Distribution Channels and Supply Chain Management - Download as PowerPoint by hsq14163

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									    Distribution Channels
and Supply Chain Management

     MGT252, lecture 11b
                  Learning Goals
1. Explain why companies use distribution channels and discuss
   the functions that these channels perform
2. Discuss how channel members interact and how they
   organize to perform the work of the channel
3. Identify the major channel alternatives open to a company
4. Explain how companies select, motivate, and evaluate
   channel members
5. Discuss the nature and importance of physical distribution




12-2
                  Learning Goals
1. Explain why companies use distribution channels and discuss
   the functions that these channels perform
2. Discuss how channel members interact and how they
   organize to perform the work of the channel
3. Identify the major channel alternatives open to a company
4. Explain how companies select, motivate, and evaluate
   channel members
5. Discuss the nature and importance of physical distribution




12-3
        Supply Chains and the Value Delivery
                     Network
• A supply chain consists of upstream and
  downstream partners
• Marketers have traditionally focused on the
  downstream side
       – Supply chain – make-and-sell view
       – Demand chain – sense-and-respond-view
• Value Delivery Network
       – The network made up of the company, suppliers,
         distributors, and ultimately customers who “partner” with
         each other to improve the performance of the entire
         system.

12-4
       Nature & Importance of Distribution
                   Channels
• Marketing channel
       – Set of interdependent organizations involved in
         the process of making a product or service
         available for use or consumption by the consumer
         or business user.




12-5
               Nature & Importance of
                Marketing Channels
• Channel choices affect other decisions in the
  marketing mix
       – Pricing, marketing communications
• A strong distribution system can be a
  competitive advantage
• Channel decisions involve long-term
  commitments to other firms


12-6
                 Nature & Importance of
                  Marketing Channels
• How Channel Members Add Value
       – Fewer contacts.
       – Match product assortment demand with supply.
       – Bridge, time, place, and possession gaps that separate
         products from users.




12-7
       Nature & Importance of Marketing
                  Channels
• Number of Channel Levels
       – The number of intermediary levels indicates the
         length of a marketing channel.
          • Direct Channels
          • Indirect Channels
       – Producers lose more control and face greater
         channel complexity as additional channel levels
         are added.


12-8
                  Learning Goals
1. Explain why companies use distribution channels and discuss
   the functions that these channels perform
2. Discuss how channel members interact and how they
   organize to perform the work of the channel
3. Identify the major channel alternatives open to a company
4. Explain how companies select, motivate, and evaluate
   channel members
5. Discuss the nature and importance of physical distribution




12-9
   Channel Behaviour and Organization
• Channel Conflict
        – Occurs when channel members disagree on roles,
          activities, or rewards.
        – Types of Conflict:
          • Horizontal conflict: occurs among firms at the same
            channel level
          • Vertical conflict: occurs among firms at different
            channel levels



12-10
   Channel Behaviour and Organization
• Conventional Distribution Channels
        – Consist of one or more independent channel members
        – Each seeking to maximize its own profits
        – Often result in poor performance
• Vertical Marketing Systems
        – Producers, wholesalers, and retailers act as a unified
          system
        – One channel member owns, has contracts with, or has so
          much power that they all cooperate
        – Benefits should include greater control, less conflict, and
          economies of scale due to the size of the system


12-11
   Channel Behaviour and Organization
• Vertical Market System     • Integrates successive stages
  (VMS)                        of production and
        – Corporate VMS        distribution under single
        – Contractual VMS      ownership – channel
        – Administered VMS     ownership is established
                               through common
                               ownership
                             • Coordination and conflict
                               through regular
                               organizational channels



12-12
   Channel Behaviour and Organization
• Vertical Market System     • Individual firms who join
  (VMS)                        through contracts
        – Corporate VMS      • Franchise organizations
        – Contractual VMS       – Manufacturer-sponsored
        – Administered VMS        retailer franchise system
                                – Manufacturer-sponsored
                                  wholesaler franchise system
                                – Service-firm-sponsored
                                  retailer franchise system




12-13
   Channel Behaviour and Organization
• Vertical Market System     • Leadership through the
  (VMS)                        size and power of
        – Corporate VMS        dominant channel
        – Contractual VMS      members
        – Administered VMS   • Leadership could be
                               manufacturer or retailer




12-14
   Channel Behaviour and Organization
• Horizontal Marketing Systems
        – Companies at the same level work together with channel
          members
• Multichannel Distribution Systems
        – Also called hybrid marketing channels
        – Occurs when a firm uses two or more marketing channels
• Changing Channel Organization
        – Disintermediation



12-15
                  Learning Goals
1. Explain why companies use distribution channels and discuss
   the functions that these channels perform
2. Discuss how channel members interact and how they
   organize to perform the work of the channel
3. Identify the major channel alternatives open to a company
4. Explain how companies select, motivate, and evaluate
   channel members
5. Discuss the nature and importance of physical distribution




12-16
               Channel Design Decisions
• Step 1: Analyzing Consumer Needs
        – Cost and feasibility of meeting needs must be considered
• Step 2: Setting Channel Objectives
        – Set channel objectives in terms of targeted level of
          customer service
        – Many factors influence channel objectives
           •   Nature of the company (size/financial position) and its products
           •   Marketing intermediaries
           •   Competition
           •   Marketing environment




12-17
               Channel Design Decisions
• Step 3: Identifying Major Alternatives
        – Types of intermediaries
           • Company sales force, manufacturer’s agency, industrial
             distributors
        – Number of marketing intermediaries
           • Intensive, selective, and exclusive distribution
        – Responsibilities of channel members



12-18
              Channel Design Decisions
• Step 4: Evaluating Major Alternatives
        – Economic criteria
        – Control issues
        – Adaptive criteria




12-19
                  Learning Goals
1. Explain why companies use distribution channels and discuss
   the functions that these channels perform
2. Discuss how channel members interact and how they
   organize to perform the work of the channel
3. Identify the major channel alternatives open to a company
4. Explain how companies select, motivate, and evaluate
   channel members
5. Discuss the nature and importance of physical distribution




12-20
        Channel Management Decisions
• Selecting channel    • Which characteristics
  members                are important?
• Managing and            – Years in business
  motivating channel      – Lines carried
  members                 – Growth and profit record
• Evaluating channel      – Cooperativeness and
                            reputation
  members
                          – Type of customer
                          – Location


12-21
        Channel Management Decisions
• Selecting channel    • Partner relationship
  members                management (PRM) for
• Managing and           long-term partnerships
  motivating channel   • Software available to
  members                coordinate members
• Evaluating channel
  members




12-22
        Channel Management Decisions
• Selecting channel    • Check channel
  members                performance of:
• Managing and           –   Sales
  motivating channel     –   Inventory
  members                –   Customer delivery
• Evaluating channel     –   Promotion and training
  members                –   Customer service




12-23
                 Public Policy and
               Distribution Decisions
• Exclusive dealing. Sellers cannot demand exclusivity for
  their product from resellers if it can be proven that it will
  lessen competition or create a monopoly
• Exclusive territories. Sellers may grant exclusive
  territories, but may have trouble demanding that
  resellers deal only within that exclusive territory
• Tying agreements. demanding that resellers buy and/or
  stock all products within a product line, as a condition of
  doing business. Not illegal but a source of much channel
  conflict

12-24
                Public Policy and
              Distribution Decisions
• Dealers’ rights. Producers are free to select dealers,
  but are limited in their ability to terminate dealers;
  they must show cause, and cannot drop dealers who
  refuse to participate in doubtful legal arrangements
• Sources of supply. Ethical concerns over supply
  sources from countries with human rights violations
  or use the proceeds to fund armed conflict




12-25
                  Learning Goals
1. Explain why companies use distribution channels and discuss
   the functions that these channels perform
2. Discuss how channel members interact and how they
   organize to perform the work of the channel
3. Identify the major channel alternatives open to a company
4. Explain how companies select, motivate, and evaluate
   channel members




12-26

								
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