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Logistics PPS9a

Logistics PPS9a. Topic 6. Topic 6. Managing the Distribution Channel. Deregulation of trucking industry Smaller truck loads Smaller lot sizes for M Shorter lead times Competitive freight rates to distributors.

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Logistics PPS9a

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  1. LogisticsPPS9a Topic 6

  2. Topic 6 Managing the Distribution Channel

  3. Deregulation of trucking industry • Smaller truck loads • Smaller lot sizes for M • Shorter lead times • Competitive freight rates to distributors

  4. Change in distribution structure – forces stronger and better management and coordination in distribution channel.

  5. Channel management = managing an existing distribution channels/ running with what has been set up already

  6. Channel design = setting up of the distribution channel

  7. CHANNEL MANAGEMENT Securing the cooperation of channel members Is not channel design Distribution objectives aligned with organisation's overall marketing objectives Interorganisational evaluation of channel member performance

  8. The process of designing, selecting and managing distribution systems and strategies Analyse consumer needs for service outputs Establish channel objectives in terms of delivering service outputs Evaluate distribution environment Identify alternative distribution systems and select appropriate members from available alternatives Determine channel leadership and control Ensure cooperation of channel members Evaluate and modify channel

  9. 1. CHANNEL LEADERSHIP AND CONTROL • Channel leader = that marketing channel institution that formulates marketing policies for other channel members and thus controls their marketing decisions • Channel performance (overall & individual) = determined by level of control that some organisations have over other

  10. Channel management by manufacturers or producersPages 235 - 236 Channel management by wholesalersPages 238-239 Channel management by retailersPages 239-240 Channel management by logistical organisationsPages 241

  11. Channel management by logistical organisations Why would it be interesting for logistical organisatios to assume channel management? Neutral relative to many of channel policies and activities

  12. Channel management by logistical organisations Reward and expert power • Reduction in rates • Special transport schedules • Minimum weight requirements • Specialised equipment • Consulting services • Providing information

  13. WHO SHOULD LEAD THE DISTRIBUTION CHANNEL? vertical marketing systems Corporate vertical systems Jewellery Administered vertical systems Central Selling Organisation of De Beers • Vertical contractual systems • Retail-sponsored systems • Wholesale-sponsored systems • Franchising Manufacturer franchise M-to-Wholesaler franchise Service-sponsor franchise

  14. Forward vertical integration – M ♥ R Reasons: • Greater effectiveness and efficiency • Gaining control over distribution activities • Allowing suppliers to access to other marketing channels

  15. Backward vertical integration – R ♥ M Reasons: • Assure self of continuous supply of consistent quality-merchandise • Effective & efficient flows of physical goods, information and transactions • Resellers often acquire their sources of supply as a competitive move

  16. horisontal integration systems = when intermediaries on same level of distribution channel are part of same group or form part of same management Why do you think it could work so well?

  17. horisontal integration systems Why do you think it could work so well? Complementary skills and resources … Could take form of strategic alliances and joint ventures even BUT ... WHO WILL BE THE LEADER?

  18. Who will be the leader? Institution/ agency within the system using its power bases to aid in overcoming the natural variability of individual channel member behaviour and adding resources within this system to enhance the system’s viability.

  19. Conflict will inevitably arise when … Performance in the channel is weak. How could one ensure strong channel performance then?

  20. Strong channel performance … • Specify roles and responsibilities clearly • Ensure cross-member evaluation and regulation • Leadership to: - correct use of power base & resources - recognition of dependency on system - actual USE of power (not just talky talky) - exercising of tolerance for control among channel members - desire on part of channel member to influence others - effective cooperation

  21. Strong channel performance … • Specify roles and responsibilities clearly • Ensure cross-member evaluation and regulation • Leadership to: - correct use of power base & resources - recognition of dependency on system - actual USE of power (not just talky talky) - exercising of tolerance for control among channel members - desire on part of channel member to influence others - effective cooperation Usually the one that has the most at stake

  22. COORDINATION IN THE DISTRIBUTION PROCESS Long-run objective of channel management = to, AT A REASONABLE COST, achieve greatest possible IMPACT at end-user level so that individual channel members can get a satisfactory RETURN.

  23. Steps in the coordination process Determine channel service leads Step 1 Identify the necessary tasks and institutions needed to perform those tasks Step 2 Use power or leadership to ensure that the services are properly delivered Step 3 Enhance channel cooperation Step 4 Deal with channel conflict Step 5 Step 6 Achieve successful channel performance

  24. Step 1 Looking at SERVICE OUTPUTS demanded by end-users of commercial channel i.e. LOT SIZE DELIVERY/ WAITING TIME MARKET DECENTRALISATION (convenient locations) BREATH/ DEPTH OF P/S ASSORTMENT (product variety) SERVICE BACKUP

  25. Step 2 Which marketing task undertaken to generate requisite service outputs & Which channel members employed to form a delivery system with tasks like: PHYSICAL PROCESSION OWNERSHIP PROMOTION FINANCING RISKING ORDERING PAYMENT

  26. Step 3 Determine exactly which influence strategies used to accomplish hoped-for results Power to be used in marketing channel to specify tasks – tasks which are: COMPLEMENTARY GAIN COOPERATION ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM

  27. Step 3 Determine exactly which influence strategies used to accomplish hoped-for results Power to be used in marketing channel to specify tasks – tasks which are: COMPLEMENTARY GAIN COOPERATION ACHIEVE SATISFACTORY DELIVERY OF CHANNEL SERVICES DESIRED BY TM Types of power?

  28. Step 3 Rewards Punishments Expertise Identification Legitimacy Information Types of power?

  29. Step 4 Channel cooperation = joint striving of channel members towards individual and mutual goals i.e. JOINT PROMOTIONAL PROGRAMMES JOINT INVENTORY MANAGEMENT ASSISTANCE EXCLUSIVE PRODUCTS INFORMATION SHARING

  30. If play nicely together, lead to CHANNEL SATISFACTION • Social interaction (between intermediary and M) • Product dimensions (demand for and quality of M’s product) • Financial dimensions (intermediary margins & ROI) • Co-op advertising initiatives and allowances • Assistance from M to intermediary re consumer promotions, promotional support and POP displays

  31. Step 5 Setting up mechanisms to deal with conflict issues which WILL arise NB that continues to provide desired service outputs … CONFLICT DUE TO DISPARITY IN GOALS: Sellers = M & PRODUCERS – HIGHEST PRICE Buyers = R – PAY LOWEST PRICE TO MAX THEIR PROFITS

  32. Step 6 Channel performance REGULAR EVALUATION BY MARKETING MANAGEMENT EXERCISE CONTROL OVER PERFORMANCE OF CHANNELS MAINTAIN EFFECTIVE DISTRIBUTION

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