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