distbn channels scm lamb & hair-ch 12

7/29/2019 Distbn Channels SCM Lamb & Hair-Ch 12

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1Chap. 12 Marketing 7e Lamb Hair McDaniel2004 South-Western/Thomson Learning

Chapter 12: Marketing Channels and Supply ChainManagementObjectives: Explain what a marketing channel is and why intermediaries are needed.

Define the types of channel intermediaries and describe their functions

and activities.

Describe the channel structures for consumer and business-to-business

products and discuss alternative channel arrangements.

Define supply chain management and discuss its benefits.

Discuss the issues that influence channel strategy.

Explain channel leadership, conflict, and partnering.

Describe the logistical components of the supply chain.

Discuss new technology and emerging trends in supply chainmanagement.

Discuss channels and distribution decisions in global markets.

Identify the special problems and opportunities associated with

distribution in service organizations.


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Marketing Channels

MarketingChannel

Supply

Chain

A set of interdependent organizationsthat ease the transfer of ownership as

products move from producer to

business user or consumer.

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

the company, that perform or supportthe logistics function.

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Marketing Channel FunctionsSpecialization andDivision of Labor

Channels

FulfillThree

ImportantFunctions

OvercomingDiscrepancies

Providing ContactEfficiency

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Specialization and Division of Labor Provides efficiency and cost savings

Attains economies of scale

Aids producers who lack resources tomarket directly

Builds good relationships with customers

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Overcoming Discrepancies

Discrepancyof

Quantity

Discrepancyof

Assortment

The difference between theamount of product producedand the amount an end user

wants to buy.The lack of all the items acustomer needs to receive fullsatisfaction from a product or

products.

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Overcoming Discrepancies

TemporalDiscrepancy

SpatialDiscrepancy

A situation that occurs when aproduct is produced but a

customer is not ready to buy it.

The difference between thelocation of a producer and the

location of widely

scattered markets.

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Contact Efficiency1


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Channel Intermediaries

Retailer

MerchantWholesaler

Agents andBrokers

A channel intermediary thatsells mainly to customers.

An institution that buys goodsfrom manufacturers, takes title

to goods, stores them,and resells and ships them.

Wholesaling intermediaries whofacilitate the sale of a product byrepresenting channel member.

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Channel Intermediaries

Retailers

MerchantWholesalers

Agentsand

Brokers

Take Title to Goods

Take Title to Goods

Do NOT Take Title to Goods

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Factors Suggesting Type ofWholesaling Intermediary to Use2


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Channel Functions Performedby IntermediariesContacting/Promotion

Negotiating

Risk Taking

Researching

Financing

Physically distributing

Storing

Sorting

FacilitatingFunction

TransactionalFunctions

LogisticalFunctions

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LogisticsThe 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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Direct Channel

A distribution channel in which

producers sell directly toconsumers.

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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 forBusiness-to-Business Products

Producer

IndustrialUser

DirectChannel

Producer

Govt.Buyer

DirectChannel

Producer Producer Producer

IndustrialUser

IndustrialUser

IndustrialUser

IndustrialDistributor


Agents orBrokers

Agents orBrokers

Agent/BrokerChannel


Agent/BrokerIndustrialChannel

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Business-to-Business Exchangeson the Internet

Linking buyers and sellers

Dropping the middleman from the supply chain

Creating private exchanges to automate the

supply chain

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On Linehttp://www.sherwinwilliams.com
http://www.sherwinwilliams.com/http://www.sherwinwilliams.com/


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Alternative Channel ArrangementsMultiple Channels

Strategic ChannelAlliances

NontraditionalChannels

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Supply Chain ManagementA 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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Physical flow process

that engineers themovement of goods

Communicator ofcustomer demand frompoint of sale to supplier

Role of Supply Chain Management4


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Benefits ofSupply Chain Management

Greater Supply Chain Flexibility

Improved Customer Service

Higher Revenues

Reduced Costs

On Line

http://www.nashfinch.com

4
http://www.nashfinch.com/http://www.nashfinch.com/


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Channel Strategy Decisions

Producer Factors

Product Factors

Market Factors

FactorsAffectingChannel

Choice

Exclusive Distribution

Selective Distribution

Intensive Distribution

Level ofDistribution

Intensity

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Market Factors

Market Factors

That AffectChannelChoices

Customer Profiles

Consumer or Industrial

Customer

Size of Market

Geographic Location

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Product Factors

Product Factors


Product Complexity

Product Price

Product Life Cycle

Product Delicacy

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Producer Factors

Producer Factors


Producer Resources

Number of Product Lines

Desire for Channel Control

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Levels of Distribution IntensityIntensity Level Objective Number of

Intermediaries

Intensive

Selective

Exclusive

Achieve massmarket selling.

Convenience goods.

Work with selectedintermediaries.

Shopping and somespecialty goods.

Work with singleintermediary. Specialtygoods and industrial

equipment.

Many

Several

One

On Line

http://www.radioshack.com

http://www.sprint.com

http://www.compaq.com

http://www.rca.com

http://www.directv.com

5
http://www.radioshack.com/http://www.sprint.com/http://www.compaq.com/http://www.rca.com/http://www.directv.com/http://www.directv.com/http://www.rca.com/http://www.compaq.com/http://www.sprint.com/http://www.radioshack.com/


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Managing Channel Relationships

Channel Partnering

Channel Conflict

Channel Leadership

Channel Control

Channel Power

SocialDimensionsof Channels

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Channel Power, Control,and LeadershipChannelPower

ChannelControl

ChannelLeader

A channel members capacity tocontrol or influence the behavior

of other channel members

A situation that occurs when onemarketing channel memberintentionally affects another

members behavior.

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

Occurs among channel memberson the same level

VerticalConflict

Occurs among channel membersat different levels

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Channel Partnering

The joint effort of all channel

members to create a supply

chain that serves customers andcreates a competitive

advantage.

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HighMinimalInvestment

Required

HighMinimalInformationSharing

FewManyNumber of

Suppliers

Long-term

Cooperative

DependentValue-added services

Short-term

Adversarial

IndependentPrice important

Supplier /

Manufacturer

Relationships

Partnership-BasedTransaction-Based

Transaction- vs.Partnership-Based Firms6


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Integrated LogisticalComponents of the Supply ChainSourcing & Procurement

Production Scheduling

Order Processing & Customer Service

Inventory Control

SupplyChainTeam

Warehouse & Materials Handling

TransportationLogisticsInformatio

nSystem

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Sourcing and Procurement

NegotiateService Levels

NegotiatePrice

SelectSuppliers

DevelopSpecifications

PlanPurchasing Strategies

Role ofPurchasing

Departments

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Production Scheduling

Push / Pull

Strategy

Traditional Focus

Push

Start ofProduction

Manufacturing

Inventory-Based

Mass Production

Customer Focus

Pull

Customer-OrderBased

Mass Customization

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Just-in-Time ManufacturingA 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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JIT Requirements

Requirements

forManufacturers

Using JIT

Receive High-Quality Parts

Meet SupplierDelivery Commitments

Have a CrisisManagement Plan

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Electronic Data Interchange

Information technology that

replaces paper documents that

accompany business

transactions.

On Line

http://www.walmartstores.com

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http://www.walmartstores.com/http://www.walmartstores.com/


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Inventory Control SystemA method of developing and

maintaining an adequate

assortment of materials or

products to meet a

manufacturers or

a customers demand.

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MRP and DRPMaterials

RequirementPlanning

DistributionResource

Planning

An inventory control system thatmanages the replenishment ofraw materials, supplies, andcomponents from the supplier to

the manufacturer.

An inventory control system thatmanages the replenishment of

goods from the manufacturer tothe final consumer.

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Warehouse and Materials-Handling

MaterialsHandlingFunctions

Receive goods intowarehouse

Dispatch the goods totemporary storage

Recall, select, or pick thegoods for shipment

Identify, sort, andlabel goods

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TransportationCost

Transit Time

Reliability

Capability

Accessibility

Traceability

Criteriafor

TransportationMode

Choice

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Criteria for RankingModes of TransportationRelativeCost

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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Trends inSupply Chain Management

ElectronicDistribution

Outsourcing ofLogistics Functions

AdvancedComputer TechnologyTrends

Affecting theLogisticsIndustry

8 eTrade
http://f/ch12/eTrade1.mpghttp://f/ch12/eTrade1.mpg


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Channels and DistributionDecisions for Global Markets

Global SupplyChain Management

Awareness of trade legalities

Transportation Issues

Global ChannelDevelopment

Channel structureand type differ

Gray marketing channels

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On Line

http://www.wto.com
http://www.wto.com/http://www.wto.com/


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Channels and DistributionDecisions for Services

Areas of Focusfor

ServiceDistribution

Minimizing wait times

Managing service capacity

Improving service delivery

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distbn channels scm lamb & hair-ch 12

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