Workshop on Supply Chain

Channel Design, Management & Logistics

By

Dr. Ravindra Pratap Gupta

 ISSUED IN PUBLIC INTEREST
Advisable

All material in slides need not be

understood.
Use your current working environment and
experience to relate to situations. Errors and
omissions regrettable. Subject to corrections
on
Being brought to notice.
Quote-1
The Future

Before thinking International Business

Development. Think of Logistics & Channel
Design Management.

Dr. Ravindra Pratap Gupta

Learning Objectives
Nature of Global Logistics and Channel Decisions-
Value Chain Concept.
International Channel Strategies
Characteristics Impacting on Channel Design and
Strategy
Global Trends in Channel Design and Strategy
Channel Design Decisions
Channel Management Decisions
Public Policy and Distribution Decisions
Supply-Chain Management
International Logistics

International logistics is the

design and management of a
system that controls the forward
and reverse flow of materials,
services, and information into,
through, and out of the international
corporation.
The Nature of Global Logistics
and Channel Decisions
International distribution encompasses two
areas of responsibility:
Global logistics
the right products are made available to customers
when and where they want them
ensuring adequate supply

Channel management
identifying, selecting and supporting distribution
partners
distribution partners bridge the gap between
manufacturer and customer
The Nature of Global Logistics
and Channel Decisions.
The value chain
Information &
Research
Target Marketing
Selection
Purchasing Product Policy &
Strategy
Inbound
Logistics Pricing Policy &
R&D Strategy

Assembly & Distribution Policy

Manufacturing & Strategy
- Messages, appeals
Outbound Communication
- Media Strategy & Plan
Logistics Policy & Strategy
- Advertising Plan
Marketing Installation & Testing - Promotion Plan
Service - Personal Selling
- Direct Marketing Plan
Margin - Direct Mail
- Telemarketing
The Nature of Global Logistics
and Channel Decisions.
The value chain provides a useful framework
for integrating various organisational activities
related to global distribution
Today, distribution activities are becoming
increasingly intertwined, i.e.
sourcing material and parts for production
taking care of product shipment
selecting suitable distribution partners
In-Bound Logistics
In-bound logistics describes the process of
moving products and materials from suppliers
to the factory
Six factors must be taken into account
factor costs and conditions
transport costs
country infrastructure
political risk
market access
currency issues
In-Bound Logistics..
Factor costs and conditions
land
labour, including the cost of workers
manufacturing and production
professional and technical

management

capital cost
The cost of these factors depends on
availability
relative abundance
In-Bound Logistics..
World factor costs that affect manufacturing
Industrialised countries
factor costs are tending to equalise (developing
infrastructure and righteous wages structure)
Industrialising countries (Singapore, other Pacific
Rim countries)
offer significant factor costs savings
offer an increasingly developed infrastructure and political
stability
Russia and other countries
lower factor costs (especially wages) are offset by limited
infrastructure development and greater political
uncertainty
In-Bound Logistics..
Transport Costs
Country Infrastructure
Political Risk
Market Access
Foreign Exchange
Out-Bound Logistics
Moving products from the factory to
customers
It involves aspects of
Order processing
Transportation
Warehousing
Transportation
inventory control
International Channel Strategies
The purpose of marketing channels is to
create utility for customers
place
time
form
information
Two forms of channel strategy
Direct involvement
Indirect involvement
Characteristics Impacting on
Channel Design and Strategy
Customer characteristics
Customer number
Geographic distribution
Income
Shopping habits
Reactions to different selling methods
Product characteristics
Perishability
Service requirements
Unit price
Characteristics Impacting on
Channel Design and Strategy
Middleman characteristics
Attitude towards the manufacturer
Selection and care of Distributors and Agents
Distributor and Agent performance

Termination

Environmental characteristics
Economic
Social
Political dimensions
Global Trends in Channel Design
and Strategy
Global Retailing
Today
Future
Direct Marketing
Distribution system, where sales to customers are carried out
via telephone, mail or door-to-door
One-on-one approach is effective for products which need
demonstration or complex explanation
E-Commerce and International Distribution Strategies
Design of appropriate distribution systems
E-Tailing
Describes the increasing trend of retail operations globalising
via the Internet
Presenting and selling a product range over the Internet gains
increasing importance
Global Trends in Channel Design
and Strategy.
Alternative Channel Responses

Channel Decision

Electronic Physical
Commerce Distribution

Manufacturer Existing Traditional

Direct Retailer Online Retailer

Cybermediary
Channel Design Decisions
Designing International Distribution Channels

Channel systems can vary from country to

country
Global marketers usually adapt their
channel strategies to structures that exist
within foreign countries
Key challenges:
May be complex or hard to penetrate
May be scattered, inefficient, or totally
lacking
Channel Design Decisions
Step 1: Analyzing Consumer Needs
Cost and feasibility of meeting needs must be
considered
Targeted levels of customer service
What segments to serve
Best channels to use
Minimizing the cost of meeting customer service
requirements

Step 2: Setting Channel Objectives

Set channel objectives in terms of targeted level of
customer service
Many factors influence channel objectives
Channel Design Decisions
Step 3: Identifying Major Alternatives
Types of intermediaries
Company sales force
Manufacturers agency

Industrial distributors

Number of marketing intermediaries

Intensive (Candy and toothpaste)

Selective (Television and home appliance)

Exclusive distribution (Luxury automobiles and prestige

clothing)
Responsibilities of channel members
Packaging
Labeling

Display

Documentation
Channel Design Decisions
Step 4: Evaluating Major Alternatives
Economic criteria
Control issues
Adaptive criteria
Channel Management Decisions

Decisions Identify characteristics that

distinguish the best channel
Selecting channel members
members Which characteristics are
Managing and important?
Years in business
motivating channel Lines carried
members Growth and profit record
Evaluating channel Cooperativeness and reputation

members Type of customer

location
Channel Management Decisions

Decisions
Selecting channel
members
Managing and
Partner relationship
motivating channel
members management (PRM) for long-
Evaluating channel term partnerships
members Software available to
coordinate members
Channel Management Decisions

Decisions Check channel performance

of:
Sales
Selecting channel Inventory

members Customer delivery

Promotion and training
Managing and
Customer service
motivating channel
Performance should be
members
checked against standards
Evaluating channel Channel members should be
members rewarded or replaced as
dictated by performance
Public Policy and Distribution
Decisions
Exclusive distribution-is when the seller
allows only certain outlets to carry its
products
Exclusive dealing-is when the seller
requires that the sellers not handle
competitors products
Exclusive territorial agreements-is when
producer or seller limit territory
Tying agreements-are agreements where
the dealer must take most or all of the line
Supply-Chain Management
Supply-chain management connects a
companys supply side with its demand side.
Supply-chain management is the
integration of business processes from
end user through original suppliers, that
provide products, services, and
information that add value for customers.
It as well opens up supplier relationships for
companies outside of the buyers domestic
market.
Marketing Logistics and
Supply Chain Management
Major Logistics Functions
Major Logistics Functions
Warehousing
How many
What types
Location
Distribution centers
Inventory Management
Just-in-time systems
RFID
Knowing exact product location
Smart shelves
Placing orders automatically

Transportation affects the pricing of products,

delivery performance, and condition of the goods
when they arrive
 Transportation
Transportation Modes
Modes
Rail
Rail
Nations
Nationslargest
largestcarrier,
carrier,cost-effective
cost-effective
for
forshipping
shippingbulk
bulkproducts,
products,piggyback
piggyback
Truck
Truck
Flexible
Flexiblein
inrouting
routing&&time
timeschedules,
schedules,efficient
efficient
for
forshort-hauls
short-haulsof
ofhigh
highvalue
valuegoods
goods
Water
Water
Low
Lowcost
costfor
forshipping
shippingbulky,
bulky,low-value
low-value
goods,
goods,slowest
slowestform
form
Pipeline
Pipeline
Ship
Shippetroleum,
petroleum,natural
naturalgas,
gas,and
andchemicals
chemicals
from
fromsources
sourcesto
tomarkets
markets
Air
Air
High
Highcost,
cost,ideal
idealwhen
whenspeed
speedis
isneeded
neededor
orto
to
ship
shiphigh-value,
high-value,low-bulk
low-bulkitems
items
Major Logistics Functions.
Integrated Logistics Management
Concept Recognizes that Providing Better
Customer Service and Trimming Distribution
Costs Requires Teamwork, Both Inside the
Company and Among All the Marketing
Channel Organizations.
Company
the Company
the
Cross-Functional Teamwork
Cross-Functional inside
Teamwork inside

Building Channel
Building Partnerships
Channel Partnerships

Logistics
Third-Party Logistics
Third-Party
Third-party logistics
Third-party logistics is the outsourcing of
logistics functions to third-party logistics providers
(3PLs)-
An independent logistics provider that performs
any or all of the functions required to get their
clients product to market.
Summary
Channel decisions are difficult to manage
globally
A global marketer must
tailor the marketing program to different
types of channels
or introduce new retail concepts
Retailing will see an increasing trend
towards globalisation of operations
Quote-2

"The most serious mistakes are not

being made as a result of wrong
answers. The truly dangerous thing is
not asking the right questions."

Dr Ravindra Pratap Gupta

Assignment-1
 The International Supply
Chain
Suppliers Corporation Customers

Domestic/Impo Inbound Throughflow Outbound Domestic/Export

rt Materials Materials Distribution
Sourcing
Order Order
Order Order Processing Placement
Processing Processing

Supplier-Firm Transportation Transportatio

Interface n
Materials Physical Costumer-Firm
Transportation Transportation Interface
Management Distribution
Management Customer Physical
Service Distribution
Management
Storage Storage Inventory Storage Inventory Inventory
Management Management Management

Forward and Reverse Flow of Information, Products, and Funds 36

Thanks
See you next week!