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Channels of Distribution

Channels of Distribution. Channel of Distribution The path a product takes from producer or manufacturer to the final user Businesses who perform these functions allow products to be in the right place at the right time. How does an IPHONE get to the customer?

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Channels of Distribution

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  1. Channels of Distribution • Channel of Distribution • The path a product takes from producer or manufacturer to the final user • Businesses who perform these functions allow products to be in the right place at the right time How does an IPHONE get to the customer? How does a Suave Shampoo get to the customer?

  2. Who’s Who • Intermediaries – channel members that move products from producer to final user • Middlemen • Merchant Intermediaries – take ownership (sharper Image) • Agent Intermediaries

  3. Merchant Intermediaries • Wholesalers • Buy large quantities of goods, store them, and resell to other businesses at a profit (holiday wholesale) Retailers • Sells goods and services through their own store to consumers What is SAM’S CLUB? Wholesaler or Retailer? BOTH

  4. Agent Intermediaries • Negotiate the ownership of goods • Work on commission (% of sale) • Work for both parties (broker) • Work to sell product (manufacturers agent)

  5. Types of Distribution • Direct distribution—straight from the producer to the ultimate consumer or industrial user • Indirect distribution—involves intermediaries • Look @ pg _3_ for photo distribution options

  6. Consumer Distribution Channels • A – Manufacturer  Consumer • B – Manufacturer Retailer  Consumer • C – Man  Wholesaler  Ret.  Cons. • D – Man. Agent WholeRet.Cons. • E - Man.AgentRetailer  Consumer

  7. Distribution Intensity • You Sell the Following Products, What would be the best way to get your products to your customer? • Digital Camera – Camera Store or Website? • Hiking Shoes – Custom Shoe store,National Chain, or Web? • Soccer Cleats – Custom Shoe Store, National Chain, or Web? • Intensive Distribution • Use of all suitable outlets for a product. (motor oil, soda) • Selective Distribution • Limited # of outlets. Less competition, more willing to promote product. (Ralph Lauren)

  8. Distribution Intensity • Exclusive Distribution • Protected territories of a product. • 1 dealer per geographic area, high profit margin, prestige, image control • (NAPA, Snap-on, Culvers,other franchises, UGG boots, COACH)

  9. Siding- pg • Window Distribution – Champion, Feldco? • http://www.youtube.com/watch?v=EOH0iLX2W4Q • http://www.youtube.com/watch?v=D1y1uQcP7fM&feature=related • What is their Distribution channel? • Sales Reps meet in your home. • List new ideas(3) for distributing siding to contractors? • Pro’s and con’s of each…then make one recommendation

  10. Physical Distribution • Process of transporting, storing and handling goods to make them available to customers. • Transportation of goods- is the marketing function of moving goods from a seller to a buyer

  11. Types of Transportation • Trucking • Rail Transportation • Water • Pipeline • Air

  12. Convenient Door-to-door Reduce packaging costs Rapid deliveries Reduce large inventories Traffic Jams Equipment Maintenance Accidents could cause delays Size / Weight restrictions Adv. vs. Dis. for Trucking

  13. Low costs Large quantities Seldom slowed by weather Lack of flexibility Must use another form Adv. vs. Dis. for Rail

  14. Low cost Ship large/ heavy items Speed, very slow Must use another form once ship is in port Affected by weather Adv. vs. Dis. for Water

  15. Operation costs are low Low risk of failure Weather does not delay High initial cost If damaged, can be expensive to repair Adv. vs. Dis. for Pipeline

  16. Very fast Reduces inventory expenses Reduces storage expenses Most expensive form of distribution Mechanical breakdowns Delays from weather Adv. vs. Dis. for Air

  17. Shipping Terms • Fishy Back • Boat to Truck • Piggy Back • Train to Truck

  18. Which Method would you ship the following • Coal • Small box that needed to be at destination quickly • Fruit • Coffee to be shipped abroad • Roses from France • Computer Equipment

  19. Purchasing • Great career area: Professional Shopper! • Important function of marketing because the costs associated with running a business are the direct result of the person who’s in charge of buying the goods/services • List all the things that you would need to purchase if you were to open a retail gift store.

  20. Planning Purchases • Organizational Buyer – purchase products for a business. • In large quantities • Requires technical knowledge of industry • Two types of buyers • Industrial- for use in business • Resale

  21. Layaway #17 99.99 125.99 36.99 18.50 =_____________ *.20 = _________ Bal due? 281.47-56.29 = _________ 281.47 56.29 228.15

  22. Returns #19 • 195 – ___ = ___ owed plus tax • 45*1.06 = ___________ 150 45 47.70

  23. Returns #22 • She will owe • 95-75 = 20.00 plus tax • 20.00*1.07= ____________ #24 Mr. Chow Discount 39.99-3 = ________ 21.40 36.99

  24. Purchase Order • Gives permission to purchase product on account. (business to business). • Read all of #25 and complete. Check yours with the Key before continuing on! • (Instructions, Date, Totals…etc)

  25. Invoice • Bills for goods that have been received. Before paying, make sure it’s correct. Total due….

  26. Dating Terms • To get businesses to pay their bills on time, we have TERMS. • Sometimes N30…bill due in 30 days…if not, you can be charged interest • 2/10 N 30 ….2% discount if you pay in 10 days, otherwise 30 days for full payment.

  27. 13=5/31 30=6/30 2=7/2 5/28 20 980 26=7/31 4=8/4 7/15 14.70 720.30 Dating Terms-#27

  28. Distribution • Your group is a new product distribution team hired by Mattel. You have been given the task of selecting the appropriate target market for the product and getting it into the hands of customers. You will need to develop a plan for distribution. ON Notecard • Product ____________________________________ • Target Market- (Age, Gender, Education, Income, Hobbies) • How will you get your product to the consumers? Choose a channel from pg 4. (direct? Wholesalers? retailers?) WHY? • What type of distribution will you use? (selective, exclusive, intensive) WHY? • What types of physical distribution will you use to move your product in these channels (Plane, Trane, Auto, Truck, Pipe, Water) WHY? • Find a company in Madison who can help you.

  29. Shipping -30 • Package 19lbs 4 oz. Zone 6 = _______ • Invoice is $322.44 • Sales Tax = 7% • Total Due?$10.22+ (322.44*1.07) = _________ 10.22 355.23

  30. Shipping pg 14 • FOB= Free on Board • FOB destination or Store = Seller Pays • FOB Shipping point= Buyer Pays • FOB Factory prepaid- Seller Pays • FOB Destination Reversed = Buyer Pays

  31. #35 • Dated 3/28 received 4/4 • Eligible for discount? _____ • FOB Dest rev? Who Pays ______ • $79,324*(.98) =$________ + 652.66 = $78,390.18 NO buyer 77,737.52

  32. #37 • $5672.35 Dated July 25 1/15 n45 • Discount Date=Aug 9 • 1%=56.72 savings • NO, took too large of discount • Payment should’ve been $5615.63

  33. Industrial Markets • Industrial Buyer=Buys materials used to make a product that is sold • Company’s master production schedule will help provide details for ordering and shipments. • Sell 500 leather coats • Must know how much fabric, insulation, thread, and zippers are needed to produce. • This information is provided on the BILL OF MATERIALS=Itemized list of goods needed to produce a product • Send bids (RFP) to vendors for Price Quotes

  34. Resellers • Wholesale and Retail buyers purchase goods for resale • Forecast consumers needs and buy the necessary products to meet them. • Use planned sales figures to determine quantity to buy • Planned Sales = Using economic forecasts, take last year’s sales x your projected amount this year

  35. Types of Purchasing • Worksheet pg 17

  36. How Much to order • Totaling Totes 1. Last Years Sales ______ + Increase (x.05)______ + Classes (5x12) ______ = Ant. Sales _____ totes Cost (3*98.40) + (2*25.08)+(6*2.15) 295.20+50.16+12.90=$358.26 120 6 60 186

  37. Buying & Distribution • Planned Sales – anticipated sales for next year. • Sales X increase • #1 Sales = $10,000 Increase 10% = • #3 Sales = 8000, Costs up 5% =

  38. BOM #5 • Beginning of Month Stock Month Sales BOM Stock to Sales Feb 4000 16,000 _________ March 4,500 11,250 _________ April 6,000 18,000 _________

  39. #9 Month Last Sales Last BOM StoS PS Planned BOM Feb 5,000 17,500 ____ _______ _______ March 7,000 21,000 ____ ______ ________ April 7,500 18,750 ____ _______ ________

  40. Reductions • Planned Reductions – discounts , shortages, markdowns • #12 Sales were $20,000 Reductions are 2% • PR = 20,000 X .02 = _______ • #14 Sales $30,000 PR=6,000 what is % • 6,000/30,000 = ____________

  41. Planned Purchases • How much should you buy each month! • Take Planned Sales • + EOM (how much you need for next) • +Reductions • - BOM (what you started with) • = What you need to buy

  42. Planned Purchases #20 Month PS -BOM +PR +EOM =PP March 9,900 29,500 900 ______ ______ April 12,100 39,300 1,200 ______ ______ May 8,800 35,200 800 ______ ______ June 13,200 33,000 1,300 ______ ______ July 6,000 19,000 600 _______ ______ Aug ---- 24,000 ---- ________ _____

  43. Selecting Suppliers • Production Capabilities • Past Experiences • Special Buying Arrangements • Consignment buying-paid for only after they are sold • Memorandum buying –take back unsold product • Special Services

  44. #29 How much can u buy? • PS-BOM+PR+EOM-Received-ordered _________ • _________ +__________ + _________ • __________ • _________ =_____________ Open to Buy 11,000

  45. Planned Sales + 20% = *1._ Planned BOM = PS * _ Planned Reduct = 15%=*.__ Planned Purchase At Cost If Markup is 45%.Cost is __% PP@Retail X.__= 12,012 ***REVIEW*** PP at Retail = Planned Sales 9600 + EOM (Next BOM) 39600 (to get this must do next month BOM) + Planned Reductions 1440 - BOM -28800 = PP at Retail = 21840 #31 -Six Month Merch Plan

  46. #31 -Six Month Merch Plan Aug Sept Oct Nov Dec Jan Last Year 8000 11000 9000 12000 15000 1000 PS x( ) ____ _____ ____ _____ _____ ____ BOM x( ) ____ _____ ____ _____ _____ ____ PR X( ) ____ _____ ____ _____ _____ ____ PP @ R ____ _____ ____ _____ _____ ____ PP@C X( ) ____ _____ ____ _____ _____ ____

  47. Dating Terms • Net 30 –from date on invoice • 2/10 Net 30- • 2% discount if paid in 10 days otherwise full payment due in 30 days • 4/15 net 60 – • 4% discount if paid in 15 days otherwise full payment due in 60 days • 2/10 EOM- End of Month • –from end of Month,2% discount 10 days,full payment due at end of Next Month • 2/10 net 45 ROG – • Full payment due 45 days from the date you receive the goods.

  48. #33-Dating Terms • Extra Dating, Adds that # of Days to Original Date… • March 17, 2/10 net 30, 60 extra… • 1st – add 60 days to March 17 • 14-End march, April –30 , May 16 • May 16 + _____ days for Discount = May __ • Final Payment +30 = June ______

  49. Dating Terms Pre-Quiz 6+28+26 = 3/26 8000*.98 = 7840 ordinary 2 / 14 21+9 4/9 6500*.96 =6240 3/25 advanced 29+1 6/1 6250*.98 = 6125 Receipt of goods 5/12 5/31+30 6/30 6/10 2500*.97=2425 End of Month 23+7 10/7 9/17 10,400*.98=10192 ordinary

  50. Government Purchasing • worksheet

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