Supply
Chain Management
• Supply
chain management: The management of flows among firms in a supply chain to
maximize total profitability
Ø Includes
physical movement of and sharing of information about goods
Ø Insourcing:
Firms contract with a specialist that handles all or part of the company’s supply chains, e.g. UPS
• Channel of
distribution: The series of firms or individuals that facilitates the movement
of a product from producer to final customer
Distribution
Channels: Get It There
• Distribution
channels may be direct or indirect
• Channel
intermediaries: Firms or individuals such as wholesalers, agents, brokers, and
retailers that help move the product from the producer to the consumer or
business user
Functions
of Distribution Channels
• Distribution
channels:
Ø Provide
time, place, and ownership utility
Ø Provide
logistics and/or physical distribution functions
Ø Create
efficiencies by reducing the number of transactions
v
Breaking bulk, e.g. from a box of 12 cans of corn to
individual corn
v
Creating assortments, e.g. “one-stop shop”
Reducing
Transactions via Intermediaries
• Distribution
channels perform several other functions:
Ø Transporting
and storing goods until the consumer is ready to buy
Ø Perform
facilitating functions to make purchase process easier
Ø Providing
setup, repair, and maintenance services
Ø Provide
communication and transaction functions
Sometimes firms “delegate” part of the distribution function to the
customer. Many customers are happy to
cooperate if they can save on shipping charges by picking up
an item at the store, or setting up their TV immediately themselves.
an item at the store, or setting up their TV immediately themselves.
Different
Types of Channels of Distribution
Distributing
Direct
Internet channels allow for global expansion
and mass customization
and mass customization
Distribution,
Marketing Mix and Ethical Issues
• Distribution
decisions interact with the marketing mix in a number of ways:
Ø Place
decisions influence pricing
Ø Distribution
decisions can help develop a position in the market
Ø Nature of
the product influences choice of distribution channels, especially retailers
• Distribution
decisions can create ethical dilemmas
Ø Slotting
allowances
Ø Size of channel
intermediaries
Steps in
Distribution Planning
• Step 3: Choose a distribution
strategy
Ø Channel
levels
Ø Type of
system
v
Conventional marketing systems
v
Vertical marketing systems
v
Horizontal marketing system
Ø Level of
distribution intensity
v
Intensive distribution
v
Selective distribution
v Exclusive distribution
Factors
that Favor Intensive vs. Exclusive Distribution
• Step 4: Develop distribution tactics
Ø Selecting
channel partners
v
Normally a long-term commitment
Ø Managing
the channel
v
Channel leader/captain:
Dominant firm that controls the channel (via economic, legitimate, reward or coercive power)
Dominant firm that controls the channel (via economic, legitimate, reward or coercive power)
Logistics:
Implement the Supply Chain
Implement the Supply Chain
• Logistics:
The process of designing, managing, and improving the movement of products
through the supply chain
• Inbound
and outbound logistics are important
• Reverse
logistics is increasingly important
Physical distribution: All activities that move finished goods from
manufacturers to final customers, including order processing, warehousing,
materials handing, transportation, and inventory control
Five
Functions of Logistics
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