Marketing planning: Place & Logistics

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.

Different Types of Channels of Distribution

Distributing Direct

Internet channels allow for global expansion
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)

Logistics:
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