Maximizing Profitability: Supply Chain and Distribution Channels Masterclass

1. Delivering Value Through Supply Chain Management: Channels of Distribution and Logistics - Managing Retailing, Whole Saling and Market Logistic

2. Chapter Objectives • value chain • key elements in a supply chain • distribution channel • functions of distribution channels • wholesaling intermediaries • found in distribution channels

3. Chapter Objectives • types of distribution channels • steps for distribution channel strategies • how supply chain uses logistics

4. LIDROCK.COM Place: The Final Frontier • Value chain: a series of activities directed at designing, producing, marketing, delivering, and supporting any product. • Supply chain: Activities necessary to turn raw materials into a good or service and put it in the hands of the consumer:

5. Figure 15.2: The Generic Value Chain

6. UPS.COM Links in the Supply Chain • Supply chain management: • the management of flows • among the firms • in a supply chain • to maximize total profitability

7. UPS.COM Links in the Supply Chain • Supply chain management: • physical movement of goods • sharing of information about goods • In-sourcing: • contracting with a specialist • that services the company’s supply chains

8. Supply Chain vs. Channel of Distribution • Channel of distribution: • facilitates movement of a product • from producer to final customer • Supply chain: • begins with raw materials

9. Figure 15.3: Supply Chain

10. The Importance of Distribution • You Can’t Sell What Isn’t There

11. The Importance of Distribution:You Can’t Sell What Isn’t There! • Direct channel: • a producer to a customer • Indirect channel: • one or more intermediaries

12. The Importance of Distribution:You Can’t Sell What Isn’t There! • intermediaries • wholesalers, agents, • brokers, retailers • they help move • product to consumer • or business user

13. Functions of Distribution Channels • To ease the flow of goods • from producer to customer • To provide time, place, and ownershiputility • logistics or physical distribution functions

14. Functions of Distribution Channels • create efficiencies • by reducing number of transactions • Breaking bulk: • purchasing large quantities of goods to sell one/few at a time to customers • Creating assortments: • providing variety of products in one location

15. Figure 15.4: Reducing Transactions via Intermediaries

16. Functions of Distribution Channels • To make purchase process easier • To manage risk • To perform communication and transaction functions

17. DELL The Internet in the Distribution Channel • Radical changes in distribution strategies • Disintermediation: • eliminating traditional intermediaries • Knowledge management: • sharing knowledge • with other supply chain members

18. Channel Composition: Types of WholesalingIntermediaries • Wholesaling intermediaries: • firms that handle the flow of products • from the manufacturer • to the retailer/business user

19. Independent Intermediaries • Merchant wholesalers: • buy goods • from manufacturers • sell to retailers • and other B2B customers

20. Independent Intermediaries • Merchant wholesalers: • Full-service merchant wholesalers • Limited-service merchant wholesalers • Cash-and-carry wholesalers • Truck jobbers • Drop shippers • Rack jobbers • Mail-order wholesalers

22. Independent Intermediaries • Merchandise Agents/Brokers: • provide services in exchange for commissions • Manufacturers’ agents/reps • Selling agents • Commission merchants • Merchandise brokers

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

24. Types of Distribution Channels • Consumer Channels • Direct channel: • producer sells directly to customers • Indirect channel: • producer uses one or more intermediaries • to reach consumers

25. MERCK.COM Types of Distribution Channels (cont’d) • Business-to-business channels • Dual distribution systems • Hybrid marketing systems

30. Figure 15.6: Steps in Distribution Planning

31. Planning a Channel Strategy • Step 1: • Develop distribution objectives • that support the firm’s • overall marketing goals. • How can distribution work with other elements of marketing mix to increase profit? • To Increase market share • Increase sales volume ? • To make firm product available when, where, and in the quantities customer at the minimum cost.

32. Strategy • Bulky products • Primary distribution objective is to minimize shipping cost • Fragile Product • minimize handling • New product • Maximum product exposure • Make product available near customer (work / live)

33. Planning a Channel Strategy • Step 2: • Evaluate internal and external environmental influences • to develop best channel structure. • ability to handle distribution functions • Channel intermediaries available • How competition distributes products • Long / Short, intensive / selective / exclusive

34. Planning a Channel Strategy (cont’d) • Step 3: Choose a distribution strategy • Channel relationships: • conventional, vertical, or horizontal system • Conventional marketing system: • Multilevel distribution channel in which channel member work independently of one another • members work independently of one another

35. IGAINC.COM Planning a Channel Strategy (cont’d) • Step 3: Choose a distribution strategy • Vertical marketing system (VMS): • formal cooperation among channel members • Administered VMS • Corporate VMS • Contractual VMS • Retailer cooperative • Franchise organizations

37. Planning a Channel Strategy (cont’d) • Step 3: Choose a distribution strategy • Horizontal marketing system: • two or more firms • at the same channel level • agree to work together • to get their product to the customer • Alliance

38. Planning a Channel Strategy (cont’d) • Step 3: Choose a distribution strategy • Distribution intensity • Exclusive distribution: • selling only through a single outlet in a region • Selective distribution: • using fewer outlets than intensive • but more than exclusive distribution • Intensive distribution: • selling through all suitable wholesalers or retailers

40. Planning a Channel Strategy (cont’d) • Step 4: distribution tactics • Selecting channel partners: • normally a long-term commitment • Managing the channel • Channel leader/captain: • dominant firm that controls the channel • (via economic, legitimate, reward/coercive power)

41. ENTERPRISE RENT-A-CAR Distribution Channels and the Marketing Mix • Place decisions affect: • Pricing • Product and its positioning

42. Logistics: Implementingthe Supply Chain • Logistics: • the process of designing, managing, and improving the movement of products through the supply chain • Purchasing • Manufacturing • Storage • Transport

43. Logistics: Implementingthe Supply Chain (cont’d) • Physical distribution: • the activities used to move finished goods • from manufacturers • to final customers

44. Logistics Functions • Order processing • Warehousing • Materials handling

45. Logistics Functions (cont’d) • Transportation: • mode by which • products move • among channel members

46. Logistics Functions • Transportation modes differ in their-- • Dependability • (safety and punctuality) • Cost • Speed of delivery • Accessibility • (different locations served) • Capability • (variety of products handled) • Traceability • (ability to locate goods in shipment)

47. Modes of Transportation • Railroads: • carry heavy, bulky items over long distances • Water: • carry large, bulky goods • (especially internationally) • Trucks: • carry consumer goods in short haul; • allow flexibility in locations

48. Modes of Transportation (cont’d) • Air: • carry high value-items; • fastest and most expensive mode • Pipelines: • carry petroleum/chemical products • Internet: • distribute services • such as banking, news, and entertainment

50. Logistics Functions (cont’d) • Inventory control: • activities to ensure foods are always available to meet customers’ demands • Radio frequency identification (RFID) • Just in time (JIT)