Professional Documents
Culture Documents
and Logistics
Dr Priyanka Suresh
How are Business Marketing Channels Different
(From Consumer Marketing Channels)
Indirect channels
• Distributors
• manufacturer’s reps
• Brokers
• Commission merchants
• Jobbers,
• VARs(value Added Resellers)
How Do Channels Add Value?
• Distributors or dealers
• Brokers
• Commission merchants
• Jobbers
Channel Design
The steps involved in channel design are:
1. Developing channel objectives
2. Analyzing channel constraints
3. Defining channel tasks
4. Identifying the feasible channel alternatives
5. Evaluating the channel alternatives, and
6. Selecting the marketing channel.
Channel Design
1.Channel objectives
• Channel objectives are derived from the firm’s marketing objectives.
• Focus should be on customers’ needs in terms of service levels required by the target
market segments.
2.Channel constraints
• Legal issues
• Competitors’ tactics
• Company constraints
• Product characteristics
• Customers’ geographic location
Channel Design
3.Defining channel tasks
• List out the tasks to be performed to move the product from the manufacturer to
the customers
• From the above Identify the tasks to be performed by the company and those
channel partners have to perform
4.Identifying the channel alternatives
• The types of intermediaries
• The number of intermediaries
• The number of channels
• The terms and responsibilities of channel members
Channel Design: Identifying Channel Alternatives
Types of Intermediaries
• Value added resellers(VARs)
• Distributors or dealers
• Manufacturer’s representatives (reps) or agents
• Brokers
• Commission merchants
• Jobbers
Channel Design: Identifying Channel Alternatives
Number of Intermediaries
Three alternative strategies available:
• Intensive distribution
• Selective distribution
• Exclusive distribution
Manufacturer should consider following factors for selecting one of the three strategies:
• End – users’ willingness to search.
• Do the intermediaries make enough money?
• Price competition among intermediaries.
• Judgment to be used for exact number of intermediaries.
Channel Design :Identifying Channel Alternatives
Number of channels
Use of more than one marketing channel may become necessary (multi-channel
or hybrid marketing)
Advantages of multi-channel marketing
• Increased market coverage
• Lower channel costs
• More customized selling
Possible problem with multi-channel marketing: Conflict between the channels due
to lack of clarity with regard to territories or customers
Channel Design :Identifying Channel Alternatives
Terms and Responsibilities of Channel Members
Manufacturer and dealer should broadly agree on:
• Objectives
• Responsibilities
• Sales policy
• Territory or market
Channel Design
Tasks involved
• Selecting
• Motivating
• Controlling , and
• Evaluation of performance of channel members.
Selecting Channel Members
Selection process consists of :
• Generating a list of intermediaries through ads., databases of consultants and trade associations
• Visiting prospective channel members
• Negotiating with short-listed intermediaries
• Finalizing agreements
Selection criteria generally used are:
• Location
• Relevant experience
• Financial standing
• Infrastructure
Specific criteria may differ for different types of intermediaries and product – market situations
Motivating Channel Members
Understand channel members’ needs
Use appropriate techniques:
• Partner relationship management (PRM) system
• Vendor managed inventory (VMI) system
• Reasonable discount / margins
• Distributor council meetings
• Training and coaching
• Developing channel positioning
• Quick response system
• Computer aided management techniques
Controlling/Managing Channel Conflicts
Undertake surveys of intermediaries to assess sources of conflicts, viz.
• Differences in objectives, interests, perceptions
• Dealings with customers
• Compensation
• Unclear territory boundaries
Methods for managing / controlling conflicts
• Effective communication network
• Joint goal – setting
• Diplomacy, mediation, or arbitration
• Vertical marketing system (VMS)
Evaluating Channel Member’s Performance
Purpose
• Know good/bad performers
• Reward / counsel, retrain, re-motivate, or terminate
Supply chain
frame work
Functions Performed by a Supply Chain
• Purchase
• Product design
• Production planning
• Production
• Processing of customer orders
• Inventory control
• Warehousing
• Material handling, and
• Customer service
Components of a Supply Chain
Source:
https://keydifferences.com/differ
ence-between-logistics-and-
supply-chain-management.html
Market Logistics
Also known as physical distribution.
Scope: Delivering the finished product to customers and intermediaries
Tasks of Physical Distribution
• Transportation
• Warehousing
• Inventory control
• Packaging
• Material handling
• Order processing
• Information
• Factory/warehouse locations
• Customer service
Total Cost Approach
Focus : Balancing two important elements of Market Logistics viz. (i) total
distribution costs., and (ii) the level of service provided to customers.
Distribution costs:
• Minimizing total distribution cost: The firm must consider the total distribution
cost of the available alternative distribution systems and select the system that
minimizes the total distribution cost.
• Return On Investment (ROI) approach
Sales Revenue-Total physical distribution cost
ROI = _________________________________ x100
Capital Investment
Total Cost Approach : Customer Service
How to improve customer service?
• Set the goals of customer service levels for each of the important
service elements.
• Measure the actual performance for each service element.
• Analyze the variance between actual service performance and the
goals.
• Take corrective actions to minimize the variance.
Improving the Performance of Physical
Distribution in the Entire Channel
• Develop computerized information system that will link individual
channel members to the manufacturer’s system to provide realistic
sales and inventory of the channel members to the manufacturer.
• Standardize packaging and material handling at all channel members
to assist in efficient operations.
• The manufacturer and the channel members should improve the
performance of their respective tasks or services.
Latest Trends in Logistics Management
Outsourcing:
• 3PL Service providers:Activities like warehousing and transportation are out
sourced to 3PL service providers who invest in assets such as warehouses, fleet of
transport vehicles and IT.
• 4PL Service providers :4PL service providers act as logistics consultants to the
clients. Apart from designing the logistics system, they also ensure its
implementation by coordinating with one or more 3PL service providers, on
behalf of their clients.
4PL companies do not own any assets unlike 3PL companies
Latest Trends in Logistics Management
Green Logistics
• An initiative to measure and minimize the ecological impacts of
logistics activities
• Focus is to adopt environment friendly and sustainable logistics
solutions
• Deployment of green and emission free vehicles
Major Cost Centres for Market
Logistics :Transportation
Modes of Transportation :Road, Rail ,Air ,Water , Pipeline
Types of carriers
• Common carriers:Provide services between predetermined geographical points .
These services are available to all shippers at standard rates(Eg. Indian Railways)
• Contract carriers:independent organizations offering transportation services to
others on a contract basis
• Private carriers:Are those shippers who own trucks or air fleets to ensure
consistent delivery performance.
Major Cost Centres for Market Logistics: Warehousing