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C H A P T E R

SUPPLY CHAIN AND CHANNEL MANAGEMENT

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McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

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L E A R N I N G O B J E C T I V E S

Supply Chain and Channel Management

LO1 Define supply chain management

LO2 Recognize the value added by the supply chain.

LO3 Describe the flow of merchandise and the flow of information in the supply chain.

LO4 Describe how supply chains are managed.

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Zara

Zara Customers

Zara Website

Royalty-Free/CORBIS Royalty-Free/CORBIS

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Supply Chain Management

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Supply Chain, Marketing Channels, and Logistics are Related

Marketing channel

Logistics management

Similar but different

Chad Baker/Getty Images

Ryan McVay/Getty Images

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Behind the Scenes at Costco

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Supply Chains Add Value

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Supply Chains Streamline Distribution

Reduce number of transactions

Increase value for consumers

More efficient and effective

FedEx Commercial

©Brand X Pictures/PunchStock

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Supply Chain Management Affects Marketing

Fulfilling delivery promises

Meeting customer expectations

Reliant on an efficient supply chain

Courtesy Zara International, Inc. Courtesy Zara International, Inc.

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1. How does supply chain management add value?

Check Yourself

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Making Information Flow

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Data Warehouse

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Electronic Data Interchange

Cycle time

Quality of communications

Easily analyzed and used

Ph

oto

by

Cab

ela

’s

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Vendor-Managed Inventory

DH Kong/Plush Studios/Getty Images

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Collaborative Planning, Forecasting, and Replenishment

Digital Vision/Getty Images

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Pull and Push Supply Chain

Pull

•Orders based on sales data

•More accurate inventory

•Better when demand is uncertain

Push

•Merchandise allocated based on forecast

•Does not need sophisticated IS system

•Good for steady demand items

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1. What are the various supply chain links associated with each information flow?

2. What is the difference between push and pull supply chains?

Check Yourself

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Making Merchandise Flow

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Bakery with Conscience

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How does Dell’s Merchandise Flow

How does Dell’s Merchandise Flow

Courtesy Dell, Inc.

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Distribution Center versus Direct Store Delivery

What are the advantages of a

distribution center?

Mario Tama/Getty Images

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The Distribution Center

Shipping to store

Preparing to ship

Getting Merchandise Floor Ready

Storing and Cross-Docking

Receiving and checking using UPC and RFID

Management of inbound transportation

ABC News Segment on a Walgreens Warehouse

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Inbound Transportation

• Dispatcher coordinates deliveries

• Manufacturer may pay transportation expenses or retailers may negotiate directly with trucking companies and pay expenses

Steve Cole/Photodisc/Getty Images

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Receiving and Checking

Receiving

Arrival receipt

Checking

Undamaged

Ordered = received

Radio Frequency

Distribution (RFID) Tags

Container computer

chips

David Buffinton/Getty Images

Photo by Scott Olson/Getty Images

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Storing and Cross-Docking

Traditional

Cross-docking

Combinations

Walter Hodges/Digital Vision/Getty Images

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Getting Merchandise Floor-Ready

Ticketing and marking

Increasingly firms are forcing suppliers to ship floor ready

merchandise

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Shipping Merchandise to Stores

• Shipping merchandise to stores is complex for multi-store chains

• Distribution centers use sophisticated routing and scheduling systems

Ryan McVay/Getty Images

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Inventory Management Through Just-In-Time Systems

Just-in-time (JIT) Quick response (QR)

Zappos Website

Co

urt

esy

Tu

bu

lar

Ste

el,

Inc.

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Benefits of JIT Systems

Reduced lead time

Increased product availability and lower inventory investment

James Leynse/Corbis

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1. How does merchandise flow through a typical supply chain?

2. Why have just-in-time supply chain systems become so popular?

Check Yourself

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Managing the Marketing Channel and Supply Chain

Supply chain or channel conflict

Co

urt

esy

Th

e S

tan

ley

Wo

rks

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Managing the Marketing Channel and Supply Chain through Vertical Marketing Systems

Independent or conventional supply chain

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Types of Vertical Marketing Systems

Independent or

conventional supply chain

Administered vertical

marketing system

Contractual vertical

marketing system

Corporate vertical

marketing system

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Managing Marketing Channels and Supply Chains Through Strategic Relationships

Strategic Relationships

Mutual Trust

Open Communications

Common Goals

Interdependence

Credible Commitments

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Relationship of supply chain members

Use

d b

y P

erm

issi

on

of

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uts

ch I

nc

as A

ge

nt

for

Nat

ion

al F

luid

M

ilk P

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sso

r P

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oti

on

Bo

ard

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1. What are the differences between the three types of vertical marketing systems?

2. How do firms develop strong strategic partnerships with their supply chain partners?

Check Yourself