerging trends in

supply chain management.

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Trends in Supply Chain Management

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Electronic DistributionElectronic Distribution

Outsourcing ofLogistics Functions

Outsourcing ofLogistics Functions

AdvancedComputer Technology

AdvancedComputer Technology

Trends Affecting the

Logistics Industry

Trends Affecting the

Logistics Industry

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Learning Objective

Discuss channels and distribution decisions in global markets.

1010

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Channels and Distribution Decisions for Global Markets

Channel structure differs

Channel types differ

“Gray” marketing channels

Global Channel Development

Global Channel Development

Global SupplyChain Management

Global SupplyChain Management

Awareness of trade legalities

Transportation Infrastructure

1010

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Learning Objective 1111

Identify the special problems and opportunities associated with

distribution in service organizations.

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Channels and DistributionDecisions for Services

1111

Areas of Focus for

Service Distribution

Areas of Focus for

Service Distribution

Minimizing wait times Minimizing wait times

Managing service capacityManaging service capacity

Improving delivery through new channels

Improving delivery through new channels