People, MARKETING
Real Real Choices
Fourth Edition
CHAPTER 15 Creating Value Through Supply Chain Management: Channels of Distribution, Logistics, and Wholesaling
Michael R. Solomon Greg W. Marshall Elnora W. Stuart
Chapter Objectives_1
Understand the concept of the value chain and the key elements in a supply chain. Explain what a distribution channel is and what functions distribution channels perform Describe the types of wholesaling intermediaries found in distribution channels
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Chapter Objectives_2
Describe the types of distribution channels and the steps in planning distribution channel strategies Explain how logistics is used in the supply chain
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Figure 15.1: Making and Delivering Value
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Figure 15.2: Generic Value Chain
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Supply Chain Management
Software programs help to manage the supply chain
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Supply Chain Management
The supply chain includes all the firms that engage in activities that are necessary to convert raw materials into a good or service and put it in the hands of the consumer or business customer Supply chain management is the management of flows among the firms in a supply chain to maximize total profitability
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Figure 15.3: Supply Chain
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What is a Distribution Channel?
Series of firms or individuals that facilitate the movement of a product from the producer to the final customer Direct Indirect
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Functions of Distribution Channels Time, place, and ownership utilities Logistics functions Transportation and storage functions Efficiency creation Facilitating functions Repair and maintenance functions Risk-taking Communications and transaction functions
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Supermarkets as Channel Members
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Creating Efficiencies
Breaking bulk - channel members purchase large quantities from manufacturers and sell smaller quantities to many different customers Creating assortments - channel members provide a variety of products in one location
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Figure 15.4: Reducing Transactions
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Channel Member Functions
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The Internet
Even small firms with limited resources can enjoy competitive advantages by making products available to customers around the globe at a very low cost Disintermediation - process by which traditional intermediaries are eliminated as companies question the value added by layers in the distribution channel
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Types of Wholesaling Intermediaries Wholesaling intermediaries are firms that handle the flow of products from the manufacturer to retailer or business user Independent Manufacturer owned
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Independent Intermediaries
Merchant wholesalers Full-service Limited-service Cash-and-carry wholesalers Truck jobbers Drop shippers Mail-order wholesalers Rack jobbers Merchandise Agents or Brokers Manufacturers' agents Selling agents Commission merchants Merchandise brokers
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Rack Jobbers
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Wholesalers
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Manufacturer-Owned Branches
Sales Intermediaries
Sales Offices Manufacturers' Showrooms
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Independent Intermediaries
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Figure 15.5: Types of Distribution Channels
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Types of Distribution Channels
Consumer channels Direct Manufacturer-retailer-consumer Manufacturer-wholesaler-retailerconsumer Business-to-business channels Direct Manufacturer-industrial distributorbusiness customer
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Consumer Channels
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B2B Channels
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The Internet as Distribution Channel
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Dual Distribution Systems
Multiple channel usage Example: pharmaceutical industry sells to hospitals, clinics, and organizational customers directly and to consumers indirectly through drug retailers
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Dual Distribution Systems
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Figure 15.6: Steps in Distribution Planning
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Cooperatives
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Marketing Systems
Conventional Vertical Horizontal
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Vertical System
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Vertical Marketing Systems
Administered Corporate Contractual
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Contractual VMS
Wholesaler-Sponsored Retailer-Cooperative Franchise Organizations
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Distribution Intensity
Decision Factors: Company, Customers, Channels, Constraints, and Competition
Intensive, Exclusive, or Selective Distribution
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Exclusive Distribution
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Selective Distribution
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Selective Distribution
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Intensive Distribution
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Managing the Channel
Selecting channel partners Managing the channel of distribution Channel leader is the dominant firm that controls the channel Channel leaders have some form of power relative to other members Economic Legitimate Reward
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Need for Inventory Control
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Logistics
Process of designing, managing, and improving the movement of products through the supply chain purchasing manufacturing...