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Unit 9 Distribution. 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?. Unit 9 Vocabulary. Drop Shippers E-marketplace E-tailing Exclusive Distribution
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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?
Unit 9 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
Unit 9 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
Unit 9 EssentialQuestion • How is distribution knowledge utilized to manage supply-chain activities?
Essential Question 1 Distribution • What are the channels of distribution and the factors that influence the length/width of each channel?
Agents Retailers Indirect Wholesalers Channels of Distribution Manufacturers / Producers Direct Industrial Distributors Industrial Users
Channel of Distribution • Channel of Distribution: The path a product takes from producer or manufacturer to final user.
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.
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.
Essential Question 2 Distribution • What are the marketing activites of transportation and storage?
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.
Modes of Transportation Rail Transportation • Major type of transportation in the United States. • Used for moving heavy and bulky freight.
Modes of Transportation • One of the oldest forms of transportation. • Primary means of international distribution. Water Transportation
Modes of Transportation • Normally owned by the company using them. • Most frequently used to transport oil and natural gas. Pipelines
Modes of Transportation • Used to ship high-value low-weight items. • Greatest advantage is speed. • Greatest disadvantage is cost. Air Transportation
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.
Essential Question 3 Distribution • What are the common terms associated with buying and shipping?
Buying • 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.
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.
Essential Question 4 Distribution • What is the receiving process?
Receiving Process • The receiving process: • Receive the goods • Check the goods • Mark the goods (if necessary) • Deliver the goods for use, storage, or sale
Essential Question 5 Distribution • What is the purpose of inventory management and how is inventory controlled?
Inventory Management • The purpose of inventory management is to find and maintain inventory levels that are neither too small nor too large.
Tracking Inventory • Keeping tabs on how much inventory you have is the first step in controlling inventory levels.
Tracking Inventory • Visual 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. • Partial Inventory Systems: A combination of systems. A perpetual system is used only for those items that account for a large share of sales. • Just-in-time (JIT) Inventory Systems: The responsibility of inventory is shifted to the vendor and is delivered just before it is used.
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.
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.
Essential Question 6 Distribution • How does distribution affect the cost of products?
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
Essential Question 7 Distribution • What are the distinguishing characteristics of retailers, wholesalers, agents, and brokers?
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.
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.
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.