Distribution & Supply Chain Management

Issues Concerning Distribution Channels

What is the Nature Of Distribution Channels? What Role Does Physical Distribution Play in Attracting and Satisfying Customers?

How do Channel What Problems do Firms Interact and Companies Face in Organize to do the Designing and Work of the Managing Their Channel? Channels?
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Whats a Distribution Channel (PLACE)

A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.

Distribution Channel
Manufacturer

Retailer

Distributor

Consumers 4

Why are Marketing Intermediaries Used?

Results from their greater efficiency in making goods available to target markets. Offer the firm more than it can achieve on its own:

Contacts, Experience, Specialization.

Purpose: match supply from producers to demand from consumers.

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How a Marketing Intermediary Reduces the Number of Channel Transactions

Number of Channel Levels

that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer. Channel 1 Direct Channel
M C

Channel Level - Each Layer of Marketing Intermediaries

Channel 2
M

Indirect Channel

Channel 3
M

Channel 4
M W J R C
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Channel Behavior & Conflict

Will be effective when

Each member is assigned tasks it can do best. All members cooperate to attain overall channel goals and satisfy the target market.

Conflict occurs: Horizontal Conflict occurs among firms at the

same level of the channel, i.e retailer to retailer. the same channel, i.e. wholesaler to retailer.

Vertical Conflict occurs between different levels of

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Manufacturer

Vertical

Distributor
Retailer

Consumers

Horizontal

Distributor Retailer Retailer Retailer

Retailer

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Conventional Marketing Channel Vs a Vertical Marketing System

Conventional Marketing Channel
Manufacturer Wholesaler Retailer Consumer

Vertical Marketing System

Manufacturer Wholesaler Retailer

Consumer

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Types of Vertical Marketing Systems

Common Ownership at Different Levels of the Channel

Corporate

Degree of Direct Control

Contractual Agreements Among Channel Members

Contractual

Leadership is Assumed by One or a Few Dominant Members

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Administered

Changing Channel Organization

Major Trend is Toward Disintermediation Which Means Producers are Bypassing Intermediaries and Going Directly to Final Buyers That New Types of Channel Intermediaries are Emerging to Displace Traditional Ones.
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Channel Design Decisions

Analyzing Consumer Service Needs

Setting Channel Objectives & Constraints

Identifying Major Alternatives Intensive Distribution Selective Distribution Exclusive Distribution

Evaluating the Major Alternatives Designing International Distribution Channels

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Selective Distribution

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Channel Management Decisions

Selecting Channel Members

FEEDBACK

Motivating Channel Members

Evaluating Channel Members

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Nature and Importance of Marketing Logistics

Involves getting the right product to the right customers in the right place at the right time. Companies place greater emphasis on logistics because:

customer service and satisfaction have become the cornerstone of marketing strategy. logistics is a major cost element for most companies.. Improvements in information technology has created opportunities for major gains in distribution efficiency.
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Goals of the Logistics System

Higher Distribution Costs; Higher Customer Service Levels Goal:
To Provide a Targeted Level of Customer Service at the Least Cost.

Lower Distribution Costs; Lower Customer Service Levels

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Major Logistics Functions

Minimize Costs of Attaining Logistics Objectives

Costs

Order Processing
Received Processed Shipped

Transportation
Rail, Truck, Water, Pipeline, Air, Intermodal

Logistics

Warehousing
Storage Distribution Automated

Functions
When to order How much to order Just-in-time

Inventory

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Transportation Modes
Rail

Nations largest carrier, cost-effective for shipping bulk products, piggyback Flexible in routing & time schedules, efficient for short-hauls of high value goods Low cost for shipping bulky, low-value, non perishable goods, slowest form Ship petroleum, natural gas, and chemicals from sources to markets High cost, ideal when speed is needed or distance markets have to be reached

Truck

Water

Pipeline

Air

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Choosing Transportation Modes

Checklist for Choosing Transportation Modes

1. Speed 2. Dependability 3. Availability 4. Costs 5. Others

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