Chapter 2 Sales and Distribution - Copy (Autosaved)

Distribution management
Distribution Management
 Logistics and supply chain management

 Marketing Channels
 Sustainable supply chain management
Supply Chain Management
 A supply chain consists of all parties involved

directly and indirectly, in fulfilling a customer
request.
 A supply chain includes suppliers,
manufacturer, transportation, warehouse,
retailers, and customers.
 The supply chain includes all functions

involved in receiving and filling a customers’
request.
 These functions include but not limited to
New product development, marketing,

operations, distributions, finance and
customer service.
Supply chain stages
 This supply chain consists of upstream and

downstream partners.
 Upstream from the company is the set of firms

that supply the raw materials, components,
parts, information, finances, and expertise
needed to create a product or service.
 Marketers, however, have traditionally focused

on the downstream side of the supply chain—
the marketing channels (or distribution
channels) that look toward the customer.
 Downstream marketing channel partners, such

as wholesalers and retailers, form a vital link
between the firm and its customers.
 Make-and-sell view of the business. It suggests

that raw materials, productive inputs, and
factory capacity should serve as the starting
point for market planning.
 sense-and-respond view of the market.

Under this view, planning starts by
identifying the needs of target customers, to
which the company responds by organizing
a chain of resources and activities with the
goal of creating customer value.
 Value delivery network

A network composed of the company,
suppliers, distributors, and, ultimately,
customers who partner with each other to
improve the performance of the entire
system in delivering customer value.
Supply chain management
 Sourcing, procurement, and supply

management
The set of activities, functions, and
processes concerned with economic
performance and inflow of inputs into the
enterprise and an efficient control over flow
of funds out of the company
 Sourcing, procurement, and supply

management
In the context of supply chain these
processes fall under sourcing, supply side
management, inbound logistics and
supplier relationship management together
with materials, information, and cash flows
connected herewith.
 Material management
Classic material management included the
functions of forecasting, inventory
management, store management,
warehousing, stock keeping till it came to
production planning and production control
to evolve into extended material
management.
• Marketing logistics (physical distribution)

Planning, implementing, and controlling the
physical flow of materials, final goods, and
related information from points of origin to
points of consumption to meet customer
requirements at a profit.
 Logistics and distribution

The part of supply chain management process
that plans, implements, and controls the
efficient, effective forward and reverse flow
and storage of goods, services and related
information between the point of origin and
the point of consumption in order to meet
customer requirement.
 Logistics and distribution

In the context of supply chain logistics would
fall at both ends that is inbound logistics
and outbound logistics.
The intracompany flow of material is

sometime referred to manufacturing
logistics.
 Thus, supply chain has emerged as an

integrative philosophy and a strategic level
business practice which encompasses flow
of materials, funds, and information
throughout the network that ultimately
deliver the value to the customer.
 Objective of supply chain
Supply chain surplus= customer value –

supply chain cost
 Decision phases in supply chain
1. Supply chain strategy or design

2. Supply chain planning
3. Supply chain operation
• Supply chain strategy or design

How to structure the supply chain over the
next several years.
It decides about configuration, resource
allocation and process each stage of
supply chain will perform.
• Supply chain strategy or design

Strategic decision includes-
1.Whether to outsource or perform a supply
chain function in- house
2. The location and capabilities of production
and warehouse facilities.
3. The mode of transportation
4. Type of information system to be utilized
 Supply chain planning

For planning, the time frame is considered is a
quarter to a year.
The configuration of supply chain establishes
constraints within which planning must be done.
Companies start planning with forecast of

demand, cost, and price in different market
 Supply chain planning

Planning includes decisions:
Which market will be supplied, from which
location, the subcontracting of
manufacturing, inventory policies, time and
size of market, price policies etc.
 Supply chain operation

The time horizon is weekly or daily
At the operational level-
• Supply chain configuration is fixed
• Planning policies are already defined
Supply chain operation

The goal of supply chain operation is to handle
incoming customer order in best possible
manner.
During this phase, firms allocate inventory or

production to individual order.
Set a date that an order to be filled.
Supply chain operation

During this phase:
• Firms allocate inventory or production to

individual order.
• Set a date that an order to be filled.
• Generate price list at a warehouse
 Supply chain operation

During this phase:
• Allocate an order to particular shipping
mode and shipment
• Set delivery schedule of truck
• Place replenishment order.
Marketing Channel (distribution
channel)
 A set of interdependent organizations that

help make a product or service available for
use or consumption by the consumer or
business user.
Marketing Channels
and Value Networks
 Multichannel
marketing
– Using two or more
marketing channels to
reach customer segments
in one market area
– Omnichannel marketing
– Integrated marketing
channel system
Marketing Channels
and Value Networks
 A marketing channel system

– The particular set of marketing channels a firm
employs
– Push vs. pull strategy
channel)
 How Channel Members Add Value

Through their contacts, experience,
specialization, and scale of operation,
intermediaries usually offer the firm more than
it can achieve on its own.
Channel Objectives & Utility
• Marketing channels exist to create utility

for customers
– Place utility – availability of a product or service in a
location that is convenient to a potential customer
– Time utility – availability of a product or service when
desired by a customer
– Form utility – availability of the product processed,
prepared, in proper condition and/or ready to use
– Information utility – availability of answers to questions
and general communication about useful product features
and benefits
channel)
 How Channel Members Add Value

1. Information 5. Physical distribution
2 Promotion. 6. Financing
3. Contact 7. Risk taking
4. Negotiation
The Role of
Marketing Channels
 Channel functions and flows

Figure 17.2
Marketing Flows For Forklift Trucks
The Role of
Marketing Channels
 Channel levels
– Zero-level channel (direct)
– One/two/three-level channels
(intermediaries)
– Reverse-flow channels
 Service sector channels
channel)
 Channel Levels.
A layer of
Intermediaries that
performs some work
in bringing the product
and its ownership closer
to the final buyer.
channel)
 Channel Levels.
Direct marketing channel
A marketing channel that has no intermediary
levels.
For example, Amway sell their products through
home and office sales parties and online
websites and social media.
channel)
 Channel Levels.
Indirect marketing channel
A marketing channel containing one or more
intermediary levels.
From the producer’s point of view, a greater

number of levels means less control and
greater channel complexity
channel)
 Channel conflict
Disagreements among marketing channel
members on goals, roles, and rewards—who
should do what and for what rewards.
 Horizontal conflict occurs among firms at the
same level of the channel. For instance, some
Ford dealers in Chicago might complain that
other dealers in the city steal sales from them
by pricing too low.
channel)
Vertical conflict, conflict between different levels

of the same channel.
For example, McDonald’s has recently faced growing
conflict with its corps of 3,100 independent franchisees.
Some conflict in the channel takes the form of

healthy competition, However, severe or
prolonged conflict can disrupt channel
effectiveness
Channel power
Coercive
Reward
Legitimate
Expert
Referent
channel)
 A conventional distribution channel
It consists of one or more independent

producers, wholesalers, and retailers. Each is
a separate business seeking to maximize its
own profits, perhaps even at the expense of
the system as a whole.
channel)
 Vertical marketing system (VMS)
It consists of producers, wholesalers, and retailers

acting as a unified system. One channel
member owns the others, has contracts with
them, or wields so much power that they must
all cooperate.
channel)
channel)
 Horizontal marketing system

Two or more unrelated companies at one level
join together to follow a new marketing
opportunity.
By working together, companies can combine
their financial, production, or marketing
resources to accomplish more than any one
company could alone.
channel)
 Horizontal marketing system

channel)
 Multichannel distribution system :A

distribution system in which a single firm
sets up two or more marketing channels to
reach one or more customer segments
Multichannel distribution system
channel)
Channel Design Decisions
Marketing channel design: Designing effective

marketing channels by analyzing customer
needs, setting channel objectives, identifying
major channel alternatives, and evaluating those
alternatives.
channel)

Analyzing customer needs:
Do consumers want to buy nearby, or are they willing
to travel to more centralized locations?
Would customers rather buy in person, by phone, or
online?
Do they value breadth of assortment, or do they prefer
specialization?
Do consumers want many add-on services, or will they
obtain these services elsewhere?
channel)

Setting channel objectives:
The company should decide which segments to

serve and the best channels to use in each case
The company’s channel objectives are also

influenced by the nature of the company, its
products, its marketing intermediaries, its
competitors, and the environment
channel)

Identifying major channel alternatives:
1.Types of Intermediaries
2.Number of Marketing Intermediaries
Intensive distribution :Stocking the product in as many
outlets as possible.
channel)

Number of Marketing Intermediaries

Exclusive distribution: Giving a limited number
of dealers the exclusive right to distribute the
company’s products in their territories.
channel)

Number of Marketing Intermediaries

Selective distribution: The use of more than
one but fewer than all of the intermediaries that
are willing to carry the company’s products.
channel)

Evaluating those alternatives.
Each alternative should be evaluated against

•Economic,
•Control, and
•Adaptability criteria.
channel)

Economic:
Using economic criteria, a company compares

the likely sales, costs, and profitability of different
channel alternatives. What will be the investment
required by each channel alternative, and what
returns will result?
channel)

Control:
The company must also consider control issues.

Using intermediaries usually means giving them
some control over the marketing of the product,
and some intermediaries take more control than
others. Other things being equal, the company
prefers to keep as much control as possible.
channel)

Adaptability criteria.
Channels often involve long-term commitments,

yet the company wants to keep the channel
flexible so that it can adapt to environmental
changes. Thus, to be considered, a channel
involving long-term commitments should be
greatly superior on economic and control
grounds.
Thank You

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Distribution management

 Logistics and supply chain management

 A supply chain consists of all parties involved

 The supply chain includes all functions

New product development, marketing,

 This supply chain consists of upstream and

 Upstream from the company is the set of firms

 Marketers, however, have traditionally focused

 Downstream marketing channel partners, such

 Make-and-sell view of the business. It suggests

 sense-and-respond view of the market.

 Value delivery network

 Sourcing, procurement, and supply

 Sourcing, procurement, and supply

• Marketing logistics (physical distribution)

 Logistics and distribution

 Logistics and distribution

The intracompany flow of material is

 Thus, supply chain has emerged as an

 Objective of supply chain

Supply chain surplus= customer value –

 Decision phases in supply chain

1. Supply chain strategy or design

• Supply chain strategy or design

• Supply chain strategy or design

 Supply chain planning

Companies start planning with forecast of

 Supply chain planning

 Supply chain operation

Supply chain operation

During this phase, firms allocate inventory or

Supply chain operation

• Firms allocate inventory or production to

 Supply chain operation

 A set of interdependent organizations that

 A marketing channel system

 How Channel Members Add Value

• Marketing channels exist to create utility

 How Channel Members Add Value

 Channel functions and flows

From the producer’s point of view, a greater

Vertical conflict, conflict between different levels

Some conflict in the channel takes the form of

 A conventional distribution channel

It consists of one or more independent

 Vertical marketing system (VMS)

It consists of producers, wholesalers, and retailers

 Horizontal marketing system

 Horizontal marketing system

 Multichannel distribution system :A

Channel Design Decisions

Marketing channel design: Designing effective

Channel Design Decisions

Channel Design Decisions

The company should decide which segments to

The company’s channel objectives are also

Channel Design Decisions

Channel Design Decisions

Number of Marketing Intermediaries

Channel Design Decisions

Number of Marketing Intermediaries

Channel Design Decisions

Each alternative should be evaluated against