Chapter 13: Marketing Channels and Supply-Chain Management

A "Marketing Intermediary"

A "middleman" linking producers to others intermediaries to ultimate consumers through contractual arrangements or through the purchase and resale of products

Supply Chain

A "total distribution perspective"--all up-stream and all downstream activities

Marketing Channel

A group of individuals and organizations directing the flow of products from producers to customers

Vertical Marketing System (VMS)

A marketing channel managed by a single channel member to achieve efficient, low-cost distribution -Pre-Engineered -Centrally-Programmed -Professional Staff to Manage

Very high Accessibility (Transportation)

Accessibility

Physical Distribution (aka Logistics)

Activities used to move products from producers to consumers and other end users -Transportation -Warehousing -Order Processing -Inventory Management

Three Types of VMS's

Administered VMS (Kellogg's; Campbell's) Contractual VMS (KFC, McDonald's, Dunkin' Donuts) Corporate VMS (Stew Leonard's)

Very high cost (Transportation)

Airplanes

Intermodal Transportation

An integrated transportation approach in which two or more transportation modes are used in combination Containerization: piggyback, fishyback, birdyback modes

Just-in-Time (JIT)

An inventory management in which supplies arrive just when needed for production or resale

Products carried (new?)

Coal

Horizontal Integration

Combines organizations at the same level of operation under one management Creates efficiences and economies of sale Supplier-Supplier-Supplier Retailer-Retailer-Retailer

Channel Functions are most basic:

Contractual Function Communication Function Pricing Function Physical Function Leadership Function

Inventory Management

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

Megacarriers

Freight transportation firms that provide several modes of shipment

Supply Chain Management

Long term partnerships among marketing channel members that reduce inefficiencies, costs, and redundancies to satisfy customers

Objective of Inventory Management

Minimize inventory costs yet have on hand a sufficient supply of goods to satisfy customers -Stockouts--inventory-related shortages of products -Recorder point=(Order Lead Time x Usage Rate) + Safety Stock

Freight Forwarders

Organizations that consolidate shipments from several firms into efficient lot sizes

Very high frequency (Transportation)

Pipelines

Marketing Channels Facilitate Exchange Efficiencies

Reduce the overall costs of market exchanges Reduce search costs for customers Maintain order in the marketplace

Dual Distribution

Runs the risk of being viewed as anti-competitive

Channel

Supplier Producer Agent and Broker Wholesaler Retailer Customer

Outsourcing

The contracting of physical distribution tasks to third parties with specialized logistics skills who do not have managerial authority within the marketing channel

Possession Utility

The customer has access to the product to use or to store for future use (raincoats).

Transportation

The movement of products from where they are made to intermediaries and end users

Form Utility

The product is assembled, prepared or otherwise refined to suit customer needs

Place Utility

The product is available in locations where customers wish to purchase it

Time Utility

The product is available when the customer wants it (newspaper delivery)

Vertical Channel Integration

Two or more stages of the marketing channel operate under one management. Channel members coordinate their efforts to reach a target market. Often effective against competition because of increased bargaining power and shared information and responsibilities

Very high load flexibility (Transportation)

Waterways