CHAPTER 15 Creating Value Through Supply Chain Management: Channels of Distribution, Logistics,

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CHAPTER 15Creating Value Through Supply Chain
Management Channels of Distribution,
Logistics, Wholesaling
M A R K E T I N G
Real People, Real Choices
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Chapter Objectives

• Understand the concept of the value chain
  elements in a supply chain
• Explain what a distribution channel is what
  functions distribution channels perform
• Describe the types of wholesaling intermediaries
  found in distribution channels

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Chapter Objectives

• Describe the types of distribution channels the
  steps in planning distribution channel strategies
• Explain how logistics is used in the supply chain

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Supply Chain Management

• The supply chain includes all firms that engage
  in activities that are necessary to convert raw
  materials into a good or service
• Supply chain management is the management of
  flows among the firms in a supply chain to
  maximize profitability

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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
• Manufacturer -gt Customer
• Indirect
• Intermediaries from wholesalers to retailers

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Functions of Distribution Channels

• Time, place, ownership utilities
• Logistics functions
• Transportation storage functions
• Efficiency creation
• Facilitating functions
• Repair maintenance functions
• Risk-taking
• Communication transaction functions

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Creating Efficiencies

• Breaking bulk channel members purchase large
  quantities from manufacturers sell smaller
  quantities to many different customers
• Creating assortments channel members provide a
  variety of products in one location

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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
• Work with lots of manufacturers
• Manufacturer owned
• Single manufacturer

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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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Manufacturer-Owned Intermediaries

• Sales branches
• Sales offices
• Manufacturers showrooms

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Types of Distribution Channels

• Consumer channels
• Direct
• Manufacturer-retailer-consumer
• Manufacturer-wholesaler-retailer-consumer
• Business-to-business channels
• Direct
• Manufacturer-industrial distributor-business
  customer

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Distribution Systems

• Conventional multi-level distribution channel
  in which members work independently of one
  another
• Vertical channel in which there is cooperation
  among channel members at two or more different
  levels of the channel
• Horizontal two or more firms at the same
  channel level agree to work together

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Vertical Marketing Systems

• Administered channel members remain independent
  but voluntarily work together
• Corporate single firm owns manufacturing,
  wholesaling, and retailing operations
• Contractual cooperation is enforced by
  contracts that spell out member rights and the
  terms of cooperation

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Contractual VMS

• Wholesaler-sponsored wholesalers get retailers
  to work together under their leadership in a
  voluntary chain
• Retailer-cooperative group of retailers with a
  wholesaling operation to help them compete more
  effectively with large chains
• Franchise organizations cooperation is
  explicitly defined and strictly enforced by
  franchiser

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Distribution Intensity
Decision Factors Company, Customers, Channels,
Constraints, and Competition
Intensive, Exclusive, or Selective Distribution
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Implementing the Value Chain

• Process of designing, managing, improving the
  movement of products through the supply chain
• purchasing
• manufacturing
• storage
• transport

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Logistics and Customer Satisfaction

• Traditionally, logistics was thought of as
  physical distribution
• order processing, warehousing, materials
  handling, transportation, inventory control
• objective to deliver product at lowest cost
• Now, customers goals become the logistics
  providers goals

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Logistics Functions

• Order processing
• Warehousing
• Materials handling
• Transportation
• Inventory Control

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Modes of Physical Transportation

• Rail
• Water
• Truck
• Air
• Pipeline

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Transportation Mode Considerations

• Dependability
• Cost
• Speed of Delivery
• Accessibility
• Capability
• Traceability