Unit 12 Distribution

1. Unit 12Distribution

2. Distribution • How did the merchandise get to the stores? • Where is the merchandise kept before it goes to the store? • How does the owner of a store know when to order more merchandise?

3. Unit 12 Vocabulary • Drop Shippers • E-marketplace • E-tailing • Exclusive Distribution • Exempt Carriers • Freight Forwarders • Indirect Distribution • Integrated Distribution • Intensive Distribution • Intermediaries • Inventory • Inventory Management • Inventory Turnover • Just-In-Time (JIT) Inventory System • Memorandum Buying • Model Stock List • Agents • Basic Stock List • Blind Check Method • Bonded Warehouse • Brick-and-mortar Retailers • Carload • Centralized Buying • Channel of Distribution • Common Carriers • Consignment Buying • Contract Carriers • Cycle Counts • Decentralized Buying • Direct Check Method • Direct Distribution • Distribution Center • Dollar Control

4. Unit 12 Vocabulary • Selective Distribution • Six-month Merchandising Plan • Source Marketing • Spot Check Method • Stockkeeping unit (SKU) • Storage • Ton-mile • Transportation • Unit Control • Want Slips • Wholesale Buyers • Wholesalers • Never-out List • Organizational Buyers • Open-to-buy (OTB) • Perpetual Inventory System • Physical Distribution • Physical Inventory System • Preretailing Marketing Method • Private Carriers • Private Warehouse • Public Warehouse • Quality Check Method • Rack Jobbers • Real-time Inventory Systems • Receiving Record • Retail Buyers • Retailers • Reverse Auction

5. Unit 12 EssentialQuestion • How is distribution knowledge utilized to manage supply-chain activities?

6. Essential Question 1 Distribution • What is the nature and scope of channel management?

7. Adding Value • Place UTILITY • Location – having the product where customers can buy it • Time UTILITY • Having the product available when the customer wants/needs it • Intermediaries provide value to producers by providing expertise in areas producers do not have such as displaying, merchandising, providing convenient shopping locations and hours for customers.

8. Functions of Channel Members Provide marketing information Producers rely on market research to determine their target markets’ needs and wants Promote products Producers rely on retailers to take a large portion of promotion responsibilities Negotiate with the customers Different prices are paid by the wholesaler, retailer and consumer based on negotiation

9. Functions of Channel Members Physical distribution Channel members move the product through the distribution channels to the consumer Financing and risk taking: Moving products through a channel costs money When channel members work together to finance activities and to assume financial risks, channels will be more effective

10. Channel Management The channel must be properly managed to be effective Channel members should Recognize the importance of their task and make informed decisions Commitment to quality of the product Satisfying the target market’s needs and wants All members cooperate to attain overall channel goals

11. Channel Management If the channel is not effective, conflict occurs….. Horizontal Conflictoccurs between channel members at the same level usually due to business competition Vertical Conflictoccurs between channel members at different levels within the same channel

12. Channel Management Decisions 1. Select Channel Members • Determine the types of members that belong in the channel, as well as the channel length (total number of channel members) 2. Manage Channel Members • Determining channel responsibilities • The company must sell not only through the intermediaries but also to/with them • Partner relationship management (PRM) and supply chain management (SCM) software might be used

13. Channel Management Decisions 3. Motivate Channel Members • Develop a cooperative/collaborative and balanced relationship with the partner • Understand the partner’s customers – their needs, wants, and demands • Understand the partner’s business – operationally and financially and what’s really important to them • Look at the partner’s needs in terms of customer support, technical support, and training

14. Channel Management Decisions 4. Evaluate Channel Members • Produces must evaluate intermediaries performance against such standards as: • Sales quota attainment • Average inventory levels • Customer delivery time • Treatment of damaged and lost goods • Cooperation in promotional programs • Should constantly evaluate the channel: • What is working? • What is not working? • What can be improved?

15. Channel Management Decisions 4. Evaluate Channel Members • Evaluate Risks & Dangers of Distribution Decisions • Transaction costs both apparent & hidden • Risks include loss in transit, destruction, negligence, non-payment and so on. • So, careful choice & evaluation of each & every channel partner is a necessity.

16. Essential Question 2 Distribution • What is the nature of channels of distribution?

17. Agents Retailers Indirect Wholesalers Channels of Distribution Manufacturers / Producers Direct Industrial Distributors Industrial Users

18. Channel of Distribution • Channel of Distribution: The path a product takes from producer or manufacturer to final user.

19. Direct vs. Indirect Channels • Direct Distribution: channel that exists when the product is sold from the producer to the final user. • Indirect Distribution: channels that exists when one or more intermediaries: middleman, are involved. The more intermediaries, the longer the channel.

20. Pg 450

21. Pg 451

22. Distribution Intensity • How widely a product will be distributed. • Intensive Distribution: Involves the use of all suitable outlets for a product. • Selective Distribution: A limited number of outlets in a given geographic area used to sell the product. • Exclusive Distribution: Involves protected territories for distribution of a product in a given geographic area.

23. Essential Question 3 Distribution • What are the marketing functions of transportation and storage?

24. Modes of Transportation • Transportation: The marketing function of moving a product from the place where it is made to the place where it is sold. Involves: • Trucking • Waterway • Air • Railway • Pipeline

25. Modes of Transportation Trucking • Most frequently used form of transportation. • Used primarily for lightweight shipments over moderate distances. • Accounts for 80% of shipments weighing less than 1000 pounds.

26. Modes of Transportation Rail Transportation • Major type of transportation in the United States. • Used for moving heavy and bulky freight.

27. Modes of Transportation • One of the oldest forms of transportation. • Primary means of international distribution. Water Transportation

28. Modes of Transportation • Normally owned by the company using them. • Most frequently used to transport oil and natural gas. Pipelines

29. Modes of Transportation • Used to ship high-value low-weight items. • Greatest advantage is speed. • Greatest disadvantage is cost. Air Transportation

30. Storage Warehousing • Private Warehouse: Facility designed to meet the needs of its owner. • Public Warehouse: Storage and handling facilities to any individual or company that will pay for its use. • Distribution Center: Warehouse designed to speed delivery of goods and to minimize storage costs. • Bonded Warehouse: Stores products that require the payment of a federal tax. Products may not be moved until the tax is paid.

31. Essential Question 4 Distribution • What are the common terms associated with buying and shipping?

32. Buying • Retail Buyers: Purchase goods for resale. • Consignment Buying: Goods are paid for only after the final customer purchases them. • Memorandum Buying: Occurs when the supplier agrees to take back any unsold goods by a certain pre-established date. • Reverse Auction: Companies post what they want to buy and suppliers bid for the contract.

33. Shipping • Common Carriers: Provides transportation services to any business in their operating area. • Contract Carrier: For-hire carriers that provide equipment and drivers for specific routes. • Private Carrier: Transport goods for an individual business. • Ton-mile: The movement of one ton of freight one mile. • Freight Forwarder: Private companies that combine less-than-carload or less-than-truckload shipments from several different businesses and deliver them to their destinations.

34. Essential Question 5 Distribution • What is the receiving process?

35. Receiving Process • The receiving process: • Receive the goods • Check the goods • Mark the goods (if necessary) • Deliver the goods for use, storage, or sale

36. Essential Question 6 Distribution • How is technology used in channel management?

37. Inventory Management • Inventory management: Finding and maintaining inventory levels that are neither too small nor too large.

38. Tracking Inventory • Keeping tabs on how much inventory you have is the first step in controlling inventory levels.

39. Tracking Inventory • Physical Inventory Systems: Looks at how much inventory is on hand and compares it to what is wanted on hand. • Perpetual Inventory Systems: As inventory is sold, it is subtracted from the inventory list. As new inventory arrives, it is added. • Just-in-time (JIT) Inventory Systems: The responsibility of inventory is shifted to the vendor and is delivered just before it is used.

40. Inventory Costs • Financing Costs: The interest you pay to borrow money to purchase inventory. • Opportunity Cost: Loss of the use of money tied up in inventory. • Storage Costs: The amount of money spent on renting or buying the space needed to store the inventory.

41. Inventory Costs • Insurance Costs: The amount spent to insure the inventory on hand against loss. • Shrinkage Costs: Money lost when inventory items are broken, damaged, spoiled, or stolen. • Obsolescence Costs: Money lost when products or materials become obsolete while in inventory.

42. Essential Question 7 Distribution • How does distribution affect the cost of products?

43. Distribution Costs • Many factors go into determining the distribution costs of a product: • Channel or channels used • Transportation method used • Intensity of distribution • Inventory costs • Who does the selling • Buying and shipping • Economic issues

44. Essential Question 8 Distribution • What are the distinguishing characteristics of retailers, wholesalers, agents, and brokers?

45. Channel Members • Retailers: Sell products to the final consumer for personal use. • Brick-and-mortar retailers:Sell products to the consumer from their own physical store. • E-tailing: Involves retailers selling products to the consumer over the internet.

46. Channel Members • Wholesalers: Businesses that buy large quantities of goods from manufacturers, store the goods, and then resell them to other businesses – also referred to as distributors. • Rack jobbers:Manage inventory and merchandising for retailers by counting stock, filling it in when needed, and maintaining store displays. • Drop shippers: Own the goods they sell but do not physically handle the actual products.

47. Channel Members • Agents: Act as intermediaries by bringing buyers and sellers together. • Independent Manufacturers’ Representatives:Works with several related (but not competing) manufactures in a specific industry. They are paid commissions based on what they sell. • Brokers:Brings buyers and sellers together in order to make a sale. They negotiate the sale, are paid a commission, and then look for other customers.

48. Essential Question 9 Distribution • How does customer service affect channel management?

49. Customer Call Center Online Order Warehouse Actions to Facilitate Order Processing Inventory Check YES: Item Packed for Shipment Items in Stock? NO: Customer Notified of Backorder Accounts Receivable Processes Payment Item Shipped

50. Customer Service Affects • Ensures timely delivery of products • Ensures effective customer communication • Order processing • Correct shipping information • Correct products • Handling complaints • Reducing the probability of complaints • Nice and friendly people