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 _____