mktg ch14

procurement

(Sometimes called supply management) involves the processes to obtain resources to create value through sourcing, purchasing, and recycling, including materials and information

customer characteristics

- Business customers often prefer to deal directly with producers and also frequently buy in large quantities - Consumers generally buy limited quantities of a product, purchases from retailers, and often do not mind limited customer service

advantages of using industrial distributors

- Can perform the needed selling activities in local markets at a relatively low cost to a manufacturer - Can reduce a producer's financial burden by providing customers with credit services - Are aware of local needs and can pass on market information to producers due to their close relationships with their customers - Reduce producers' capital requirements by holding adequate inventories in local markets

type of organization

- Larger firms are in a better position to deal with vendors or other channel members; are likely to have more distribution centers, which reduce delivery times to customers; and can use an extensive product mix as a competitive tool - Smaller firms may be in a better position to serve local or regional needs and may have to consider including other channel members that have the resources to provide services, such as shipping products long distances and extending credit, to customers that the firm cannot supply

product attributes

- Marketers of complex and expensive products, perishable products, and fragile products that require special handling will likely employ short channels - Less-expensive standardized products with long shelf lives can go through longer channels with many intermediaries

disadvantages of using industrial distributors

- May be difficult to manage because they are independent firms - Often stock competing brands, so a producer cannot depend on them to sell its brand aggressively - Incur expenses from maintaining inventories - Are less likely to handle bulky or slow-selling items, or items that need specialized facilities or extraordinary selling efforts - May lack the specialized knowledge necessary to sell and service technical products

channel conflict occurs when

- Members disagree about the best methods for distributing products profitably and efficiently - Intermediaries overemphasize competing products or diversity into product lines traditionally handled by other intermediaries - Self-interest creates misunderstanding about role expectations of channel members - Communication is poor between channel members

disadvantages of using manufacturers' agents

- The seller has little control over the actions of manufacturers' agents - Prefer to concentrate on larger accounts due to the fact they work on commission - Are often reluctant to spend time following up with customers after the sale, putting forth special selling efforts, or providing sellers with market information because they are not compensated for these activities and they reduce the amount of productive selling time - Have a limited ability to provide customers with parts or repair services quickly because they rarely maintain inventories

courts accept tying agreements when

- The supplier is the only firm able to provide products of a certain quality - The intermediary is free to carry competing products as well - A company has just entered the market

Advantages of using manufacturers' agents

- Usually possess considerable technical and market information and have an established set of customers - Can be an asset to an organizational seller with highly seasonal demand because the seller does not have to support a year-round sales force - Are typically paid on a commission basis, which can be an economical alternative for a firm that has highly limited resources and cannot afford a full-time sales force

customer relationship management (CRM) systems

- exploit the information in supply chain partners' information systems and make it available for easy reference - CRM systems can help all channel members make better marketing strategy decisions that develop and sustain desirable customer relationships

selecting marketing channels

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

Electronic Data Interchange (EDI)

A computerized means of integrating order processing with production, inventory, accounting, and transportation - Functions as an information system that links marketing channel members and outsourcing firms together

Marketing channel (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 - The major role of marketing channels is to make products available at the right time at the right place in the right quantities

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

exclusive dealing

A situation in which a manufacturer forbids an intermediary from carrying products of competing manufacturers

supply chain

All the organizations and activities involved with the flow and transformation of products from raw materials through to the end consumer

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

strategic channel alliance

An agreement whereby the products of one organization are distributed through the marketing channels of another

industrial distributor

An independent business organization that takes title to industrial products and carries inventories - Usually sells standardized items, although some carry a wide variety of product lines - Can be most effective when a product: Has broad market appeal Is easily stocked and serviced Is sold in small quantities Is needed on demand to avoid high losses

manufacturers' agent

An independent businessperson who sells complementary products of several producers in assigned territories and is compensated through commissions

just in time

An inventory-management approach in which supplies arrive just when needed for production or resale - Usually there is no safety stock - Requires a high level of coordination between producers and suppliers - Eliminates waste - Reduces inventory costs

order entry

Begins when customers or salespeople place purchase orders

administered vms

Channel members are independent, but informal coordination achieves a high level of inter-organizational management

contractual vms

Channel members are linked by legal agreements spelling out each member's rights and obligations

corporate VMS

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

vertical channel integration

Combining two or more stages of the marketing channel under one management

private warehouse

Company-operated facilities for storing and shipping products

strategic issues in marketing channels

Competitive priorities in marketing channels Channel integration Channel leadership, coordination, and conflict

recycling

Converting waste into reusable material, reprocessing, reclaiming, or reusing supplies and final products

digital distribution

Delivering content through the Internet to a computer or other device

order delivery

Delivery is scheduled with an appropriate carrier

inventory management

Developing and maintaining adequate assortments of products to meet customers' needs

environmental forces

Economic conditions, technology, and government regulations can affect channel selection

third party logistics (3PL)

Firms 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

megacarriers

Freight transportation firms that provide several modes of shipment

competition

In a highly competitive market, it is important for a company to maintain low costs so it can offer lower prices than its competitors if necessary to maintain a competitive advantage

levels of market coverage

Intensive Selective Exclusive

distribution centers

Large, centralized warehouses that focus on moving rather than storing goods

operations management

Managing activities from production to final delivery through system-wide coordination

marketing intermediaries

Middlemen that link producers to other intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products

unit loading

One or more boxes are placed on a pallet or skid

freight forwarders

Organizations that consolidate shipments from several firms into efficient lot sizes

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 customers' needs and wants

order handling

Product availability and customer creditworthiness is verified; order assembly occurs

legal issues in channel management

Refusal to deal Restricted sales territories Tying agreements Exclusive dealing

variables that affect intensity of market coverage

Replacement rate Product adjustment (services) Duration of consumption Time required to find the product

stockouts

Shortage of products

public warehouse

Storage space and related physical distribution facilities that can be leased by companies

channel power

The ability of one channel member to influence another member's goal achievement

purhcasing

The act of negotiating and executing transactions to buy and sell goods, materials and purchasing

safety stock

The amount of extra inventory a firm keeps to guard against stockouts resulting from above-average usage rates and/or longer-than-expected lead times

order lead time

The average time lapse between placing the order and receiving it

containerization

The consolidation of many items into a single, large container that is sealed at its point of origin and opened at its destination

supply chain management (scm)

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

distribution

The decisions and activities that make products available to consumers when and where they want to purchase them

warehousing

The design and operation of facilities for storing and moving goods - Provides time utility by enabling firms to compensate for dissimilar production and consumption rates - Helps stabilize prices and the availability of seasonal items

channel captain

The dominant leader of a marketing channel or a supply channel - May be a producer, wholesaler, or retailer - To attain desired objectives, the captain must possess channel power

reorder point

The inventory level that signals the need to place a new order Reorder Point = (Order Lead Time × Usage Rate) + Safety Stock

intensity of market coverage

The number and kinds of outlets in which a product will be sold

sourcing

The process of determining what materials a firm needs, where those materials come from, and how they impact marketing integrity

usage rate

The rate at which a product's inventory is used or sold during a specific time period

order processing

The receipt and transmission of sales order information

cycle time

The time needed to complete a process

multichannel distribution

The use of a variety of marketing channels to ensure maximum distribution

intermodal transportation

Two or more transportation modes used in combination

exclusive distribution

Using a single outlet in a fairly large geographic area to distribute a product - Is suitable for products: Purchased infrequently Consumed over a long period of time That require a high level of customer service or information - Is used for expensive, high-quality products with high profit margins - Is not appropriate for convenience products and many shopping products - Is often used as an incentive to sellers when only a limited market is available for products

intensive distribution

Using all available outlets to distribute a product - Is appropriate for products that: Have a high replacement rate Require almost no service Are bought based on price cues

selective distribution

Using only some available outlets in an area to distribute a product - Is appropriate for shopping products - Is desirable when a special effort, such as customer service from a channel member, is important to customers - Is often used to motivate retailers to provide adequate service

channel integration

Various channel stages may be combined, either horizontally or vertically, under the management of a channel captain - Such integration may: Stabilize supply Reduce costs Increase channel member coordination

characteristics of intermediaries

When an organization believes that an intermediary is not promoting its products adequately or does not offer the correct mix of services, it may reconsider its channel choices

Logistics in supply chain management

involving physical distribution, relates to planning, implementing, and controlling the efficient flow and storage of products - Includes: Order processing Inventory management Materials handling Warehousing Transportation

trade offs

strategic decisions to combine (and recombine) resources for greatest cost-effectiveness

birdyback

truck and air

piggyback

truck and rail

fishyback

truck and water

2 types of material handling

unit loading containerization