MARKETING CHANNELS

&
SUPPLY CHAIN MANAGEMNET

CHAPTER 7
MARKETING CHANNELS

Explain what a marketing

channel is and why
intermediaries are needed
MARKETING CHANNELS

Marketing A set of interdependent

Channel organizations that ease the
transfer of ownership as
products move from
producer to business user
or consumer.
MARKETING CHANNELS

The connected chain of all

Supply Chain the business entities, both
internal and external to the
company, that perform or
support the logistics
function.
MARKETING CHANNEL
FUNCTIONS

Specialization
Specialization and
and division
division of
of labor
labor

Overcoming
Overcoming discrepancies
discrepancies

Providing
Providing contact
contact efficiency
efficiency
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
OVERCOMING DISCREPANCIES

The
The difference
difference between
between the
the
Discrepancy
Discrepancy amount
amount of of product
product produced
produced
of
of and
and the
the amount
amount anan end
end user
user
Quantity
Quantity wants
wants to
to buy.
buy.

The
The lack
lack of
of all
all the
the items
items aa
Discrepancy
Discrepancy customer
customer needs
needs to to receive
receive full
full
of
of satisfaction
satisfaction from
from aa product
product oror
Assortment
Assortment products.
products.
OVERCOMING DISCREPANCIES

AA situation
situation that
that occurs
occurs when
when aa
Temporal
Temporal product
product isis produced
produced but
but aa
Discrepancy
Discrepancy customer
customer isis not
not ready
ready to
to buy
buy it.
it.

The
The difference
difference between
between the
the
Spatial
Spatial location
location of
of aa producer
producer and
and the
the
Discrepancy
Discrepancy location
location ofof widely
widely
scattered
scattered markets.
markets.
PROVIDING CONTACT EFFICIENCY
REVIEW LEARNING OUTCOME
MARKETING CHANNELS

Marketing
Channel

Providing Specialization
and Division of Labor

Overcoming
Discrepancies

Providing Contact
Efficiency
Supply
Chain
CHANNEL INTERMEDIARIES

Define the types of

channel intermediaries
and describe their
functions and activities
 CHANNEL INTERMEDIARIES

A
A channel
channel intermediary
intermediary that
that
Retailer
Retailer sells
sells mainly
mainly to
to customers.
customers.

Merchant
Merchant An
An institution
institution that
that buys
buys goods
goods
Wholesaler from
from manufacturers,
manufacturers, takes
takes title
title
Wholesaler
to
to goods,
goods, stores
stores them,
them,
and
and resells
resells and
and ships
ships them.
them.
Wholesaling
Wholesaling intermediaries who
intermediaries who
Agents
Agents and
and facilitate
facilitate the
the sale
sale of
of aa product
product
Brokers
Brokers by
by representing
representing channel
channel
members.
members.
 CHANNEL INTERMEDIARIES

Take
Take Title
Title to
to Goods
Goods
Retailers
Retailers

Merchant Take
Merchant
Wholesalers Take Title
Title to
to Goods
Goods
Wholesalers

Agents Do
Agents
and
and
Do NOT
NOT Take
Take Title
Title to
to Goods
Goods
Brokers
Brokers
 FACTORS SUGGESTING TYPE OF
WHOLESALING INTERMEDIARY TO USE

Product
Product characteristics
characteristics

Buyer
Buyer considerations
considerations

Market
Market characteristics
characteristics
FACTORS SUGGESTING TYPE OF
WHOLESALING INTERMEDIARY TO
USE
Factor Merchant Agents/Brokers
Wholesalers

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 Shorter lead time Longer lead time
shipment

Number of customers Many Few

Concentration of customers Dispersed Concentrated

CHANNEL FUNCTIONS
PERFORMED BY INTERMEDIARIES
Contacting/Promotion
Transactional
Transactional Negotiating
Functions
Functions
Risk Taking

Physically distributing
Logistical
Logistical Storing
Functions
Functions
Sorting

Facilitating Researching
Facilitating
Functions
Functions Financing
LOGISTICS

The process of strategically

Logistics managing the efficient flow
and storage of raw
materials, in-process
inventory, and finished
goods from point of origin
to point of consumption.
REVIEW LEARNING OUTCOME
CHANNEL INTERMEDIARIES AND
FUNCTIONS

CHANNEL
CHANNEL CHANNEL
CHANNEL
INTERMEDIARIES
INTERMEDIARIES FUNCTIONS
FUNCTIONS
Perform
Retailers
Retailers Transactional
Transactional
Wholesalers
Wholesalers Logistical
Logistical
Agents
Agents and
and Brokers
Brokers Facilitating
Facilitating
CHANNEL STRUCTURES

Describe the channel

structures for consumer
and business products
and discuss alternative
channel arrangements
CHANNELS FOR CONSUMER
PRODUCTS

Direct Channel A distribution channel in

which producers sell
directly to consumers.
 Channels for Consumer Products
Direct Retailer Wholesaler Agent/Broker
Channel Channel Channel Channel
Producer Producer Producer Producer

Agents or
Brokers

Wholesalers Wholesalers

Retailers Retailers Retailers

Consumers Consumers Consumers Consumers

 Channels for Business Products
Direct Direct Industrial Agent/Broke Agent/Broker
Channe Channe Distributo r Industrial
l l r Channel Channel
Producer Producer Producer Producer Producer

Agents or Agents or
Brokers Brokers

Industrial Industrial
Distributor Distributor

Industrial Govt. Industrial Industrial Industrial

User Buyer User User User
BUSINESS-TO-BUSINESS
EXCHANGES ON THE INTERNET
ALTERNATIVE CHANNEL
ARRANGEMENTS

Multiple channels

Nontraditional channels

Strategic channel alliances

REVIEW LEARNING OUTCOME
CHANNEL STRUCTURES

CONSUMER
CONSUMER BUSINESS
BUSINESS ALTERNATIVE
ALTERNATIVE
CHANNELS
CHANNELS CHANNELS
CHANNELS CHANNELS
CHANNELS

Direct
Direct Direct
Direct Multiple
Multiple
Retail
Retail Industrial
Industrial Nontraditional
Nontraditional
Wholesaler
Wholesaler Agent/broker
Agent/broker Strategic
Strategic
Agent/broker Agent/broker alliances
alliances
Agent/broker Agent/broker
industrial
industrial
SUPPLY CHAIN MANAGEMENT

Define supply chain

management
and discuss its benefits
SUPPLY CHAIN MANAGEMENT

A management system that

coordinates and integrates
Supply Chain
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.
 ROLE OF SUPPLY CHAIN
MANAGEMENT

Communicator
Communicator of
of customer
customer demand
demand
from
from point
point of
of sale
sale
to supplier
to supplier

Physical
Physical flow
flow process
process that
that engineers
engineers the
the
movement
movement of
of goods
goods
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
The Supply Chain Process
 BENEFITS OF SUPPLY CHAIN
MANAGEMENT

Means of differentiation

Reduced costs

Greater supply chain flexibility

Improved customer service

Higher revenues
REVIEW LEARNING OUTCOME
SUPPLY CHAIN MANAGEMENT
MAKING CHANNEL STRATEGY
DECISIONS

Discuss the issues that

influence channel strategy
 CHANNEL STRATEGY DECISIONS

Factors
Factors Level
Level of
of
Affecting
Affecting Distribution
Distribution
Channel
Channel Intensity
Intensity
Choice
Choice

Market
Market Factors
Factors Intensive
Intensive Distribution
Distribution
Product
Product Factors
Factors Selective
Selective Distribution
Distribution
Producer
Producer Factors
Factors Exclusive
Exclusive Distribution
Distribution
 MARKET FACTORS

Customer
Customer profiles
profiles

Consumer
Consumer or
or Industrial
Industrial
Customer
Customer

Size
Size of
of market
market
Market
Market
Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices Geographic location
 PRODUCT FACTORS

Product
Product Complexity
Complexity

Product
Product Price
Price

Product
Product Standardization
Standardization

Product
Product Product
Product Life
Life Cycle
Cycle
Factors
Factors
That
That Affect
Affect
Channel
Channel Product
Product Delicacy
Delicacy
Choices
Choices
 PRODUCER FACTORS

Producer
Producer Resources
Resources

Number
Number of
of Product
Product Lines
Lines

Producer
Producer
Factors
Factors
That
That Affect
Affect
Channel
Channel Desire
Desire for
for Channel
Channel Control
Control
Choices
Choices
LEVELS OF DISTRIBUTION
INTENSITY

A form of distribution aimed at

Intensive having a product available
in every outlet

A form of distribution achieved

Selective by screening dealers to eliminate
all but a few in any single area

A form of distribution that

established one or a few
Exclusive
dealers within a given area
 LEVELS OF DISTRIBUTION
INTENSITY
Intensity Number of
Objective
Level Intermediaries

Achieve mass market

Intensive selling. Many
Convenience goods.

Work with selected

intermediaries.
Selective Shopping and some Several
specialty goods.

Work with single

intermediary. Specialty
Exclusive goods and industrial One
equipment.
REVIEW LEARNING OUTCOME
ISSUES INFLUENCING CHANNEL STRATEGY
MANAGING CHANNEL
RELATIONSHIPS

Discuss the issues that

influence
channel strategy
SOCIAL DIMENSIONS OF CHANNELS
CHANNEL POWER, CONTROL, AND
LEADERSHIP

A channel member’s capacity to

Channel
control or influence the behavior
Power
of other channel members

A situation that occurs when

Channel one marketing channel member
Control intentionally affects another
member’s behavior

A member of a marketing
Channel channel that exercises
Leader authority/power over the
activities of other members
CHANNEL CONFLICT AND
PARTNERING

A clash of goals and methods

Channel
Conflict between distribution channel
members

The joint effort of all channel

Channel members to create a supply chain
Partnering that serves customers and
creates a competitive advantage
 CHANNEL CONFLICT

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

Transaction-Based Partnership-Based

Short-term Long-term
Supplier /
Adversarial Cooperative
Manufacturer
Relationships Independent Dependent
Price important Value-added services

Number of
Many Few
Suppliers

Information
Minimal High
Sharing

Investment
Minimal High
Required
REVIEW LEARNING OUTCOME
CHANNEL LEADERSHIP, CONFLICT, &
PARTNERING

Channel Power, Channel

Control, Leadership Partnering

Channel
Relationship
Synergy

Channel Conflict

Horizontal Vertical
MANAGING LOGISTICAL
COMPONENTS

Describe the logistical

components of the
supply chain
LOGISTICAL COMPONENTS OF THE
SUPPLY CHAIN
Sourcing
Sourcing &
& Procurement
Procurement

System
Information System
Production
Production Scheduling
Scheduling
Logistics Information

Order
Order Processing
Processing
Supply
Chain
Team Inventory
Inventory Control
Control
Logistics

Warehouse
Warehouse &
& Materials
Materials Handling
Handling

Transportation
Transportation
SOURCING AND
PROCUREMENT
The
The Role
Role of
of Purchasing:
Purchasing:

 Plan purchasing strategies

 Develop specifications

 Select suppliers

 Negotiate price and service levels

 Reduce costs
 PRODUCTION SCHEDULING

Traditional Focus Customer Focus

Push / Pull
Push Pull
Strategy

Start of Inventory- Customer-Order

Production Based Based

Manufacturing Mass Production Mass Customization

JUST-IN-TIME MANUFACTURING

A process that redefines and

JIT
simplifies manufacturing by
reducing inventory levels and
delivering raw materials just
when they are needed on the
production line.
 BENEFITS OF JIT

 Reduces raw material inventories

 Shortens lead times
 Creates better supplier relationships
 Reduces production and storeroom costs
 Reduces paperwork
 JIT REQUIREMENTS

Receive
Receive high-quality
high-quality parts
parts

Meet
Meet supplier
supplier delivery
delivery commitments
commitments

Have
Have aa crisis
crisis management
management plan
plan
 ORDER PROCESSING

Electronic
Data
Information technology
Interchange that replaces paper
documents that
accompany business
transactions with
electronic transmission of
the information.
ORDER PROCESSING

Inventory
Control
A method of developing
System and maintaining an
adequate assortment of
materials or products to
meet a manufacturer’s or a
customer’s demand.
ORDER PROCESSING

Materials An inventory control system

Requirement that manages the
replenishment of raw
Planning materials, supplies, and
(MRP) components from the supplier
to the manufacturer.

Distribution An inventory control system

Resource that manages the replenishment
Planning of goods from the manufacturer
(DRP) to the final consumer.
INVENTORY REPLENISHMENT
EXAMPLE

Sleep Right Mattress

Retail Store

Sleep Right
Distribution Center

ABC Mattress
Wholesaling Company

Great Mattress
Company

MRP
MATERIALS HANDLING FUNCTIONS

Receive goods into

warehouse

Identify, sort, and label

goods

Dispatch the goods to

temporary storage

Recall, select, or pick the

goods for shipment
TRANSPORTATION

Airways

Water

Pipelines

Motor Carriers

Railroads
TRANSPORTATION MODE CHOICE

 Cost
 Transit time
 Reliability
 Capability
 Accessibility
 Traceability
 CRITERIA FOR RANKING
MODES OF TRANSPORTATION

Highest Lowest

Relative Truck Rail Pipe Water

Air
Cost
Transit
Water Rail Pipe Truck Air
Time
Reliability Pipe Truck Rail Air Water

Capability Water Rail Truck Air Pipe

AccessibilityTruck Rail Air Water Pipe

Traceability Air Truck Rail Water Pipe

TRENDS IN SUPPLY CHAIN
MANAGEMENT

Discuss new technology

and emerging trends in
supply chain management
TRENDS IN SUPPLY CHAIN
MANAGEMENT

Advanced
Advanced computer
computer technology
technology

Outsourcing
Outsourcing of
of logistics
logistics functions
functions

Electronic
Electronic distribution
distribution
 ADVANCED COMPUTER
TECHNOLOGY

 Automatic identification systems

 Bar coding
 Radio frequency technology

 Communications technology

 Supply chain software systems

 OUTSOURCING LOGISTICS
FUNCTIONS

Outsourcing
Outsourcing Benefits
Benefits

 Reduce inventories

 Locate stock at fewer plants and

distribution centers

 Provide same or better levels of service

CHANNELS AND DISTRIBUTION
DECISIONS
FOR GLOBAL MARKETS

Discuss channels and

distribution decisions
in global markets
CHANNELS AND DISTRIBUTION
DECISIONS
FOR GLOBAL MARKETS
Channel
Channel structure
structure
and
and type
type differ
differ
Global
GlobalChannel
Channel
Development
Development
Gray
Gray marketing
marketing channels
channels

Awareness
Awareness of
of trade
trade legalities
legalities
Global
GlobalSupply
Supply
Chain
ChainManagement
Management
Transportation
Transportation Issues
Issues
 REVIEW LEARNING OUTCOME
Global Market Channel & Distribution Decisions

Distribute directly or through

foreign partners

Different channel structures than in

domestic markets

Illegitimate “gray”
marketing channels

Legal and infrastructure differences

CHANNELS AND DISTRIBUTION
DECISIONS
FOR SERVICES

Identify the special problems

and opportunities associated
with distribution
in service organizations
 CHANNELS AND DISTRIBUTION
DECISIONS
FOR SERVICES

Minimizing wait times

Managing service capacity

Improving service delivery

REVIEW LEARNING OUTCOME
DISTRIBUTION IN SERVICE
ORGANIZATIONS
THANK
YOU…