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