Chapter 11
accumulating bulk
taking in a product from multiple sources, often through sorting it into different classifications for sales through the channel
electronic retailing
the communication and sale of products or services to consumers over the internet
supply chain management
the coordination of value-adding flows among the entities in a channel of distribution in a way that maximizes overall value delivered and profit realized
channel power
the degree to which any member of a marketing channel can exercise influence over the other members of the channel
exclusive distribution
the distribution strategy that is designed to grant limited territories to a few channel members
physical distribution (logistics)
the integrated process of moving input materials to the producer, in process inventory through the firm, and finished goods out of the firm through the channel of distribution
assortment
the number of different product items within a product category and is referred to as the depth of merchandise
distribution intensity
the number of intermediaries involved in distributing a product
variety
the number of product categories offered by a retailer, referred to as the breadth of merchandise
reward power
the power which allows one of the channel members to reward in order to control the channel
disintermediation
the shortening or collapsing of marketing channels due to the elimination of one of more intermediaries
enterprise resource planning (ERP)
the systems that manages much of the logistics and other processes for many firms, A software application designed to integrate information related to logistics processes throughout the organization.
physical distribution functions
transportation and storage, creating assortments, reducing transactions, breaking bulk, accumulating bulk and sorting
characteristics of store retailers
type of merchandise, assortment, services imparted to consumers, differences in value proposition,
market makers
websites that bring buyers and sellers together in the B2B electronic commerce marketplace
customer communities
websites where customers come and share stories about their vendor experiences
issues to consider when selecting a channel
what is the level of distribution intensity sought within the channel, what are the priority channel function that require investment, how much control and adaptability are required over the channel and its activities
expert power
when a channel member adopts an approach of utilizing their unique competencies to influence others in the channel
corporate VMS
when a channel member has invested in backward or forward vertical integration by buying a controlling interest in other intermediaries
outsourcing
when a company hands over one or more of its core internal functions to other (third-party) companies that are experts in those areas
tying contract
when a intermediary is required to purchase a supplementary product in order to qualify to purchase the primary product that intermediary wishes to buy
stock-out
when an item is not in stock
channel conflict
when channel members experience disagreements and relationships become strained or fall apart
contractual VMS
when otherwise independent entities are bound together through legal agreements
administered VMS
when sheer size and power of one of the channel members place it in a position of channel control, channel captain typically controls many aspects of a channel's operations
showrooming
when the consumer goes into the store and takes advantage of a product demonstration and the expertise of the salesperson and then buys the product from an online retailer at a lower price
distributor
wholesale middleman, found especially when selective or exclusive distribution is common and strong promotional support is needed; sometimes used synonymously for a wholesaler
supply chain
A complex logistics network characterized by high levels of coordination and integration among its members
accumulating bulk
A function performed by intermediaries that involves taking product from multiple sources and sorting it into different classifications for sales through the channel
breaking bulk
A shipping method used by manufacturers to better match quantities needed in terms of the space constraints and inventory turnover requirements of their buyers
channel of distribution
A system of interdependent relationships among a set of organizations that facilitates the exchange process
facilitating functions
Activities that help fulfill completed transactions and also maintain the viability of the channel relationships
value network
An overarching system of formal and informal relationships within which the firm participates to procure, transform, and enhance, and ultimately supply its offerings in final form within a market space
vertical integration
Buying a controlling interest in other intermediaries
transportation and storage
Commonly provided intermediary functions for producers that do not perform these functions themselves
outsourcing (third-party logistics 3PL)
Handing over one or more of their core internal functions, such as most or all of their supply chain activities, to other (third-party) companies that are experts in those areas.
network organization (virtual organization)
Organizations that eliminate many in-house business functions and activities in favor of focusing only on those aspects for which it is best equipped to add value
intermediaries
Organizations that play a role in the exchange process between producers and consumers
contractual VMS
The binding of otherwise independent entities in the vertical marketing system legally through contractual agreements
value co-creation
The combining of capabilities among members of a value network to create value
corporate VMS
The investment of a channel member in backward or forward vertical integration by buying controlling interest in other intermediaries
creating assortments
The process of accumulating products from several sources to then make those products available down the channel as a convenient assortment for consumers
sorting
The process of classifying products for sale through different channels
reducing transactions
The process of lowering the number of purchasing transactions carried out by a firm by utilizing the services of intermediaries
supply chain management
The process of managing the aspects of the supply chain
disintermediation
The shortening or collapsing of marketing channels due to the elimination of one or more intermediaries
nimble
To be in a position to be maximally flexible, adaptable, and speedy in response to the many key change drivers affecting business
vertical marketing system (VMS)
Vertically aligned networks behaving and performing as a unified system.
franchise organization
a contractual relationship between company 1 and company 2, where company 2 agrees to perform at the standards requires by company 1
retailer cooperative
a group of independent retailers across a variety of product categories that band together to gain cost and operating economies of scale in the channel
key elements of a value network
a shared vision within the network, network and team relationships, value views as a network value, value emanating from expertise and competencies
pull strategy
a strategy in which much of the focus of the company's promotional investment is on the end- user consumer
exclusive dealing
a supplier creates a restrictive agreement that prohibits the intermediaries that handle its product from selling competing firms' products
creating assortments
accumulate products from several sources and then make this products available down the channel as a convenient package for consumers
manufacturers' agent
agent that usually operated on an extended contract, often sells within an exclusive territory, handles noncompeting but related lines of goods, and has limited authority to price and create terms of sale
value network
an overarching system of formal and informal relationships within which the firm participates to procure, transform and enhance, and ultimately supply its offerings in final form within a market space
electronic commerce
any action using electronic media to communicate with customers, facilitate the inventory, exchange, and distribution of goods and services, or make payment
retailing
any business activity that creates value in the delivery of goods and services to consumers for their personal, non-business consumption and is an essential component of the supply chain
agent
business entity that negotiates purchases, sales, or both, but does not take title to the goods involved
non-store retailers
catalogs, direct selling, television home shopping, vending machines, and electronic retailing
channel of distribution
consists of independent entities that are aligned for the purpose of transferring possession of a product from producer to consumer or business user
food and general merchandise retailers
define traditional store retailing in the US
selective distribution
designed to require that consumers engage in a limited search
intensive distribution strategy
designed to saturate every possible intermediary and especially retailers
reasons a firm needs to be nimble
discontinuous innovation, rapidly shifting technology, relentless market globalization
network or virtual organization
eliminated many in-house business function and activities in favor of focusing only on those aspects for which it is best equipped to add value
wholesaler
entity primarily engaged in buying, taking title to, storing (usually), and physical handling goods in large quantities; wholesalers resale goods (usually in smaller quantities) to retailers or organizational buyers
retailer
entity primarily engaged in selling to end-user consumers
facilitating agent
entity that assists in the performance of distribution tasks other than buying, selling, ad transferring title (examples include: trucking companies, warehouses, importers, etc.)
true
entrepreneur magazine reports that franchising remains the highest-potential start-up and growth mechanism for small business owners
reasons reverse logistics is used to get goods back to a manufacturer or intermediary after purchase
excess inventory, overstocks, spoilage and breakage, customer dissatisfaction
facilitating functions
financing, market research, risk taking, other services
breaking bulk
function that occurs within a channel to better match quantities needed to space constraints and inventory turnover requirements
just in time (JIT)
goal is to balance having too many goods on hand and creating unnecessary warehousing costs, with the chance of having so little inventory in stock that stock-outs occur, requiring expensive rush production and express delivery situations, An inventory management system designed to balance levels of overstock and stock-out in an effort to reduce warehousing costs
partner relationship management (PRM)
goal is to share resources, especially knowledge-based resources, to effect optimally profitable relationships between two channel members
materials requirement planning (MRP)
guides overall management of the inbound materials from suppliers to facilitate minimal production delays, The overall management of the inbound materials from suppliers to facilitate minimal production delays
direct channel
has no intermediaries and operates strictly from producer to end-user consumer or business user
middleman
independent business entity that links producers and end-user consumers or organizational buyers
direct selling
independent businesspeople who contact consumers directly to demonstrate and sell products or services in a convent location, often the consumer's home or workplace
advantages of electronic retailing
individualized customer experience, considerable information available for product research and evaluation, extensive selection, building product communities
agent intermediaries
intermediaries who do not take title to the product during the exchange process
merchant intermediaries
intermediaries who take title to the product during the exchange process
outbound logistics
logistics that start with production and ends with receipt of the finished good by the end-user consumer or business
inbound logistics
logistics that starts with sourcing materials and knowledge iputs from external suppliers and goes to the point at which production begins
push strategy
many of the intensive promotional activities take place from the manufacturer downward through the channel of distribution
jobber
middleman that buys from manufacturers and sells to retailers; this intermediary is sometimes called a "rack jobber" to connote the service of stocking racks or shelves with merchandise
merchant middleman
middleman that buys goods outright, taking title to them
major types of intermediaries
middleman, merchant middleman, agent, manufacturer's agent, distributor, wholesaler, jobber, facilitating agent, retailer
make additional services available to consumers, offer variety for consumers, separate large product volume into consumer purchase quantities, maintain inventory levels
name critical ways that retailers add value for companies and consumers
advantages of merchandise retailers
personal contact with the product, personal service, payment options, social experience, immediate need fulfillment, reduced risk to the consumer
coercive power
power that involved an explicit or implicit threat that a channel captain will invoke negative consequences on a channel member if it does not comply with the leader's request or expectations
referent power
power where a channel member is respected, admired, or revered based on one or more attributes and is able to use this power within the channel
exclusive territory
protects an intermediary from having to compete with others while selling a producer's goods
1. pipeline 2. water 3. rail 4. motor 5. air
rank the types of transportation from the lowest cost to the highest cost
supply chain
represents all organizations involved in supplying a firm, the members of its channels of distribution, and its end user consumers and business users
legitimate power
results from contracts such as franchise agreements or other formal agreements
wholesaler cooperative
retailers contract for varying degrees of exclusive dealings with a particular wholesaler
catalog retailers
retailers that offer their merchandise in the comfort of a consumer's home using a printed or online collection of products
transaction and communication functions
selling, buying, marketing communications
vending machine retailing
sells merchandise or services that are stores in a machine then dispensed to the consumer when the payment has been made
