Marketing Channels And: Supply Chain Management

Insert Chapter Picture Here
Marketing Channels and

Supply Chain Management
CHAPTER
12
Introduction to 9
Marketing
Designed by McDaniel, Lamb, Hair Prepared by
Eric Brengle Deborah Baker
B-books, Ltd. Texas Christian University
Chapter 12
Copyright 2008 by South-Western, a division of Thomson Learning. All rights reserved 1
Learning Outcomes
LOI Explain what a marketing channel is and why

intermediaries are needed
Define the types of channel intermediaries and

LO2 describe their functions and activities
Describe the channel structures for consumer

LO3 and business products and discuss alternative
channel arrangements
Chapter 12 2
Copyright 2008 by South-Western, a division of Thomson Learning. All rights reserved
Learning Outcomes
Define supply chain management and discuss

LO4 its benefits
Discuss the issues that influence channel

LO5 strategy
Explain channel leadership, conflict, and

LO6 partnering
Describe the logistical components of the

LO7 supply chain
Chapter 12 3
Learning Outcomes
Discuss new technology and emerging trends

LO8 in supply chain management
Discuss channels and distribution decisions

LO9 in global markets
Identify the special problems and

LOIO opportunities associated with distribution
in service organizations
Chapter 12 4
LOI Marketing Channels
Explain what a marketing

channel is and why
intermediaries are needed
Chapter 12
Marketing A set of interdependent

Channel organizations that ease the
transfer of ownership as
products move from
producer to business user
or consumer.
Chapter 12
The connected chain of all

Supply Chain the business entities, both
internal and external to the
company, that perform or
support the logistics
function.
Chapter 12
LOI Marketing Channel Functions
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
Chapter12
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
LOI Chapter 12
LOI Overcoming Discrepancies
The difference between the

Discrepancy
amount of product produced
of
and the amount an end user
Quantity
wants to buy.
The lack of all the items a

Discrepancy
customer needs to receive full
of
satisfaction from a product or
Assortment
products.
Chapter 12
LOI Overcoming Discrepancies
A situation that occurs when a

Temporal
product is produced but a
Discrepancy
customer is not ready to buy it.
The difference between the

Spatial location of a producer and the
Discrepancy location of widely
scattered markets.
Chapter 12
LOI Providing Contact Efficiency
Chapter 12
LOI REVIEW LEARNING OUTCOME
Marketing Channels
Marketing
Channel
Providing Specialization
and Division of Labor
Overcoming
Discrepancies
Providing Contact
Efficiency
Supply
Chain
13
Chapter 12
LO2 Channel Intermediaries
Define the types of

channel intermediaries
and describe their
functions and activities
Chapter 12
A channel intermediary that

Retailer
sells mainly to customers.
An institution that buys goods

Merchant from manufacturers, takes title
Wholesaler to goods, stores them,
and resells and ships them.
Wholesaling intermediaries who

Agents and
facilitate the sale of a product by
Brokers representing channel members.
Chapter 12
Retailers Take Title to Goods
Merchant
Wholesalers Take Title to Goods
Agents
and Do NOT Take Title to Goods
Brokers
Chapter12
Factors Suggesting Type of
Wholesaling Intermediary to Use
Product characteristics
Buyer considerations
Market characteristics
Chapter 12
LO2
Factors Suggesting Type of
Wholesaling Intermediary to Use
Factor Merchant Agents/Brokers
Wholesalers
Nature of product Standard Nonstandard,

custom
Technicality of product Complex Simple
Products gross margin High Low
Frequency of ordering Frequent Infrequent
Time between order and receipt Shorter lead time Longer lead time
of shipment
Number of customers Many Few
Concentration of customers Dispersed Concentrated
Chapter 12
LO2
Channel Functions
Performed by Intermediaries
Contacting/Promotion
Transactional
Negotiating
Functions
Risk Taking
Physically distributing
Logistical Storing
Functions
Sorting
Facilitating Researching
Functions Financing
Chapter 12
LO2
LO2 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.
Chapter 12
LO2 REVIEW LEARNING OUTCOME
Channel Intermediaries and Functions
CHANNEL CHANNEL
INTERMEDIARIES FUNCTIONS
Perform
Retailers Transactional
Wholesalers Logistical
Agents and Brokers Facilitating
21
Chapter 12
LO3 Channel Structures
Describe the channel

structures for consumer
and business products
and discuss alternative
channel arrangements
Chapter 12
LO3 Channels for Consumer Products
Direct Channel A distribution channel in

which producers sell
directly to consumers.
Chapter 12
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
LO3
Chapter 1 24
Channels for Business Products
Direct Direct Industrial Agent/Broker Agent/Broker
Channel Channel Distributor Channel Industrial
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
LO3
Chapter 1 25
Business-to-Business
LO3
Exchanges on the Internet
Agents link buyers and sellers
Companies drop the intermediary from

the supply chain
Private exchanges with select suppliers

automate the supply chain
http://www.sherwinwilliams.com
Chapter 12
Online
LO3
Alternative Channel Arrangements
Multiple channels
Nontraditional channels
Strategic channel alliances
Chapter12
LO3
28
Chapter12
Channel Structures
CONSUMER BUSINESS ALTERNATIVE

CHANNELS CHANNELS CHANNELS
Direct Direct Multiple

Retail Industrial Nontraditional
Wholesaler Agent/broker Strategic
Agent/broker Agent/broker alliances
industrial
29
Chapter 12
LO4 Supply Chain Management
Define supply chain

management
and discuss its benefits
Chapter 12
LO4 Supply Chain Management
A management system that

coordinates and integrates all
Supply Chain
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.
Chapter 12
Role of Supply Chain Management
Communicator of customer demand

from point of sale
to supplier
Physical flow process that engineers the

movement of goods
Chapter 12
LO4
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
Chapter 12
The Supply Chain Process
LO4
Chapter 1 34
Benefits of Supply Chain Management
Means of differentiation
Reduced costs
Greater supply chain flexibility
Improved customer service
Higher revenues
Chapter 12
LO4
Supply Chain Management
36
Chapter 12
LO5 Making Channel Strategy Decisions
Discuss the issues that

influence channel strategy
Chapter 12
LO5 Channel Strategy Decisions
Factors
Level of
Affecting
Distribution
Channel
Intensity
Choice
Market Factors Intensive Distribution

Product Factors Selective Distribution
Producer Factors Exclusive Distribution
Chapter12
LO5 Market Factors
Customer profiles
Consumer or Industrial
Customer
Market Size of market

Factors
That Affect
Channel
Choices Geographic location
Chapter 12
LO5 Product Factors
Product Complexity
Product Price
Product Standardization
Product Product Life Cycle

Factors
That Affect
Channel Product Delicacy
Choices
Chapter 12
LO5 Producer Factors
Producer Resources
Number of Product Lines

Producer
Factors
That Affect
Channel Desire for Channel Control
Choices
Chapter 12
LO5 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
Chapter 12
LO5 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.
Chapter12
Issues Influencing Channel Strategy
44
Chapter 12
LO6 Managing Channel Relationships
Discuss the issues that

influence
channel strategy
Chapter 12
Social Dimensions of Channels
Power
Control
Leadership
Conflict
Partnering
LO6 Chapter 12
LO6 Channel Power, Control, and Leadership
A channel members 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
members behavior
A member of a marketing
Channel channel that exercises
Leader authority/power over the
activities of other members
Chapter 12
LO6 Channel Conflict and Partnering
A clash of goals and methods

Channel
between distribution channel
Conflict
members
The joint effort of all channel

Channel members to create a supply chain
Partnering that serves customers and
creates a competitive advantage
Chapter 12
LO6 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
Chapter 12
LO6 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
Chapter12
Channel Leadership, Conflict, & Partnering
Channel Power, Channel

Control, Leadership Partnering
Channel
Relationship
Synergy
Channel Conflict
Horizontal Vertical
51
Chapter 12
LO7 Managing Logistical Components
Describe the logistical

components of the
supply chain
Chapter 12
LO7 Logistical Components of the Supply Chain
Sourcing & Procurement
Logistics Information System

Production Scheduling
Order Processing
Supply
Chain
Team Inventory Control
Warehouse & Materials Handling
Transportation
Chapter12
LO7 Sourcing and Procurement
The Role of Purchasing:
Plan purchasing strategies
Develop specifications
Select suppliers
Negotiate price and service levels
Reduce costs
Chapter 12
Production Scheduling
Traditional Focus Customer Focus
Push / Pull
Push Pull
Strategy
Start of Inventory- Customer-Order

Production Based Based
Manufacturing Mass Production Mass Customization
Chapter 12
LO7
LO7 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.
Chapter 12
LO7 Benefits of JIT
Reduces raw material inventories

Shortens lead times
Creates better supplier relationships
Reduces production and storeroom costs
Reduces paperwork
Chapter 12
JIT Requirements
Receive high-quality parts
Meet supplier delivery commitments
Have a crisis management plan
Chapter 12
LO7
LO7 Order Processing
Electronic
Information technology that
Data
replaces paper documents
Interchange
that accompany business
transactions with electronic
transmission of the
information.
http://www.walmartstores.com
Chapter 12
Online
Inventory
A method of developing and
Control
maintaining an adequate
System
assortment of materials or
products to meet a
manufacturers or a
customers demand.
Chapter 12
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.
Chapter 12
LO7 Inventory Replenishment Example
Sleep Right Mattress
Retail Store
Sleep Right
Distribution Center
ABC Mattress
Wholesaling Company
Great Mattress
Company
MRP
Chapter12
LO7 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
Chapter 12
LO7 Transportation
Airways
Water
Pipelines
Motor Carriers
Railroads
Chapter12
Transportation Mode Choice
Cost
Transit time
Reliability
Capability
Accessibility
Traceability
LO7 Chapter 12
Criteria for Ranking
LO7
Modes of Transportation
Highest Lowest
Relative Air Truck Rail Pipe Water

Cost
Transit Water Rail Pipe Truck Air
Time
Reliability Pipe Truck Rail Air Water
Capability Water Rail Truck Air Pipe
Accessibility Truck Rail Air Water Pipe
Traceability Air Truck Rail Water Pipe
Chapter 12
LO8 Trends in Supply Chain Management
Discuss new technology

and emerging trends in
supply chain management
Chapter 12
LO8 Trends in Supply Chain Management
Advanced computer technology
Outsourcing of logistics functions
Electronic distribution
Chapter 12
LO8 Advanced Computer Technology
Automatic identification systems

Bar coding
Radio frequency technology
Communications technology
Supply chain software systems
Chapter 12
Outsourcing Logistics Functions
Outsourcing Benefits
Reduce inventories
Locate stock at fewer plants and

distribution centers
Provide same or better levels of service
Chapter 12
LO8
Channels and Distribution Decisions
LO9 for Global Markets
Discuss channels and

distribution decisions
in global markets
Chapter 12
LO9 Channels and Distribution Decisions
for Global Markets
Channel structure
and type differ
Global Channel
Development
Gray marketing channels
Awareness of trade legalities

Global Supply
Chain Management
Transportation Issues
Chapter 12 72
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
73
Chapter 12
LOIO for Services
Identify the special problems

and opportunities associated
with distribution
in service organizations
Chapter 12
LOIO
for Services
Minimizing wait times
Managing service capacity
Improving service delivery
Chapter12
LOIO REVIEW LEARNING OUTCOME
Distribution in Service Organizations
76
Chapter 12

Marketing Channels And: Supply Chain Management

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Insert Chapter Picture Here

Marketing Channels and

LOI Explain what a marketing channel is and why

Define the types of channel intermediaries and

Describe the channel structures for consumer

Define supply chain management and discuss

Discuss the issues that influence channel

Explain channel leadership, conflict, and

Describe the logistical components of the

Discuss new technology and emerging trends

Discuss channels and distribution decisions

Identify the special problems and

Explain what a marketing

Marketing A set of interdependent

The connected chain of all

Specialization and division of labor

Providing contact efficiency

Creates greater efficiency

The difference between the

The lack of all the items a

A situation that occurs when a

The difference between the

Define the types of

A channel intermediary that

An institution that buys goods

Wholesaling intermediaries who

Retailers Take Title to Goods

Nature of product Standard Nonstandard,

Technicality of product Complex Simple

Products gross margin High Low

Frequency of ordering Frequent Infrequent

Number of customers Many Few

Concentration of customers Dispersed Concentrated

The process of strategically

Describe the channel

Direct Channel A distribution channel in

Retailers Retailers Retailers

Consumers Consumers Consumers Consumers

Industrial Govt. Industrial Industrial Industrial

Agents link buyers and sellers

Companies drop the intermediary from

Private exchanges with select suppliers

Strategic channel alliances

CONSUMER BUSINESS ALTERNATIVE

Direct Direct Multiple

Define supply chain

A management system that

Communicator of customer demand

Physical flow process that engineers the

Channel strategy decisions

Greater supply chain flexibility

Improved customer service

Discuss the issues that

Market Factors Intensive Distribution

Market Size of market

Product Product Life Cycle

Number of Product Lines

A form of distribution aimed at

A form of distribution achieved

A form of distribution that

Achieve mass market

Work with selected

Work with single