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Marketing Channels and Supply Chain Management

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Prepared by Deborah Baker Texas Christian University
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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. 5. Discuss the issues that influence channel strategy.
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Learning Objectives (continued)
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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Learning Objectives (continued)
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

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

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Marketing Channels
Marketing Marketing Channel Channel

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A set of interdependent organizations A set of interdependent organizations that ease the transfer of ownership as that ease the transfer of ownership as products move from producer to products move from producer to business user or consumer. business user or consumer. The connected chain of all the business The connected chain of all the business entities, both internal and external to the entities, both internal and external to the company, that perform or support the company, that perform or support the logistics function. logistics function.
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Supply Supply Chain Chain

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Marketing Channel Functions
Specialization and Specialization and Division of Labor Division of Labor Channels Channels Fulfill Fulfill Three Three Important Important Functions Functions Overcoming Overcoming Discrepancies Discrepancies Providing Contact Providing Contact Efficiency 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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Overcoming Discrepancies
Discrepancy Discrepancy of of Quantity Quantity Discrepancy Discrepancy of of Assortment Assortment

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The difference between the amount The difference between the amount of product produced and the of product produced and the amount an end user wants to buy. amount an end user wants to buy. The lack of all the items a The lack of all the items a customer needs to receive full customer needs to receive full satisfaction from a product or satisfaction from a product or products. products.

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Overcoming Discrepancies
Temporal Temporal Discrepancy Discrepancy Spatial Spatial Discrepancy Discrepancy

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A situation that occurs when a A situation that occurs when a product is produced but a product is produced but a customer is not ready to buy it. customer is not ready to buy it. The difference between the The difference between the location of a producer and the location of a producer and the location of widely location of widely scattered markets. scattered markets.

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Contact Efficiency
Zenith Zenith Sony Sony RCA RCA Toshiba Toshiba

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Zenith Zenith

Sony Sony

RCA RCA

Toshiba Toshiba

Circuit City 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 Retailer
A channel intermediary that A channel intermediary that sells mainly to customers. sells mainly to customers. An institution that buys goods An institution that buys goods from manufacturers, takes title from manufacturers, takes title to goods, stores them, to goods, stores them, and resells and ships them. and resells and ships them.

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Merchant Merchant Wholesaler Wholesaler Agents and Agents and Brokers Brokers
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Wholesaling intermediaries who Wholesaling intermediaries who facilitate the sale of a product by facilitate the sale of a product by representing channel member. representing channel member.
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Channel Intermediaries
Retailers Retailers Merchant Merchant Wholesalers Wholesalers Agents Agents and and Brokers Brokers
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Take Title to Goods Take Title to Goods

Take Title to Goods Take Title to Goods

Do NOT Take Title to Goods Do NOT Take Title to Goods
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Channel Functions Performed by Intermediaries
Transactional Transactional Functions Functions
Contacting/Promotion Negotiating Risk Taking Physically distributing Storing Sorting Researching
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Logistical Logistical Functions Functions

Facilitating Facilitating Function Function Chapter 12 Version 6e

Financing

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Logistics

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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

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A distribution channel in which producers sell directly to consumers.

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Channels for Consumer Products
Direct Channel Producer Retailer Channel Producer

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Wholesaler Agent/Broker Channel Channel Producer Producer
Agents or Brokers Wholesalers Wholesalers Retailers Consumers 20

Retailers

Retailers

Consumers 6e Consumers South-Western Consumers Chapter 12 Version ©2002

Channels for Business-toBusiness Products
Direct Channel

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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

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Alternative Channel Arrangements
Multiple Channels

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Different Channels May be Used

Nontraditional Channels Adaptive Channels

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Strategic Channel Alliances

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Learning Objective
Define supply chain management and discuss its benefits.

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Supply Chain Management

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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
Focus on Innovative Solutions Focus on Innovative Solutions
Competitive with focus on Competitive with focus on Customer Satisfaction Customer Satisfaction

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Results Results of of Supply Chain Supply Chain Management Management
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Synchronized Flow Synchronized Flow Customer Value Customer Value
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Role of Supply Chain Management
Communicator of Communicator of customer demand from customer demand from point of sale to supplier point of sale to supplier

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Role of Role of Supply Chain Supply Chain Management Management

Physical flow process Physical flow process that engineers the that engineers the movement of goods movement of goods

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Supply Chain Management Activities
Determine channel strategy and Determine channel strategy and level of distribution intensity level of distribution intensity Manage relationships Manage relationships in the supply chain in the supply chain Manage the logistical components Manage the logistical components of the supply chain of the supply chain Balance the costs of the supply chain Balance the costs of the supply chain with the service level demanded by customer with the service level demanded by customer
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Benefits of Supply Chain Management
Reduced Costs Reduced Costs

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Improved Service Improved Service Common Benefits Common Benefits of Supply Chain of Supply Chain Management Management
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Enhanced Revenues 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 Issues that Influence Channel Strategy Channel Strategy Factors Factors Affecting Affecting Channel Channel Choice Choice Market Factors Market Factors Product Factors Product Factors Producer Factors Producer Factors
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Levels of Levels of Distribution Distribution Intensity Intensity Intensive Distribution Intensive Distribution Selective Distribution Selective Distribution Exclusive Distribution Exclusive Distribution
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Market Factors
Customer Profiles Customer Profiles Consumer or Industrial Consumer or Industrial Customer Customer Market Factors Market Factors That Affect That Affect Channel Channel Choices Choices
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Size of Market Size of Market

Geographic Location
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Product Factors
Product Complexity Product Complexity

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Product Price Product Price Product Life Cycle Product Life Cycle

Product Factors Product Factors That Affect That Affect Channel Channel Choices Choices
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Product Delicacy Product Delicacy
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Producer Factors
Producer Resources Producer Resources

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Number of Product Lines Number of Product Lines Producer Factors Producer Factors That Affect That Affect Channel Channel Choices Choices
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Desire for Channel Control Desire for Channel Control

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Levels of Distribution Intensity
Intensity Level Intensity Level Intensive Intensive Objective Objective
Achieve mass market Achieve mass market selling. selling. Convenience goods. Convenience goods. Work with selected Work with selected intermediaries. intermediaries. Shopping and some Shopping and some specialty goods. specialty goods. Work with single Work with single intermediary. Specialty intermediary. Specialty goods and industrial goods and industrial equipment. equipment.
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Number of Number of Intermediaries Intermediaries
Many Many

Selective Selective

Several Several

Exclusive Exclusive
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One One
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Learning Objective

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Explain channel leadership, conflict, and partnering.

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Managing Channel Relationships
Channel Power Channel Power Channel Control Channel Control Channel Leadership Channel Leadership Channel Conflict Channel Conflict Channel Partnering Channel Partnering
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Social Social Dimensions Dimensions of Channels of Channels

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

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A clash of goals and methods between distribution channel members. Horizontal Horizontal Conflict Conflict Vertical Vertical Conflict Conflict
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Occurs among channel members Occurs among channel members on the same level on the same level Occurs among channel members Occurs among channel members at different levels at different levels
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Channel Partnering

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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 relationships Short-term relationships Multiple suppliers Multiple suppliers Adversarial relationships Adversarial relationships Price dominates Price dominates Minimal supplier investment Minimal supplier investment Minimal information sharing Minimal information sharing Firms are independent Firms are independent Minimal functional Minimal functional area interaction area interaction
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Partnership-Based Partnership-Based
Long-term relationships Long-term relationships Few suppliers Few suppliers Cooperative partnerships Cooperative partnerships Value-added services dominate Value-added services dominate High supplier/buyer investment High supplier/buyer investment Extensive information sharing Extensive information sharing Firms are interdependent Firms are interdependent Extensive functional Extensive functional area interaction area interaction

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Learning Objective

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Describe the logistical components of the supply chain.

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Integrated Logistical Components of the Supply Chain
Sourcing & Procurement Sourcing & Procurement

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Logistics Information System Logistics Information System

Production Scheduling Production Scheduling Order Processing & Customer Service Order Processing & Customer Service Inventory Control Inventory Control Warehouse & Materials Handling Warehouse & Materials Handling Transportation Transportation
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Sourcing and Procurement
Develop Develop Specifications Specifications Select Select Suppliers Suppliers Negotiate Negotiate Price Price Negotiate Negotiate Service Levels Service Levels
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Plan Plan Purchasing Strategies Purchasing Strategies

Role of Role of Purchasing Purchasing Departments Departments

Production Scheduling

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Traditional Focus Customer Focus Traditional Focus Customer Focus
Push/Pull Push/Pull Strategy Strategy Start of Start of Production Production Manufacturing Manufacturing Push Push Inventory-Based Inventory-Based Pull Pull Customer-Order Customer-Order Based Based

Mass Production Mass Customization Mass Production Mass Customization

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Just-in-Time Manufacturing

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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

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 Reduces production and storeroom costs  Reduces paperwork

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Electronic Data Interchange

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Information technology that replaces paper documents that accompany business transactions.

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Inventory Control System

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

Transportation
Cost Cost Transit Time Transit Time Reliability Reliability

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Criteria Criteria for for Transportation Transportation Mode Mode Choice Choice
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Capability Capability Accessibility Accessibility Traceability Traceability
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Criteria for Ranking Modes of Transportation
Highest
Relative Cost Transit Time Reliability Capability Accessibility Traceability
Air Water Pipe Water Truck Air 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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Lowest

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Learning Objective

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Discuss the concept of balancing logistics service and cost.

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Logistics Service

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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

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Learning Objective

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Discuss new technology and emerging trends in supply chain management.

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Trends in Supply Chain Management
Trends Trends Affecting the Affecting the Logistics Logistics Industry Industry
Advanced Advanced Computer Technology Computer Technology Outsourcing of Outsourcing of Logistics Functions Logistics Functions Electronic Electronic Distribution Distribution

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Learning Objective

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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 Global Channel Development Development

Channel types differ “Gray” marketing channels Awareness of trade legalities

Global Supply Global Supply Chain Management Chain Management
Transportation Infrastructure
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Learning Objective

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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 Minimizing wait times

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Managing service capacity Managing service capacity Areas of Focus Areas of Focus for for Service Distribution Service Distribution
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Improving delivery Improving delivery through new channels through new channels

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