M A R K E T I N G

1. M A R K E T I N G Real People, Real Choices Fourth Edition CHAPTER 15Creating Value Through Supply Chain Management: Channels of Distribution, Logistics, and Wholesaling Michael R. Solomon Greg W. Marshall Elnora W. Stuart

2. Chapter Objectives_1 • Understand the concept of the value chain and the key elements in a supply chain. • Explain what a distribution channel is and what functions distribution channels perform • Describe the types of wholesaling intermediaries found in distribution channels

3. Chapter Objectives_2 • Describe the types of distribution channels and the steps in planning distribution channel strategies • Explain how logistics is used in the supply chain

4. Supply Chain Management • The supply chain includes all the firms that engage in activities that are necessary to convert raw materials into a good or service and put it in the hands of the consumer or business customer • Supply chain management is the management of flows among the firms in a supply chain to maximize total profitability

5. Figure 15.3: Supply Chain

6. What Is a Distribution Channel? • Series of firms or individuals that facilitate the movement of a product from the producer to the final customer • Direct • Indirect

7. Functions of Distribution Channels • Time, place, and ownership utilities • Logistics functions • Transportation and storage • Efficiency creation • Facilitating functions • Repair and maintenance functions • Risk-taking • Communications and transaction functions

8. Creating Efficiencies • Breaking bulk – channel members purchase large quantities from manufacturers and sell smaller quantities to many different customers • Creating assortments – channel members provide a variety of products in one location

9. Types of Wholesaling Intermediaries • Wholesaling intermediaries are firms that handle the flow of products from the manufacturer to retailer or business user • Independent • Manufacturer owned

10. Merchant wholesalers Full-service Limited-service Cash-and-carry wholesalers Truck jobbers Drop shippers Mail-order wholesalers Rack jobbers Merchandise Agents or Brokers Manufacturers’ agents Selling agents Commission merchants Merchandise brokers Independent Intermediaries

11. Manufacturer-Owned Intermediaries • Sales branches • Sales offices • Manufacturers’ showrooms

12. Figure 15.4: Reducing Transactions

13. Types of Distribution Channels • Consumer channels • Direct • Manufacturer-retailer-consumer • Manufacturer-wholesaler-retailer-consumer • Business-to-business channels • Direct • Manufacturer-industrial distributor-business customer

14. Major Types of Distribution Channels

15. Consumer Channels

16. B2B Channels

17. Dual Distribution Systems • Multiple channel usage • Example: • pharmaceutical industry sells to hospitals, clinics, and organizational customers directly and to consumers indirectly through drug retailers

18. Planning a Channel Strategy • Develop distribution objectives • Evaluate internal and external influences • Choose a distribution strategy • Conventional • Vertical • Administered, corporate, contractual– • Horizontal • Develop distribution tactics

19. Vertical Marketing Systems • Administered – channel members remain independent but voluntarily work together • Corporate – single firm owns manufacturing, wholesaling, and retailing operations • Contractual – cooperation is enforced by contracts that spell out member rights and the terms of cooperation

20. Develop Distribution Tactics • Selecting channel partners • Managing the channel of distribution • Channel leader is the dominant firm that controls the channel • Channel leaders have some form of power relative to other members • economic power • legitimate power • reward or coercive power

21. Logistics: Implementing the Value Chain • Process of designing, managing, and improving the movement of products through the supply chain • purchasing • manufacturing • storage • transport

22. Logistics and Customer Satisfaction • Traditionally, logistics was thought of as physical distribution • order processing, warehousing, materials handling, transportation, and inventory control • objective to deliver product at lowest cost • Now, customers’ goals become the logistics provider’s goals

23. Transportation Mode Considerations • Dependability • Cost • Speed of Delivery • Accessibility • Capability • Traceability

24. Modes of Transportation • Rail • Water • Truck • Air • Pipeline • Internet

25. Issues for Discussion • Do you think marketers should be concerned with the total supply chain concept? • Do intermediaries increase the cost of products? Are consumers better off with intermediaries? • Do you think franchises offer the typical businessperson good opportunities? • Describe characteristics of your school’s channel of distribution. What other channels should your school try?