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Channels of Distribution
Channel of Distribution The path a product takes from producer or manufacturer to the final userBusinesses who perform these
functions allow products to be in the right place at the right time
How does an IPHONE get to the customer?
How does a Suave Shampoo get to the customer?
Who’s Who Intermediaries – channel members that move products from producer to final userMiddlemenMerchant Intermediaries – take ownership (sharper Image)Agent Intermediaries
Merchant IntermediariesWholesalersBuy large quantities of goods, store
them, and resell to other businesses at a profit (holiday wholesale) Retailers
Sells goods and services through their own store to consumers
What is SAM’S CLUB?Wholesaler or Retailer?
BOTH
Agent IntermediariesNegotiate the ownership of goodsWork on commission (% of sale)Work for both parties
(broker)Work to sell product
(manufacturers agent)
Types of Distribution
Direct distribution—straight from the producer to the ultimate consumer or industrial user
Indirect distribution—involves intermediaries
Look @ pg _3_ for photo distribution options
Consumer Distribution Channels
A – Manufacturer Consumer
B – Manufacturer Retailer Consumer
C – Man Wholesaler Ret. Cons.
D – Man. Agent WholeRet.Cons.
E - Man.AgentRetailer Consumer
Distribution Intensity Intensive DistributionUse of all suitable outlets for a product. (motor oil, soda)
Selective DistributionLimited # of outlets. Less competition, more willing to promote product. (Ralph Lauren)
You Sell the Following Products, What would be the best way to get your products to your customer?
• Digital Camera – Camera Store or Website?
• Hiking Shoes – Custom Shoe store,National Chain, or Web?
• Soccer Cleats – Custom Shoe Store, National Chain, or Web?
Distribution IntensityExclusive DistributionProtected territories of a product.
1 dealer per geographic area, high profit margin, prestige, image control
(NAPA, Snap-on, Culvers,other franchises, UGG boots, COACH)
Siding- pg Window Distribution – Champion, Feldco? http://www.youtube.com/watch?v=EOH0iLX2W4Q http://www.youtube.com/watch?v=D1y1uQcP7fM&feature=related
What is their Distribution channel?Sales Reps meet in your home.
List new ideas(3) for distributing siding to contractors?Pro’s and con’s of each…then make one recommendation
Physical DistributionProcess of transporting, storing and handling goods to make them available to customers.
Transportation of goods- is the marketing function of moving goods from a seller to a buyer
Types of Transportation
Trucking
Rail Transportation
Water
Pipeline
Air
Adv. vs. Dis. for TruckingConvenient
Door-to-door
Reduce packaging costs
Rapid deliveries
Reduce large inventories
Traffic JamsEquipment MaintenanceAccidents could cause delaysSize / Weight restrictions
Adv. vs. Dis. for RailLow costs
Large quantities
Seldom slowed by weather
Lack of flexibility
Must use another form
Adv. vs. Dis. for WaterLow cost
Ship large/ heavy items
Speed, very slow
Must use another form once ship is in port
Affected by weather
Adv. vs. Dis. for PipelineOperation costs are low
Low risk of failure
Weather does not delay
High initial cost
If damaged, can be expensive to repair
Adv. vs. Dis. for AirVery fastReduces inventory expensesReduces storage expenses
Most expensive form of distributionMechanical breakdownsDelays from weather
Shipping Terms
Fishy Back Boat to Truck
Piggy BackTrain to Truck
Which Method would you ship the following
CoalSmall box that needed to be at destination quicklyFruitCoffee to be shipped abroadRoses from FranceComputer Equipment
PurchasingGreat career area: Professional Shopper!Important function of marketing because the costs associated with running a business are the direct result of the person who’s in charge of buying the goods/servicesList all the things that you would need to purchase if you were to open a retail gift store.
Planning PurchasesOrganizational Buyer – purchase products for a business. In large quantitiesRequires technical knowledge of
industryTwo types of buyersIndustrial- for use in businessResale
Layaway #17
99.99
125.99
36.99
18.50
=_____________
*.20 = _________
Bal due? 281.47-56.29 = _________
281.47
56.29
228.15
Returns #19
195 – ___ = ___ owed plus tax
45*1.06 = ___________
150 45
47.70
Returns #22
She will owe95-75 = 20.00 plus tax20.00*1.07= ____________
#24Mr. Chow Discount39.99-3 = ________
21.40
36.99
Purchase OrderGives permission to purchase product on account. (business to business).
Read all of #25 and complete. Check yours with the Key before continuing on!
(Instructions, Date, Totals…etc)
Invoice
Bills for goods that have been received. Before paying, make sure it’s correct.
Total due….
Dating TermsTo get businesses to pay their bills on time, we have TERMS.Sometimes N30…bill due in 30 days…if not, you can be charged interest2/10 N 30 ….2% discount if you pay in 10 days, otherwise 30 days for full payment.
Dating Terms-#27Amount Dating
terms Invoice Date
Discount Date
DiscountAmount
Net Amount
Final date for payment
1000 2/10 Net 45
5/18
8500 4/20 N 60
1/22
735 2/10 n 30
7/05
10000 3/15 n45
5/07
5/28 13=5/3130=6/30
2=7/220 980
7/15 14.70 720.3026=7/31
4=8/4
DistributionYour group is a new product distribution team hired by Mattel. You have been given the task of selecting the appropriate target market for the product and getting it into the hands of customers. You will need to develop a plan for distribution.
ON Notecard
Product ____________________________________
Target Market- (Age, Gender, Education, Income, Hobbies)
How will you get your product to the consumers? Choose a channel from pg 4. (direct? Wholesalers? retailers?) WHY?
What type of distribution will you use? (selective, exclusive, intensive) WHY?
What types of physical distribution will you use to move your product in these channels (Plane, Trane, Auto, Truck, Pipe, Water) WHY?
Find a company in Madison who can help you.
Shipping -30
Package 19lbs 4 oz. Zone 6 = _______Invoice is $322.44 Sales Tax = 7%
Total Due? $10.22+ (322.44*1.07) = _________
10.22
355.23
Shipping pg 14
FOB= Free on BoardFOB destination or Store = Seller PaysFOB Shipping point= Buyer PaysFOB Factory prepaid- Seller PaysFOB Destination Reversed = Buyer Pays
#35
Dated 3/28 received 4/4
Eligible for discount? _____
FOB Dest rev? Who Pays ______
$79,324*(.98) =$________ + 652.66 = $78,390.18
NO
buyer
77,737.52
#37
$5672.35 Dated July 25 1/15 n45
Discount Date=Aug 9
1%=56.72 savings
NO, took too large of discount
Payment should’ve been $5615.63
Industrial MarketsIndustrial Buyer=Buys materials used to make a product that is soldCompany’s master production schedule will help provide details for ordering and shipments.Sell 500 leather coats
Must know how much fabric, insulation, thread, and zippers are needed to produce.
This information is provided on the BILL OF MATERIALS=Itemized list of goods needed to produce a product
Send bids (RFP) to vendors for Price Quotes
ResellersWholesale and Retail buyers purchase goods for resaleForecast consumers needs and buy the necessary products to meet them.Use planned sales figures to determine quantity to buyPlanned Sales = Using economic
forecasts, take last year’s sales x your projected amount this year
Types of Purchasing
Worksheet pg 17
How Much to orderTotaling Totes
1. Last Years Sales ______ + Increase (x.05)______ + Classes (5x12) ______
= Ant. Sales _____ totesCost (3*98.40) + (2*25.08)+(6*2.15)295.20+50.16+12.90=$358.26
120
6
60
186
Buying & Distribution
Planned Sales – anticipated sales for next year.Sales X increase#1 Sales = $10,000 Increase 10%
=
#3 Sales = 8000, Costs up 5%=
BOM #5
Beginning of Month StockMonth Sales BOM Stock to Sales
Feb 4000 16,000 _________
March 4,500 11,250 _________
April 6,000 18,000 _________
#9
Month Last Sales Last BOM StoS PS Planned BOM
Feb 5,000 17,500 ____ _______ _______
March 7,000 21,000 ____ ______ ________
April 7,500 18,750 ____ _______ ________
Reductions
Planned Reductions – discounts , shortages, markdowns
#12 Sales were $20,000 Reductions are 2%PR = 20,000 X .02 = _______
#14 Sales $30,000 PR=6,000 what is %6,000/30,000 = ____________
Planned Purchases
How much should you buy each month!Take Planned Sales + EOM (how much you need for next)+Reductions- BOM (what you started with)= What you need to buy
Planned Purchases #20
Month PS -BOM +PR +EOM =PP
March 9,900 29,500 900 ______ ______
April 12,100 39,300 1,200 ______ ______
May 8,800 35,200 800 ______ ______
June 13,200 33,000 1,300 ______ ______
July 6,000 19,000 600 _______ ______
Aug ---- 24,000 ---- ________ _____
Selecting SuppliersProduction CapabilitiesPast ExperiencesSpecial Buying ArrangementsConsignment buying-paid for only after
they are soldMemorandum buying –take back
unsold product
Special Services
#29 How much can u buy?
PS-BOM+PR+EOM-Received-ordered_________- _________+__________+ _________- __________- _________=_____________ Open to Buy11,000
#31 -Six Month Merch Plan
Planned Sales + 20% = *1._
Planned BOM = PS * _
Planned Reduct = 15%=*.__
Planned Purchase At Cost
If Markup is 45%.Cost is __%
PP@Retail X.__= 12,012
***REVIEW***
PP at Retail
= Planned Sales 9600
+ EOM (Next BOM) 39600 (to get this must do next month BOM)
+ Planned Reductions 1440
- BOM -28800
= PP at Retail = 21840
#31 -Six Month Merch Plan
Aug Sept Oct Nov Dec Jan
Last Year 8000 11000 9000 12000 15000 1000
PS x( ) ____ _____ ____ _____ _____ ____
BOM x( ) ____ _____ ____ _____ _____ ____
PR X( ) ____ _____ ____ _____ _____ ____
PP @ R ____ _____ ____ _____ _____ ____
PP@C X( ) ____ _____ ____ _____ _____ ____
Dating TermsNet 30 –from date on invoice2/10 Net 30- 2% discount if paid in 10 days otherwise full payment due in
30 days4/15 net 60 – 4% discount if paid in 15 days otherwise full payment due in
60 days2/10 EOM- End of Month –from end of Month,2% discount 10 days,full payment due at
end of Next Month2/10 net 45 ROG – Full payment due 45 days from the date you receive the
goods.
#33-Dating Terms
Extra Dating, Adds that # of Days to Original Date…
March 17, 2/10 net 30, 60 extra…
1st – add 60 days to March 1714-End march, April –30 , May 16May 16 + _____ days for Discount = May __Final Payment +30 = June ______
Invoice Terms
Date Received
Dating terms
Last date for discount
New price w/discount
Date full price
Type of dating terms
Jan 25$8,000
Jan 30th 2/20 net 60
Feb 10$6,500
Feb 25 4/15 net 30 as of March 10
April 23$6250
May 2 2/10 Net 30, ROG
May 16$2,500
June 8 3/10 net 30, EOM
Sep 7$10,400
Sept. 12 2/10 Net 30
2 / 148000*.98
= 7840
6+28+26
= 3/26ordinary
3/25 6500*.96
=6240 21+9
4/9 advanced
5/12 Receipt
of goods
29+1
6/1 6250*.98
= 6125
6/10 2500*.97
=2425
5/31+30
6/30 End of Month
9/17 10,400*.98
=10192
23+7
10/7 ordinary
Dating Terms Pre-Quiz
Government Purchasing
worksheet
Bright IdeasBar codes are everywhere today, on product packages and goods. They are so common you probably don’t even think twice about them. Created by Bernard Silver and Joseph Woodland, the first barcode was born in Troy, Ohio in 1974. What was the first product to carry a UPC barcode? Wrigleys Gum! Why are bar codes so important today?http://www.dailymotion.com/video/x50stp_barcodes-barcodes-barcodes_tech UPC= Universal Product Code
Stock and Inventory control
The processReceiving MerchandiseChecking MerchandiseMarking MerchandiseTransferring Merchandise
Marking Merch.Attaching selling price and other information for customerSource Marking – manufacturer marks with price before delivering to retailer (Frito Lay, apparel, little Debbie, gum)Pre-retailing Marking – seller marks the suggested retail on the invoice (Pepsi)
Inventory SystemsPerpetual Inventory SystemTracks # of items on a consistent
basisPhysical Inventory SystemVisually inspected or counted
periodically.
The FutureReal-Time Inventory SystemE-businesses, each time an item is
ordered, is automatically deducted from inventory
Web site only lists the merchandise it actually has in inventory.
#41 Average Inventory
1,748,000+150,000 =1,898,000 / ___ months= ________ Average Inventory
45 Stock Turnover
BOM of
34,750
38250
36842
35158 = _________ /
Sales for period were $81,900 = ____
#51 Stock turnover at cost
__Cost of Goods Sold___
Average inventory at Cost
Total COGS = 14,300+15,375+15,300+14,400=_______
Avg Inventory=
40,000+45,000+50,000+55,000/4=_______
ShrinkThe difference between the company’s inventory records and what is actually in stockPerpetual shows what you should havePhysical shows what you actually haveInventory Shrinkage is the difference
between them
What counts Not Just your sales inventoryCould be raw materials
Sugar from a bakeryCould be supplies
post it notes from an officeEquipment
A saw from a construction co.
Who causes ShrinkEmployeesNot checking in merchandise properly
CustomersBreaking products, shoplifting
VendorsShorting on deliveryOver chargingNot giving proper credit for goods
Calculating Shrink$ or unit #’s from previous count
+ purchases company has made
- Total Sales transactions
= if answer is 0, no shrinkage
Most companies expect some shrinkage and plan for it accordingly
#59 Inventory Shrink
Begin Net merch Net Sales Perp. Count ShrinkA. $25,900 $15,000 _______ $26,000 _______ $14,850 _____
B. $26,000 $17,200 _______ $23,000 _______ $20,000 _____