CHAPTER 15 DISTRIBUTION DECISIONS
supply-chain management
-Long-term partnerships among channel members working together to reduce inefficiencies, costs, and redundancies in the entire marketing channel is called-a set of approaches used to integrate the functions of operations to management, logistics management, supply management, and marketing channel management so products are produced and distributed in the right quantities, to the right locations, and at the right time -operation management, supply management, logistics management, and channel management
Selecting Marketing Channels
1. customer characteristics 2. product attributes 3. type of organization 4. competition 5. marketing environmental forces 6. characteristics of intermediaries
Channel Captain
A single leader who controls and organizes a marketing channel is called a
What is the primary determinant in deciding how materials will be handled?
Product Characteristics
Marketing Channel
a group of organizations and individuals that directs the flow of products from producers to the ultimate consumer -channel of distributions
What is a primary difference between an industrial distributor and a manufacturers' agent?
a manufacturers agent does not acquire a title nor usually take possession of the products whereas an industrial distributor does
Vertical Marketing System VMS
a marketing channel managed by a single channel member to achieve efficient, low- cost distribution aimed at satisfying target market customers -When channel members are linked by legal agreements that specify each member's rights and responsibilities -achieved by informal coordination -informal coordination brings about a high level of interorganizational management but channel member remain anonymous
Megacarriers
freight transportation firms that provide several modes of shipment
Time utility
having products available when the customer wants them
Physical Distribution cost trade off goal
is to reduce time it takes to complete cycle time
Distribution centers
large centralized warehouses that focus on moving rather than storing
Marketing intermediaries
link producers to consumers through the purchase and reselling of products or contractual agreements - goal is to link producers other middlemen or to consumers
Producer to business buyer
markets a product directly to a business
freight forwards
organizations that consolidate shipments from several firms into efficient lot sizes -reduces transit time
logistics management
planning, implementing, and controlling the efficient and effective flow and storage of products and information from the point of origin to consumption to meet consumers needs and wants -all activities designed to move the product through the marketing channel to the end user, including warehouse and inventory management
Consumer x Producers = Consumers + Producers=
possible transactions possible transactions with intermediary
most commonly used channel for distributing business products
producer and organizational buyers
Place Utility
products are available in locations where consumers want to buy them
Without wholesalers and other intermediaries
products would likely be more expensive due to the use of less efficient channel members
Which mode of transportation hauls more freight than any other?
railroads
inventory stockout
result from lost sales
Containerization
sells boxes for shipping to decrease loss and damage -Piggyback (railroads and trucks), fishyback, and birdyback
Possession Utility
the customers having access to the product to use now or store and use later
Distribution
the decisions and activities that make products available to customers when and where they want to purchase them
Warehousing
the design and operation of facilities for storing and moving goods -involves design and operation of facilities for storing goods -enables companies to compensate for dissimilar production and consumption rates and stabilize prices and availability of seasonal items
reorder point = (Order lead time x Usage rate) + safety stock
the inventory level that signal the need to place a new order
Cycle Time
the time needed to complete a process
Which major mode of freight transportation provides the most flexible schedules and routes?
trucks
The three major levels of intensity at which a company can choose to distribute its products are:
1. exclusive 2. selective 3. intensive
Exclusive dealing
a situation which a manufacturer forbids an intermediary from carrying products of competing manufacturers -An arrangement where a producer forbids an intermediary to carry products made by competing manufacturers is called
inventory management
developing and maintaining adequate assortments of products to meet customers needs
Unit loading
easier movement of items between internal destinations in the warehouse -example: Mogul places several boxes of products or materials on pallets in order to load them efficiently using forklifts
supply managment
in its broadest form, refers to the processes that enable the progress of value from raw material to final customer and back to design and final disposition -sourcing of necessary resources, products, and services to support all supply-chain memebers
Manufacturers' Agent
independent businessperson who is paid a commission to sell complementary products of different producers in an assigned territory without actually taking title of the merchandise - when a firm is small and presently does not generate enough volume to justify a sales force
public warehouses
storage space and related physical distribution facilities that can be leased by companies
safety stock
the amount of extra inventory a firm keeps to guard against stockout resulting from above average usage rates and/or longer than expected lead time -used to guard against stockouts
intermodal transportation
two or more transportation modes used in combination -is the combining and coordinating of two or more modes of transportation to take advantage of benefits offered by each of the different types of carriers.
The best way to reduce overall distribution costs is to
use a total-cost approach to analyze and evaluate the entire system
exclusive distribution
using a single outlet in a fairly large geographic area to distribute a product -The product is very expensive and targeted to upscale consumers
Intensive Distribution
using all available outlets to distribute a product -connivence products -Sales are most likely to have a direct relationship to product availability
Selective Distribution
using only some available outlet in an area to distribute a product -Durable goods such as television sets and DVD players generally reach their target markets
Order handling
-The order-processing task that involves verifying product availability, checking prices and customer credit ratings, and filling orders -credit department approves the purchase. -order is transmitted to the warehouse. -availability of product is verified. -warehouse is instructed to fill the order.
Horizontal channel integration
-combining organizations at the same level of operation under one management -advantage: Efficiencies in advertising, marketing research, and purchasing are increased -example: To expand the number of its retail outlets in the Washington, D.C., area, the Dress Barn bought out a small chain of women's apparel stores in northern Virginia
industrial distributor
-independent business that takes title to products and carries inventories -taking inventories of the goods, reduces capital requirements for the producers -disadvantage: They are unlikely to handle bulky items or items that are slow sellers -advantage: They help reduce a producer's financial burdens by extending credit to customers -not likely to receive aggressive promotion of its brand
Channel Conflict
-when produce companies bypass wholesalers and sell directly to retailers -allowing companies to distribute and discount -If a wholesaler continually emphasizes and promotes one company's products over a competing company's products
3 primary task of order processing:
1. order receipt 2. order checking 3. order delivery
3 types of utility for consumers
1. place 2. time 3. possession
When the marketer wishes to enter a new geographic market but does not wish to expand the existing sales force
A channel that includes both a manufacturers' agent and an industrial distributor is appropriate
electronic data interchange
A commonly used computerized means of integrating order processing with production, inventory, accounting, and transportation
Materials Handling
Physical handling of tangible goods, supplies, and resources
Outsourcing
The contracting of physical distribution tasks to third parties who do not have managerial authority within the marketing channel -example: hired a shipper and an information technology firm to assist with these functions
Channel power
When one company in a marketing channel has the ability to influence another member's goal achievement
Retailer channel
a channel with only 1 intermediary
physical distribution
activities used to move products from producers to consumers and other end users -Order processing, inventory management, materials handling, warehousing, and transportation -notation is: the movement of products from producers to end users - by wholesaler, retailer producer or outsourcer -main objective: decrease costs while increasing service
Channel management
all activities related to selling, service, and the development of long-term customer relationships
supply chain
all the activities associated with the flow and transformation of products from raw materials through to the end customer -start at the customer - all members should determine their position in the chain, identify their partners and roles, and establish partnerships that focus on customer relationships
Tying agreement
an agreement in which a supplier furnishes a product to a channel member with the stipulation that the channel member must purchase other products as well -supplier furnishes a product to a channel member with the stipulation that the channel member must purchase other products as well.
Strategic channel alliance
an agreement whereby the products of one organization are distributed through the marketing channels of another
Just in time (JIT)
an inventory management approach in which supplies arrive just when needed for production or resell
Contractual Vertical marketing
channel members are linked by legal agreements that spell out the obligations and rights of each member
Vertical channel integration
combining two or more stages of the marketing channel under one management -is made possible by purchasing the operations of a link in the channel -example: Warner Bros. sells cookie jars, puzzles, photo albums, and other items featuring its popular cartoon characters directly through its own retail outlets
Private warehouses
company operated facilities for storing and shipping products
direct-marketing channel
consumers who purchase straight from manufacturers -many producers selling on the internet
shorter channels
distribute fragile products that require special handling
Order lead time
the average time lapse between placing the order and receiving it
transportation
the movement of products from where they are made to intermediaries and end users -most expensive -adds time and place utility to a product by moving it from where it is made to where it is purchased and used.
usage rate
the rate at which a products inventory is used or sold during a specific time period
Order Processing
the receipt and transmission of sales order information
operations management
the total set of managerial activities used by an organization to transform resource inputs into products, services or both -organizational and system-wide coordination of operations and partnerships to meet customers product need
Dual distribution
the use of two or more marketing channels to distribute the same products to the same target market
Channel decisions are important to marketers mostly because
they involve long-term commitments and affect customer accessibility
According to the text, physical distribution cost tradeoffs enable firms to
utilize resources for greatest cost-effectiveness