CHAPTER 11 Distribution Channels and Logistics Management

7/30/2019 CHAPTER 11 Distribution Channels and Logistics Management

1/16

Distribution Channels

and

Logistics Management


2/16

What is a Distribution Channel?

A set of interdependent organizations(intermediaries) involved in the processof making a product or service available

for use or consumption by the consumeror business user.

Channel decisions are among the most

important decisions that managementfaces and will directly affect every othermarketing decision.


3/16

Why are Marketing IntermediariesUsed?

Greater efficiency in making goodsavailable to target markets.

Offer the firm more than it can achieve

on its own through the intermediaries:Contacts

Experience

SpecializationScale of operation

Match supply and demand.


4/16

Distribution Channel Functions

Contact

Financing

InformationRisk Taking

Promotion

MatchingNegotiation

PhysicalDistribution

All Use Up Scarce Resources

All May Often Be Performed Better Through Specialization

All Can Often Be Shifted Among Channel Members


5/16

Consumer Marketing Channels & Levels

Direct

Indirect

M Super Stocist R1 R2 C

M W R C

M R C

M C

Channel 1

Channel 2

Channel 3

Channel 4

Channel Level - A Layer of Intermediaries that Perform Some Work inBringing the Product and its Ownership Closer to the Buyer.


6/16

Channel Behavior & Conflict

The channel will be most effective when:

each member is assigned tasks it can do best.

all members cooperate to attain overall channelgoals and satisfy the target market.

When this doesnt happen, conflict occurs:

Horizontal Conflict occurs among firms at thesame level of the channel.

Vertical Conflict occurs between different levelsof the same channel.

For the channel to perform well, conflict

must be managed.


7/16

Types of Vertical Marketing Systems

Corporate

Common Ownership at DifferentLevels of the Channel

ContractualContractual Agreement Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

Greater

Lesser

Degreeof

DirectControl


8/16

Vertical Marketing Systems

VerticalMarketing

Systems (VMS)

Corporate

VMS

Contractual

VMS

AdministeredVMS

RetailerCooperatives

FranchiseOrganizations

WholesalerSponsored

Voluntary Chain

Service-Firm-Sponsored

Franchise System

Manufacturer-Sponsored

WholesalerFranchise System

Manufacturer-Sponsored

RetailerFranchise System


9/16

Innovations in Marketing Systems

Horizontal MarketingSystem

Hybrid MarketingSystem

Two or More

Companies at OneChannel Level JoinTogether to Follow aNew MarketingOpportunity.

Example:Banks in GroceryStores

A Single Firm Sets

Up Two or MoreMarketing Channelsto Reach One orMore Customer

Segments.

Example:Retailers, Catalogs,and Sales Force


10/16

Channel Design Decisions

Analyzing Consumer Service Needs

Setting Channel Objectives & Constraints

ExclusiveDistributionSelectiveDistributionIntensiveDistribution

Identifying Major Alternatives

Evaluating the Major Alternatives


11/16

Channel Management Decisions

Selecting

Motivating

Evaluating

FEEDBACK


12/16

Nature and Importance of MarketingLogistics

Involves getting the right product to the rightcustomers in the right place at the right time.

Companies today place greater emphasis on

logistics because:effective logistics is becoming a key to winning and

keeping customers.

logistics is a major cost element for most

companies.the explosion in product variety has created a need

for improved logistics management.

information technology has created opportunities

for major gains in distribution efficiency.


13/16

Logistics Systems

InventoryWhen to order

How much to orderJust-in-time

CostsMinimize Costs ofAttaining Logistics

Objectives

WarehousingStorage

Distribution

Order ProcessingSubmittedProcessed

Shipped

Logistics

FunctionsTransportationWater, Truck,

Rail,Pipeline & Air


14/16

Transportation Modes

Rail

Nations largest carrier, cost-effectivefor shipping bulk products, piggyback

TruckFlexible in routing & time schedules, efficient

for short-hauls of high value goods

WaterLow cost for shipping bulky, low-value

goods, slowest form

PipelineShip petroleum, natural gas, and chemicals

from sources to markets

AirHigh cost, ideal when speed is needed or to

ship high-value, low-bulk items


15/16

Choosing TransportationModes

1. Speed.

2. Dependability.3. Capability.

4. Availability.

5. Cost.

Checklist for ChoosingTransportation Modes

I d L i i M


16/16

Integrated Logistics Management

Concept Recognizes that Providing Better Customer

Service and Trimming Distribution Costs RequiresTeamwork, Both Inside the Company and Among Allthe Marketing Channel Organizations.

Cross-Functional Teamwork insidethe Company

Building Channel Partnerships

Third-Party Logistics

Documents

CHAPTER 11 Distribution Channels and Logistics Management