Distribution Management

1. Distribution Management Marketing 2B Distribution Management

2. Hugo van Zyl • Representative – SA Druggist, Knoll, Roche • Product and Brand Manager - Roche • Senior Marketing and Sales Manager – AstraZeneca • General Manager – Bausch & Lomb • Director – Knowledge Warehouse • Managing Director – Hugo van Zyl & Associates Marketing 2B Distribution Management

3. Housekeeping • Cell phones switched off. • Being on time is a matter of choice • Lecture structure • 10min – Quiz on previous week’s lecture (Points to count for semester mark) • 50min lecture • 10min break • 50min lecture • Text book – Distribution management – Strydom, Grove et al. Second edition • Van Schaik!! Marketing 2B Distribution Management

4. Lecture program Marketing 2B Distribution Management

5. Distribution Management Marketing 2B Distribution Management

6. Distribution Management Getting the right product to the right place in the right quantity with the right quality at the best possible price in order to present it to customers where they want when they want it. Marketing 2B Distribution Management

7. Chapter 1 – Supply chain, Value chain and Distribution 2.Value Chain analysis 3.Typical Distribution channel 1.Supply Chain Distribution 6.Distribution Structure decisions 5.Trends / Issues 4.Intermediaries Marketing 2B Distribution Management

8. Chapter 1 – Supply chain • What is a Supply chain? • What is Supply chain Management? Marketing 2B Distribution Management

9. Chapter 1 – Supply chainPrimary decisions Sourcing Development Planning Transport logistics Inventory Production Marketing 2B Distribution Management

10. Principles of SCM 1. Communication • Raw material to End-product flow is critical in SCM • The info flow that support this is the basis of success • Sharing of “demand data” between suppliers and producers • Dell Direct model • Most efficient path to customer • Single point of accountability • Build to order • Low cost leader • Standards based technology Marketing 2B Distribution Management

11. Marketing 2B Distribution Management

12. Principles of SCM 2. Flexibility, Inventory and Customer service. • Customer satisfaction • Typically measured in “fill rate”, “ on time delivery” and “not delivered on time” • Inventory • Inventory is dead money. • Flexibility • Ability to respond to changes in the environment • Flexibility buffer = Safety Stock So…… it’s a trade off between keeping customers happy and the cost involved Marketing 2B Distribution Management

13. Marketing 2B Distribution Management

14. Principles of SCM 3. Decision making Decision are made on 3 levels: • Strategic – Long term decisions • Location, production, transportation and inventory • Tactical – Medium term decisions. • Demand forecasts, Distribution planning, production planning and materials requirement • Operational level – Day to day decisions • Changes in internal environment – e.g. staff shortages Marketing 2B Distribution Management

15. Telecoms giant BT has joined the growing band of Western firms to transfer call centre operations to India, at a cost of 2,000 UK jobs. The firm has said it is to open two Indian call centers - in Bangalore and Delhi - employing 2,200 people by 2004. The shake-up is part of plans which will see BT's UK-based centers drop from about 100 to 31, with the number of workers falling from 16,000 to 14,000. BT said no permanent UK employees would be made redundant as a result of the move, and there would be no compulsory lay-offs among agency staff. Marketing 2B Distribution Management

16. Principles of SCM 4. Metrics and Data collection “Modern supply chains are to complex to make decisions without Data” • Back order reports • Cycle times • DPMO • Fill rate • Inventory accuracy • Inventory ABC • Inventory turns • On time delivery % www.supplychainmetrics.com Marketing 2B Distribution Management

17. Principles of SCM 4. Metrics and Data collection Performance dimension 1 – Quality • Functionality • Conformance • Reliability • Durability • Safety • Serviceability • Aesthetics • Measure aspects that coincide with customer expectations or requirements • Measured by tools such as DPMO Marketing 2B Distribution Management

18. Principles of SCM 4. Metrics and Data collection Performance dimension 2 - Delivery • Speed • Time, from order receipt to delivery • Reliability • Deliver products in agreed time frame • Measured with: • Fill rate reports • Back order reports Marketing 2B Distribution Management

19. Principles of SCM 4. Metrics and Data collection Performance dimension 3 – Flexibility • Mix flexibility • Change over flexibility • Design flexibility • Volume flexibility • Measured with • Inventory accuracy reports • Cycle time reports Marketing 2B Distribution Management

20. Principles of SCM 4. Metrics and Data collection Performance dimension 4 – Cost • Supply chain or Distribution cost is part of P&L • Measures the effectiveness of the spend on the distribution function • Measure with: • Inventory turn reports Marketing 2B Distribution Management

21. Principles of SCM 4. Metrics and Data collection Performance dimension 5 – After sales support • Especially important in high price goods, goods where ASS is sales tool and “upgradeable” products. • Effectiveness can be measured as part of Supply chain Management metrics Marketing 2B Distribution Management

22. Supply chain management • Pitfalls in Inventory management • Globalization and the supply chain • Improving SCM Marketing 2B Distribution Management

23. Value - Chain analysis • The Supply chain is a value adding process. R2.50 / Kg R12.50 / Kg 10c / Kg R35.00 / Kg R18.00 / Kg Marketing 2B Distribution Management

24. Value-chain analysis 9 Value creating stages - Porter • Primary activities • Inbound logistics • Operations goods • Outbound logistics • Marketing / Sales • Service • Support activities • Procurement function • Tech Development • Human resources • Infrastructure Marketing 2B Distribution Management

25. The Typical distribution channel Selecting a distribution channel. • Customer satisfaction – Product availability, convenience, price • Marketing objectives of the company • Cost of the channel • Nature of the product – Perishables, electronics… • Intermediaries • Competitors • Legal / regulatory environment Marketing 2B Distribution Management

26. The Typical distribution channel Importer Producer Wholesaler Retailer Consumer Manufacturer Supplier Importer Producer Retailer Consumer Manufacturer Supplier Global company Local Manufacturer Local Wholesaler Local Retailer Local Consumer Marketing 2B Distribution Management

27. Distribution channels for Services 4 Characteristics of Services • Intangibility • Inseparability of Production and Consumption • Same time • Customer participation • Perishable nature. • Heterogeneity • Little need for logistical functions – Inventory, Transportation • Little need for Intermediaries – direct from supplier to consumer Marketing 2B Distribution Management

28. Functions and activities of Intermediaries • Intermediaries = Wholesalers and Retailers • Resolve Discrepancies • Geographically dispersed Supply sources • Manufacturer volumes • Production timing • Quantity and assortment • Transferring ownership Marketing 2B Distribution Management

29. Functions and activities of Intermediaries • Close Gaps • Quantity • Assortment • Spatial • Knowledge • Ownership • Provide Utility • Form • Time • Place • Possession Marketing 2B Distribution Management

30. Functions and activities of Intermediaries • Distribution • Transactional – Buying, selling (Risk taking) • Operational - Warehousing, transporting, order processing • Financing, grading. • Specialization • Functional – Transport, warehousing, Order fulfillment. • Support – Financial, Information, Insurance. • Efficiencies of exchange • More efficient to have intermediaries involved in distribution than going directly to end consumer. • Or is it? Marketing 2B Distribution Management

31. Trends and issues. • Social trends • A change in social trends impact the preference for products and the channels through which they are distributed. Marketing 2B Distribution Management

32. Trends and issues. • Economic environment • A change in the economic environment creates different demands on a existing distribution network. Marketing 2B Distribution Management

33. Trends and issues. • Competition in Distribution channels • Porter’s five forces: Substitute products Supplier power Competitive rivalry Buyer power Threat of Potential competitors Marketing 2B Distribution Management

34. Trends and issues. • Supply chain issues in SAF • High cost of Transport in SAF, due to being road based not rail based. • Mining generates more demand than other sectors due to weight • Geographical position of Steel industry related to harbors add cost • Geographic distribution of Agricultural sector adds complexity Marketing 2B Distribution Management

35. Distribution and Structure decisions • Intensive distribution • Convenience products • Large number of locations • Many intermediaries • Strategy = low cost and high convenience • Selective distribution • Specialized products • Less locations • Few intermediaries • Differentiation strategy with medium to high cost. • Exclusive distribution • Specialized / exclusive products • Few locations • Strategy is focused on exclusivity • Sales support is important Marketing 2B Distribution Management

36. Distribution and Structure decisions • Cost leadership Strategy • Producing and distributing at very low per unit cost. • Focused on price sensitive consumers • Convenience products • Differentiation Strategy • Uniqueness • Non price sensitive consumers • Focus strategy • Focused on a particular segment of the market Marketing 2B Distribution Management

37. Distribution and Structure decisions • Innovative structures • Due to changes in demand in the traditional marketplace Marketing 2B Distribution Management

38. Distribution and Structure decisions • Vertical marketing system arrangements • Corporate VMS – Motor dealerships • Contractual VMS – Franchises • Alliance VMS – SPAR • Administered VMS – SAB-Miller and Liquor retailers Marketing 2B Distribution Management