Chapter 14 Marketing Channels and Supply-Chain Management

reorder point=

(order lead time x usage rate) + safety stock

agent/broker channel

Producer --> Agents or Brokers --> Wholesalers --> Retailers --> Consumers intended for mass distribution, such as processed foods

wholesaler channel for consumer products

Producer --> Wholesalers --> Retailers --> Consumers ex: appliances, hardware and many convenience products.

Operations Management

The total set of managerial activities used by an organization to transform resource inputs into products, services, or both.

multichannel distribution

The use of a variety of marketing channels to ensure maximum distribution. main purpose of these are to reach target customers wherever and whenever they may choose to interact with a company or its products.

intensive distribution

Uses all available outlets to distribute a product, appropriate for products that have a high replacement rate, require almost no service, and are bought on price cues. - convenience products -Multiple channels may be used ex: sodas, laundry detergent

verticle marketing system

a single channel member coordinates or manages all activities to maximize efficiencies, resulting in an effective and low cost distribution system that does not duplicate services.

full-line forcing

a suppler requires that channel members purchase the suppliers entire line to obtain any of the suppliers products.

Marketing information (marketing intermediaries)

analyze sales data and other info in databases and information systems. Perform or commission marketing research.

administered vertical marketing system

channel members are independent, but informal coordination achieves a high level of inter organizational development. one channel member dominates the VMS so that distribution decisions take the whole system into account.

Channel Integration

channel members can either combine and control activities or pass them to another channel member.

corporate vertical marketing system

combines all stages of the marketing channel, from producers to consumers, under a single owner.

Warehousing

design and operation of facilities for storing and moving goods, is another important physical distribution function. provides time utility.

strategic channel alliance

exists when the products of one firm are distributed through the marketing channels of another. products of these two firms are usually similar with respect to target markets or uses, but not direct competitors. ex: brand of bottled water may be distributed through a marketing channel for soft drinks.

Digital Distribution

forgo physical distribution, involves delivering content through the internet to a computer or other device. ex: netflix, hulu, spotify, rental of digital textbook

Marketing channels create utility

four types: time, place, possession, and form.

Megacarriers

freight transportation companies that offer several shipping methods, including rail, truck, and air service, prior to this transportation companies generally only specialized in one mode.

Coordinating Transportation

intermodal transportation, freight forwarders, and megacarriers.

inventory management

involves developing and maintaining adequate assortments of products to meet customers' needs. key component of any effective physical distribution system.

logistics management

involves planning, implementing, and controlling the efficient and effective flow and storage of products and information from the point of origin to consumption to meet customers' needs and wants

place utility

making products available in locations where customers wish to purchase them.

Physical Distribution (marketing intermediaries)

manage transportation, warehousing, materials handling, inventory control, and communication.

Possession Utility

means that the customer has access to the product to use or to store for future use. ex: lease or rental agreement

Types of marketing channels

most are classified as: - channels for consumer products - channels for business products

contractual vertical marketing system

most popular - channel members are linked by legal agreements spelling out each members rights and obligations. ex: Mcdonalds

transportation

movement of products from where they are made to intermediaries and end users, is the most expensive physical distribution function.

retailer channel for consumer products

moves goods from a producer, to a retailer, to customers. ex: target and walmart use this frequently producer ---> retailer ---> consumer

physical distribution in supply chain management

physical distribution, third party logistics (3pl) firms, cycle time,

industrial distributor channel

producer - industrial distributor - organizational buyers.

manufacturers' agent and industrial distributor channel

producer --> agents --> industrial distributors --> organizational buyers may be appropriate when the producer wishes to cover large geographic area, but maintains no sales force due to highly seasonal demand, or cannot afford one.

manufacturer agent channel

producer --> agents --> organizational buyers

direct channel for business products

producer --> organizational buyers most common way to sell business products, especially expensive equipment.

Refusal to Deal

producers have the right to choose or reject the channel members with which they do business with.

Supply Chain Management (SCM)

refers to the coordination of all the activities involved with the flow and transformation of supplies, products, and information throughout the supply chain to the ultimate consumer. implements OM, LM, SM and marketing channel management so that products are produced and distributed in the right quantities, to the right locations, and at the right times.

Legal Issues in Channel Management

restricted sales territories, tying agreements, exclusive dealing, and refusal to deal.

Restricted Sales Territories

to tighten control over product distribution , a manufacturer may try to prohibit intermediaries from selling outside of designated sales territories.

marketing channel

(also called channel of distribution or distribution channel) a group of individuals and organizations that direct the flow of products from producers to customers within the supply chain

Channel Leadership, Cooperation, and Conflict

- Each channel member performs a specific role in the distribution system - Agrees to accept rights, responsibilities, rewards, and sanctions for nonconformity - Channel partnerships can facilitate effective supply-chain management - Channel cooperation reduces wasted resources

Foundations of the Supply Chain

-distribution -supply chain -operations management -logistics management -supply management -supply-chain management

selecting marketing channels

1. Customer Characteristics 2. Product Attributes 3. Type of Organization 4. Competition 5. Environmental Forces 6. Characteristics of Intermediaries

Channels for Business Products

1. direct channel

Channels for Consumer Products

1. direct channel 2. retailer channel 3. wholesaler channel 4. agent/broker channel long channels could actually be the most efficient

bonded storage

A warehousing arrangement in which imported or taxable products are not released until the products owners pay US customs duties, taxes or other fees.

channel cooperation

Enables retailers, wholesalers, suppliers and logistics providers to Speed up inventory, replenishment, Improve customer service, and Cut the costs of bringing products to customers, without this neither overall channel goals nor individual members goals can be realized. should agree to direct efforts toward common objectives.

Third-party logistics (3PL) firm

Firms that have special expertise in core physical distribution activities such as warehousing, transportation, inventory management, and information technology and can often perform these activities more efficiently

Intensity of Market Coverage

Intensive, selective, and exclusive distribution

marketing intermediaries

Middlemen that link producers to other intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products. They perform these activities: - marketing information - marketing management -facilitating exchanges -promotion -price -physical distribution

materials handling

Physical handling of tangible goods, supplies, and resources, is an important factor in warehouse operations, as well as in transportation from points of production to points of consumption.

channel captain

Single leader who controls marketing channels. -producer, wholesaler, retailer, they may establish channel policies, and coordinate development in the marketing mix, they must attain desired objectives by possessing channel power.

Direct channel of Consumer Products

a channel in which products move from the producer straight to the consumer with no other organizations participating. ex: a haircut has no intermediaries because it goes straight from the person performing to the person receiving. producer ---> consumer

channel power

ability to influence another channel member's goal achievement.

environmental forces (marketing channel selection)

adverse economic conditions might force an organization to use a low cost channel, even though it reduces customer satisfaction , contrast, a growing economy may allow a company to choose a channel that had previously been too costly.

Channel Management

all activities related to selling, service, and the development of long-term customer relationships.

physical distribution

also known as logistics, refers to the activities used to move products from producers to customers and other end users. includes order processing, inventory management, materials handling, warehousing, and transportation.

industrial distributor

an independent business organization that takes title to products and carries inventories. usually sell standardized items such as maintenance supplies, production tools, and small operating equipment.

Product Attributes (marketing channel selection)

attributes of the product can have a strong influence on the choice of marketing channels. expensive products likely have short channels, less expensive products with long shelf life may have longer channels.

Channel Leadership

channel captain and channel power

type of organization (marketing channel selection)

characteristics of organization will have great impact on the distribution channels chosen. owing to their size, larger firms are in better positions to deal with channel members, and are likely to own more distribution centers to get products to customers faster, smaller companies may not have the bandwidth to ship products long distance or maintain large inventory so they may want to include other channel members to do this for them.

facilitating exchanges (marketing intermediaries)

choose product assortments that match the needs of customers. cooperate with channel members to develop partnerships.

intermodal transportation

combined or coordinate two or more modes, easier than every because of developments within the transportation industry. combines flexibility of trucking with the low cost or speed of other forms of transport.

vertical channel integration

combines two or more stages of the channel under one management. may occur when one member of the channel purchases the operations of another member, eliminating the need for that intermediary, progressive approach.

horizontal channel integration

combining organizations at the same level of operation under one management. orgs may integrate this by merging with other organizations at the same level in the marketing channel. ex: sherwin Williams combine with other paint companies.

Strategic Issues in Marketing Channels

competitive priorities in marketing channels, channel leadership, cooperation, and conflict channel integration

Distribution

component of the marketing mix that focuses on the decisions and activities involved in making products available to customers when and where they want to purchase them.

Form Utility

created by assembling, preparing, or otherwise refining the product to suit individual customer needs.

channel conflict

disagreements among marketing channel members on goals, roles, and rewards - who should do what and for what rewards

Price (marketing intermediaries)

establish pricing policies and terms of sales.

Marketing Management (marketing intermediaries)

establish strategic and tactical plans for developing customer relationships and organizational productivity.

field public warehouses

established by public warehouses at the owner's inventory location

marketing channels facilitate exchange efficiencies

ex: when four buyers seek products from four producers, 16 transactions are possible, if one intermediary serves both buyers and producers, the # of transactions are cut in half. some critics believe whole sellers could be eliminated and it would reduce the price of products, but that does not mean the functions that whole sellers do can be eliminated, someone has to perform these functions and other people may not be as efficient and consumers will still have to pay for whoever performs the functions.

cycle time

goal of physical distribution, time needed to complete a process.

Time Utility

having products available when they customer wants them.

supply management

in its broadest form, refers to the processes that enable the progress of value from raw material to final customer and back to redesign and final disposition.

manufacturer agents

independent business person who sells complementary products of several producers in assigned territories and is compensated through commissions. this agent does not acquire a title to the products and usually does not take possession. generally have an established set of customers.

order processing

is the receipt and transmission of sales order information. efficiency in this facilitates product flow. three main tasks: oder entry, order handling, and order delivery.

distribution center

large facilities used for receiving, warehousing, and redistributing products to stores or customers. designed for rapid flow of products and are usually one-story buildings with access to transportation networks, such as major highways and/or railway lines.

public warehouses

lease storage space and related physical distribution facilities to other companies. sometimes provide distribution services such as receiving, unloading, inspecting, filling orders, financing, displaying products, and coordinating shipments.

Customer Characteristics (marketing channel selection)

must consider the characteristics of target market members in this process. business customers tend to prefer to interact directly with producers bc products are expensive ex: jet airplanes, consumers generally buy limited quantities, purchase from retailers, and do not mind limited customer service. for consumer products distribution through multiple intermediaries is likely more efficient.

Choosing Transportation Modes

select transportation mode based on the combination of cost, speed, dependability, load flexibility, accessibility, and frequency that is most appropriate for their products and generates the desired level of customer service.

Promotion (marketing intermediaries)

set promotional objectives, coordinate advertising, personal selling, sales promotion, publicity and packaging.

multiple marketing channels

strategic channel alliance, multichannel distribution, and digital distribution.

competition (marketing channel selection)

success or failure of a competitors marketing channel may encourage or dissuade an organization from taking a similar approach.

Just-in-time (JIT)

supplies arrive just as they are needed for use in production or for resale, for this to work firms must have an efficient inventory management system.

Competitive Priorities

supply chains can be a source of competitive advantage, building the most effective and efficient supply chain can sustain a business and help it to use its resources effectively. supply chain driven by a firm establishing goals focused on the priorities of "speed, quality, cost, or flexibility as the performance objective.

transportation modes

the means for moving physical goods through railroads, trucks (most flexible schedules), waterways (cheapest method), airways (fastest but most expensive), and pipelines (most automated).

The role of marketing channels in supply chain

the significance of marketing channels, types of marketing channels, and selecting marketing channels.

freight forwarder

these firms combine shipments from several organizations into efficient lot sizes, small loads (less than 500 pounds) are more expensive than full carloads or trucks, these firms help firms by consolidating small loads from various organizations to allow them to collectively qualify for lower rates.

significance of marketing channels

they create utility, and facilitate exchange efficiencies

reorder point

to determine when to order a marketer calculates ___, which is the inventory level that signals the need to place a new order.

private warehouses

used for shipping and storing their own products. usually leases or purchases a ____ when its warehousing needs in a given geographic market are substantial and stable enough to warrant a long-term commitment to a fixed facility.

Electronic Data Interchange (EDI)

uses computer technology to integrate order processing with production, inventory, accounting, and transportation.

exclusive distribution

uses only one outlet in a relatively large geographical area, suitable for products purchased infrequently, consumed over long periods of time, and require high level of customer service.

Radio Frequency Identification (RFID)

uses radio waves to identify and track materials tagged with special microchips- through every phase of handling. greatly improved shipment tracking and reduced cycle times.

selective distribution

uses some available outlets in an area to distribute a product. appropriate for shopping products, like ipods, television, and shoes.

exclusive dealing

when a manufacturer forbids an intermediary to carry products of competing manufacturers

tying agreement

when a supplier furnshishes a product to a channel member with the stipulation that the channel member must purchase other products as well it has negotiated a ____, suppliers may institute this as a means of getting rid of slow-moving inventory, or franshiser may tie the purchase of equipment and supplies to the sale of franchises, justifying the policy is necessary for quality control and protection of the franchisers reputation.

characteristics of intermediaries (marketing channel selection)

when an organization believes that an intermediary is not promoting its products adequately or does not offer correct mix of services, it may consider other channel choices.