Chapter 14

reorder point

(Order lead time x usage rate) + safety stock = _____ _____

procurement

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

Inventory management

- Developing and maintaining adequate assortments of products to meet customers' needs - Stockouts - Maintaining too many products in inventory increases risks of product obsolescence, pilferage, and damage

administered VMS

1 of 3 forms of vertical marketing system (VMS) Channel members are independent, but informal coordination achieves a high level of inter-organizational management - Ex: Walmart - Least restrictive form of VMS

Contractual VMS

1 of 3 forms of vertical marketing system (VMS) Channel members are linked by legal agreements spelling out each member's rights and obligations - Less restrictive than corporate VMS but more restrictive than administered VMS

corporate VMS

1 of 3 forms of vertical marketing system (VMS) Combines all stages of the marketing channel, from producers to consumers, under a single owner - most restrictive form of VMS

Safety stock

1 of 3 things a marketer must know to calculate the reorder point: 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

1 of 3 things a marketer must know to calculate the reorder point: The average time lapse between placing the order and receiving it

usage rate

1 of 3 things a marketer must know to calculate the reorder point: The rate at which a product's inventory is used or sold during a specific time period

order entry

1 of the 3 tasks of order processing: Begins when customers or salespeople place purchase orders

order delivery

1 of the 3 tasks of order processing: Delivery is scheduled with an appropriate carrier

order handling

1 of the 3 tasks of order processing: Product availability and customer creditworthiness is verified; order assembly occurs

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

A group of individuals and organizations that direct the flow of products from producers to customers within the supply chain

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 Takes on one of three forms: - corporate VMS - Administered VMS - Contractual VMS

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 - Does not acquire title to the products and usually does not take possession Cons: - Focus is on large accounts because they are commission based - You cannot control them

just in time (JIT)

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

conflict

Channel ____ 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

vertical channel integration

Combining two or more stages of the marketing channel under one management - May occur when one member of a marketing channel purchases the operations of another member or simply performs the functions of another member, eliminating the need for that intermediary - Can be more effective against competition because of increased bargaining power and the ease of sharing information and responsibilities

recycling

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

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

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 - Play key roles in customer relationship management through distribution activities and by maintaining databases and information systems to help all members of the marketing channel maintain effective customer relationships

exclusive distribution

One of the levels of market coverage: 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

One of the levels of market coverage: 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 To satisfy consumers seeking to buy these products, they must be available at a store nearby and be obtained with minimal search time

selective distribution

One of the levels of market coverage: 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

stockouts

Part of inventory management: A shortage of products

trade offs

Physical distribution managers must be sensitive to the issue of cost ______ _____: strategic decisions to combine (and recombine) resources for greatest cost-effectiveness - The goal is not always to find the lowest cost, but rather to find the right balance of costs

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

channel power

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

purchasing

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

outsourcing

The contracting of physical distribution tasks to third parties

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

channel captain (channel leader)

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 To calculate the reorder point, the marketer must know the following: - order lead time - usage rate - safety stock

sourcing

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

order processing

The receipt and transmission of sales order information Entails three main tasks: - order entry - order handling - order delivery

cycle time

The time needed to complete a process - Firms should look for ways to reduce cycle time while maintaining or reducing costs and maintaining or improving customer service

levels

____ of market coverage: - intensive - selective - exclusive

strategic issues

_____ _____ in marketing channels: - competitive priorities - channel integration - channel leadership, coordination, and conflict

cooperation

______ enables retailers, wholesalers, suppliers, and logistics providers to: •Speed up inventory replenishment •Improve customer service •Cut the costs of bringing products to the consumer •Lead to greater trust among channel members •Improve the overall functioning of the channel •Lead to more satisfying relationships among channel members

integration

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

logistics

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

marketing channel

is the least flexible, the main driving force behind marketing channel decisions

supply chain

organizations and activities involved with the flow and transformation of products from raw materials through to the end consumer - "upstream" and "downstream" working together to serve customers and generate competitive advantage

upstream supply chain

producers and suppliers

intensity

variables that affect the ______ of market coverage: - Replacement rate - Product adjustment (services) - Duration of consumption - Time required to find the product

downstream supply chain

wholesalers and retailers