DISTRIBUTION AND LOGISTICS

BBB4M

Channels of Distribution All businesses need to distribute their product

either to a place where a consumer can find itOR directly to the consumer

IF the consumer has the product, the marketer has been SUCCESSFUL

There are two components to distribution selecting, developing, and managing distribution

channels physically distributing goods through those channels

Channels of Distribution

are the paths of ownership that goods follow as they pass from the producer to the consumer

Channel Selection deciding what path a product

should take to reach the target consumer

Possible Channels

Distribution Policies

1) Intensive Distribution

Used if the product is sold everywhere

Ex: Coca-cola is found in schools, bus stations, parks, malls, arenas, cafeterias, grocery stores, drugstores, retail outlets, planes, trains, movie theatres, restaurants, etc.

Distribution Policies2) Selective Distribution

Try to control and select the distribution of their product

May seek to avoid conflicts in positioning/brand image

If a retailer orders a manufacturer’s product, by law the manufacturer cannot refuse to sell the product to the store without a valid reason

Distribution Channels3) Exclusive Distribution The manufacturer has made a deal

with one or two retailers in a particular area to sell the manufacturer’s product exclusively

This allows the product to have a prestige image and allows the manufacturer to dictate some of the retail strategies.

Ex: High fashion clothing, famous-name watches, luxury giftware

Distribution Channels4) Integrated Distribution

a manufacturer, distributor, or retailer owns both distribution outlets and manufacturing facilities for a product

Ex: IKEA, Lee Valley tools – own and operate their own manufacturing & retail stores

Logistics The management of the flow of

goods and services both into and out of an organization, from the point of origin to the point of consumption.

It consists of transportation, inventory management, warehousing and storage, and packaging.

Supply chain

The sum total of all activities involved in moving raw materials, processed goods, and finished products into an organization, and moving the semi-processed or finished goods out of the organization toward the end-consumer.

Supply ChainVertical Integration

A business grows by buying their supply chain (suppliers, distributers, etc.)

Supply ChainHorizontal Integration

a company expands by acquiring its competitors (same industry)

Supply ChainThe main links in the supply chain are:

Inventory managementStorageCash flowSupplier co-ordination Information processingPhysical distribution

Supply Chain

Inventory management For retailers, this requires a system

that records sales Usually a point-of-sale terminal, a

system that tracks retail sales by recording the code or stock number of each stock-keeping unit (SKU)

In larger companies, this becomes more complex, particularly if they design and manufacture the products they sell

Warehouse Example

Supply Chain

Companies are reluctant to be responsible for storage of goods because it takes up valuable space and increases the possibility that they will have to deal with damage or theft. Each link in the supply chain tries to pass goods on as quickly as possible.

Supply Chain Just-in-time (JIT) inventory systems

are used to eliminate storage altogether.

JIT requires suppliers to make and ship the materials that are needed quickly enough that the goods and materials arrive at the workstation, factory floor, or retail store just as they are needed.

Follow-up

We will continue with Logistics next class .

You are to work on your Market Research assignments for the remainder of the class.

Remember: assignments are due

Wednesday.