Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared

Chapter 12 Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1

MKTG

Designed byAmy McGuire, B-books, Ltd.

Prepared byDeborah Baker, Texas Christian University

Lamb, Hair, McDaniel 2008-2009 Marketin

g Channels and Supply Chain Management

12

CHAPTER


Learning Outcomes

Explain what a marketing channel is and why intermediaries are needed

Define the types of channel intermediaries and describe their functions and activities

Describe the channel structures for consumer and business products and discuss alternative channel arrangements

LO1

LO2

LO3


Learning Outcomes

Define supply chain management and discuss its benefits

Discuss the issues that influence channel strategy

Explain channel leadership, conflict, and partnering

Describe the logistical components of the supply chain

LO4

LO5

LO6

LO7


Learning Outcomes

Discuss new technology and emerging trends in supply chain management

Discuss channels and distribution decisions in global markets

LO8

LO9


Explain what a marketing channel is

and why intermediaries are

needed

Marketing ChannelsMarketing ChannelsLO1


LO1

Marketing Channels

A set of interdependent

organizations that ease

the transfer of ownership

as products move from

producer to business

user or consumer.

Marketing Channels

Marketing Channels


LO1

Marketing Channels

The connected chain of

all the business entities,

both internal and external

to the company, that

perform or support the

logistics function.

Supply ChainSupply Chain


LO1

Marketing Channel Functions

Specialization and division of labor Specialization and division of labor

Overcoming discrepancies Overcoming discrepancies

Providing contact efficiency Providing contact efficiency


LO1

Specialization and Division of Labor

Creates greater efficiency

Provides lower costs

Achieves economies of scale

Aids producers who lack resources to market directly

Builds good relationships with customers


LO1

Overcoming Discrepancies

Discrepancyof

Quantity

Discrepancyof

Quantity

Discrepancyof

Assortment

Discrepancyof

Assortment

The difference between the amount of product produced and the amount an end user

wants to buy.

The difference between the amount of product produced and the amount an end user

wants to buy.

The lack of all the items a customer needs to receive full satisfaction from a product or

products.

The lack of all the items a customer needs to receive full satisfaction from a product or

products.


LO1

Overcoming Discrepancies

TemporalDiscrepancyTemporal

Discrepancy

SpatialDiscrepancy

SpatialDiscrepancy

A situation that occurs when a product is produced but a

customer is not ready to buy it.

A situation that occurs when a product is produced but a

customer is not ready to buy it.

The difference between the location of a producer and the

location of widely scattered markets.

The difference between the location of a producer and the

location of widely scattered markets.


LO1

Providing Contact Efficiency


REVIEW LEARNING OUTCOMELO1

Marketing Channels

Providing Specialization and Division of Labor

Providing Specialization and Division of Labor

OvercomingDiscrepancies

OvercomingDiscrepancies

Providing ContactEfficiency

Providing ContactEfficiency

MarketingChannel

SupplyChain


Define the types of channel intermediaries

and describe their functions and activities

Channel IntermediariesChannel IntermediariesLO2


Channel Intermediaries

LO2

RetailerRetailer A channel intermediary that sells mainly to customers.

A channel intermediary that sells mainly to customers.

MerchantWholesalerMerchant

Wholesaler

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

An institution that buys goods from manufacturers, takes title

to goods, stores them, and resells and ships them.

Agents andBrokers

Agents andBrokers

Wholesaling intermediaries who facilitate the sale of a product by representing channel members.

Wholesaling intermediaries who facilitate the sale of a product by representing channel members.


Channel Intermediaries

LO2

RetailersRetailers

Merchant WholesalersMerchant

Wholesalers

Agents and

Brokers

Agents and

Brokers

Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods

Take Title to GoodsTake Title to GoodsTake Title to GoodsTake Title to Goods

Do NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to GoodsDo NOT Take Title to Goods


Factors Suggesting Type of Wholesaling Intermediary to Use

LO2

Product characteristicsProduct characteristics

Buyer considerationsBuyer considerations

Market characteristicsMarket characteristics


Factors Suggesting Type of Wholesaling Intermediary to Use

LO2

Factor Merchant Wholesalers

Agents/ Brokers

Nature of product Standard Nonstandard, custom

Technicality of product Complex Simple

Product’s gross margin High Low

Frequency of ordering Frequent Infrequent

Time between order and receipt of shipment

Shorter lead time Longer lead time

Number of customers Many Few

Concentration of customers Dispersed Concentrated


Channel Functions Performed by Intermediaries

LO2

Contacting/Promotion

Negotiating

Risk Taking

Researching

Financing

Physically distributing

Storing

Sorting

FacilitatingFunctions

FacilitatingFunctions

TransactionalFunctions

TransactionalFunctions

Logistical Functions

Logistical Functions


LO2

Logistics

LogisticsThe process of strategically

managing the efficient flow

and storage of raw materials,

in-process inventory, and

finished goods from point of

origin to point of

consumption.



Channel Intermediaries and Functions

CHANNELINTERMEDIARIES

CHANNELINTERMEDIARIES

Retailers

Wholesalers

Agents and Brokers

Retailers

Wholesalers

Agents and Brokers

CHANNELFUNCTIONSCHANNEL

FUNCTIONS

Transactional

Logistical

Facilitating

Transactional

Logistical

Facilitating

Perform


Describe the channel structures for consumer and business products

and discuss alternative channel

arrangements

Channel StructuresChannel StructuresLO3


Channels for Consumer ProductsLO3

A distribution channel in

which producers sell

directly to consumers.

Direct Channel

Direct Channel


Channels for Consumer ProductsLO3

Producer Producer Producer Producer

Consumers Consumers Consumers Consumers

Retailers Retailers Retailers

Wholesalers Wholesalers

Agents orBrokers

WholesalerWholesalerChannelChannel

RetailerRetailerChannelChannel

DirectDirectChannelChannel

Agent/BrokerAgent/BrokerChannelChannel


Channels for Business ProductsLO3

Producer

IndustrialUser


Producer

Govt.Buyer


Producer Producer Producer

IndustrialUser

IndustrialUser

IndustrialUser

IndustrialDistributor

IndustrialDistributor

Agents orBrokers

Agents orBrokers

Agent/BrokerAgent/BrokerChannelChannel

IndustrialIndustrialDistributorDistributor

Agent/BrokerAgent/BrokerIndustrialIndustrialChannelChannel


Business-to-Business Exchanges on the Internet

LO3

Agents link buyers and sellersAgents link buyers and sellers

Companies drop the intermediary from the supply chainCompanies drop the intermediary from the supply chain

“Private exchanges” with select suppliers automate the supply chain

“Private exchanges” with select suppliers automate the supply chain

Online

http://www.sherwinwilliams.com


Alternative Channel ArrangementsLO3

Multiple channels

Strategic channel alliances

Nontraditional channels


Biz Flix

LO3Casino



Channel Structures

CONSUMERCHANNELS

CONSUMERCHANNELS

Direct

Retail

Wholesaler

Agent/broker

Direct

Retail

Wholesaler

Agent/broker

BUSINESSCHANNELSBUSINESSCHANNELS

Direct

Industrial

Agent/broker

Agent/brokerindustrial

Direct

Industrial

Agent/broker

Agent/brokerindustrial

ALTERNATIVECHANNELS

ALTERNATIVECHANNELS

Multiple

Nontraditional

Strategicalliances

Multiple

Nontraditional

Strategicalliances


Define supply chain management and

discuss its benefits

Supply Chain ManagementSupply Chain ManagementLO4


LO4

Supply Chain Management

Supply ChainSupply Chain

A management system that

coordinates and integrates all

of the activities performed by

supply chain members into a

seamless process, from the

source to the point of

consumption, resulting in

enhanced customer and

economic value.


LO4

Role of Supply Chain Management

Physical flow process that engineers the movement of goods

Physical flow process that engineers the movement of goods

Communicator of customer demand from point of sale to supplier

Communicator of customer demand from point of sale to supplier


LO4

Responsibilities of Supply Chain Managers

Channel strategy decisions

Sourcing and procurement of raw materials

Production schedules

Order processing

Inventory management

Finished goods/supplies transportation and storage

Customer service coordination

Supply chain information flow management

Partner relationships


LO4

The Supply Chain Process


LO4

Benefits of Supply Chain Management

Means of differentiationMeans of differentiation

Greater supply chain flexibility Greater supply chain flexibility

Improved customer serviceImproved customer service

Higher revenuesHigher revenues

Reduced costs Reduced costs



Supply Chain Management


Discuss the issues that influence

channel strategy

Making Channel Strategy DecisionsMaking Channel Strategy DecisionsLO5


Channel Strategy DecisionsLO5

Factors Factors Affecting Affecting Channel Channel ChoiceChoice

Factors Factors Affecting Affecting Channel Channel ChoiceChoice

Producer FactorsProducer Factors

Product FactorsProduct Factors

Market FactorsMarket Factors

Exclusive DistributionExclusive Distribution

Selective DistributionSelective Distribution

Intensive DistributionIntensive Distribution

Level ofLevel ofDistributionDistribution

IntensityIntensity

Level ofLevel ofDistributionDistribution

IntensityIntensity


Market FactorsLO5

Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Market Market FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Customer profilesCustomer profiles

Consumer or IndustrialCustomer

Consumer or IndustrialCustomer

Size of marketSize of market

Geographic location


Product FactorsLO5

Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Product Product FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Product Complexity Product Complexity

Product StandardizationProduct Standardization

Product Life CycleProduct Life Cycle

Product DelicacyProduct Delicacy

Product PriceProduct Price


Product FactorsLO5

Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Producer Producer FactorsFactorsThat Affect That Affect ChannelChannelChoicesChoices

Producer Resources Producer Resources

Number of Product LinesNumber of Product Lines

Desire for Channel ControlDesire for Channel Control


Levels of Distribution IntensityLO5

IntensiveIntensiveA form of distribution aimed at having a product available in every outlet

A form of distribution aimed at having a product available in every outlet

SelectiveSelectiveA form of distribution achievedby screening dealers to eliminate all but a few in any single area

A form of distribution achievedby screening dealers to eliminate all but a few in any single area

ExclusiveExclusiveA form of distribution that established one or a few dealers within a given area

A form of distribution that established one or a few dealers within a given area


Levels of Distribution IntensityLO5

IntensiveAchieve mass marketselling. Convenience goods.

Many

Selective

Exclusive

Work with selected intermediaries. Shopping and some specialty goods.

Work with singleintermediary. Specialty goods and industrial equipment.

Several

One

Intensity Level Objective Number of

Intermediaries



Issues Influencing Channel Strategy


Discuss the issues that influence

channel strategy

Managing Channel RelationshipsManaging Channel RelationshipsLO6


Social Dimensions of Channels

LO6 PartneringPartnering

ConflictConflict

LeadershipLeadership

ControlControl

PowerPower


Channel Power, Control, and Leadership

LO6

ChannelPower

ChannelPower

A channel member’s capacity to control or influence the behavior of other channel members

A channel member’s capacity to control or influence the behavior of other channel members

ChannelControl

ChannelControl

A situation that occurs when one marketingchannel member intentionally affects another member’s behavior

A situation that occurs when one marketingchannel member intentionally affects another member’s behavior

Channel Leader

Channel Leader

A member of a marketing channel that exercises authority/power over the activities of other members

A member of a marketing channel that exercises authority/power over the activities of other members


Channel Conflict and Partnering

LO6

ChannelConflict

ChannelConflict

A clash of goals and methods

between distribution channel

members

A clash of goals and methods

between distribution channel

members

ChannelPartnering

ChannelPartnering

The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage

The joint effort of all channel members to create a supply chain that serves customers and creates a competitive advantage


Channel Conflict

LO6

Conflicts may occur if channel members:

Have conflicting goals

Fail to fulfill expectations of other channel members

Have ideological differences

Have different perceptions of reality


Channel Partnering

LO6

Supplier / Manufacturer Relationships

Short-termAdversarialIndependentPrice important

Long-termCooperativeDependentValue-added services

Number of Suppliers Many Few

Transaction-Based Partnership-Based

Information Sharing Minimal High

InvestmentRequired Minimal High



Channel Leadership, Conflict, & Partnering

ChannelRelationship

Synergy

ChannelRelationship

Synergy

Channel Conflict

Horizontal Vertical

Channel Power,Control, Leadership

Channel Partnering


Discuss global issues

in services marketing

Global Issues in Global Issues in Services MarketingServices MarketingLO7


Logistical Components of the Supply Chain

LO7

SupplySupplyChainChainTeamTeam

Sourcing & ProcurementSourcing & Procurement

Production SchedulingProduction Scheduling

Order ProcessingOrder Processing

Inventory ControlInventory Control

Warehouse & Materials HandlingWarehouse & Materials Handling

TransportationTransportationLo

gis

tics

Info

rma

tio

n S

yste

mL

og

isti

cs In

form

ati

on

Sys

tem


Sourcing and Procurement

LO7

Plan purchasing strategies

Develop specifications

Select suppliers

Negotiate price and service levels

Reduce costs

The Role of Purchasing:The Role of Purchasing:


Production Scheduling

LO7

Push / Pull Strategy

Traditional Focus

Push

Start of Production

Manufacturing

Inventory-Based

Mass Production

Customer Focus

Pull

Customer-Order Based

Mass Customization


Just-in-Time Manufacturing

LO7

A process that redefines and

simplifies manufacturing by

reducing inventory levels and

delivering raw materials just

when they are needed on the

production line.

JITJIT


Benefits of JIT

LO7

Reduces raw material inventories Shortens lead times Creates better supplier relationships Reduces production and storeroom costs Reduces paperwork


JIT Requirements

LO7

Receive high-quality parts Receive high-quality parts

Meet supplier delivery commitmentsMeet supplier delivery commitments

Have a crisis management planHave a crisis management plan


Order Processing

LO7

Information technology that

replaces paper documents that

accompany business

transactions with electronic

transmission of the information.

ElectronicData

Interchange

ElectronicData

Interchange

http://www.walmartstores.com

Online


Order Processing

LO7

A method of developing

and maintaining an

adequate assortment of

materials or products to

meet a manufacturer’s or

a customer’s demand.

InventoryControlSystem

InventoryControlSystem


Order Processing

LO7

MaterialsRequirement

Planning(MRP)

MaterialsRequirement

Planning(MRP)

An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.

An inventory control system that manages the replenishment of raw materials, supplies, and components from the supplier to the manufacturer.

DistributionResourcePlanning

(DRP)

DistributionResourcePlanning

(DRP)

An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.

An inventory control system that manages the replenishment of goods from the manufacturer to the final consumer.


Materials Handling Functions

LO7

Receive goods into warehouse

Dispatch the goods totemporary storage

Recall, select, or pick the goods for shipment

Identify, sort, and label goods


Transportation

LO7

Airways

Water

Pipelines

Motor Carriers

Railroads


Transportation Mode Choice

LO7

Cost Transit time Reliability Capability Accessibility Traceability


Criteria for RankingModes of Transportation

LO7

Relative CostTransitTime

Reliability

Capability

Accessibility

Traceability

HighestHighest LowestLowest

Air WaterPipeRailTruck

Water Rail Pipe Truck Air

Pipe Truck Rail Air Water

Water

Truck

Rail Truck Air Pipe

Rail Air Water Pipe

Air Truck Rail Water Pipe


Discuss new technology and

emerging trends in supply chain management

Trends in Supply Chain Trends in Supply Chain ManagementManagementLO8


Trends in Supply Chain Management

LO8

Electronic distributionElectronic distribution

Outsourcing of logistics functionsOutsourcing of logistics functions

Advanced computer technologyAdvanced computer technology


Advanced Computer Technology

LO8

Automatic identification systems

- Bar coding

- Radio frequency technology

Communications technology

Supply chain software systems


Outsourcing Logistics Functions

LO8

Outsourcing BenefitsOutsourcing Benefits

Reduce inventories

Locate stock at fewer plants and distribution centers

Provide same or better levels of service


Discuss channels and

distribution decisions

in global markets

Channels and Distribution Channels and Distribution Decisions for Global Markets Decisions for Global MarketsLO9


LO9

Channels and Distribution Decisions for Global Markets

Global Channel Development

Global Channel Development

Channel structure and type differ

Channel structure and type differ

Gray marketing channelsGray marketing channels

Global SupplyChain Management

Global SupplyChain Management

Awareness of trade legalitiesAwareness of trade legalities

Transportation IssuesTransportation Issues



Global Market Channel & Distribution Decisions

Distribute directly or through foreign partners

Different channel structures than indomestic markets

Illegitimate “gray”marketing channels

Legal and infrastructure differences


Beyond

the

Book

Channels and Distribution Decisions for Services

NOTE: Supplemental content – not in book.

Identify the special problems and opportunities

associated with distribution in service

organizations


Beyond

the

Book

Channels and Distribution Decisionsfor Services


Minimizing wait times

Managing service capacity

Improving service delivery


Beyond

the

Book

Distribution in Service Organizations


Documents

Chapter 12Copyright ©2008 by South-Western, a division of Thomson Learning. All rights reserved 1 MKTG Designed by Amy McGuire, B-books, Ltd. Prepared