Merchandise Distribution Contract by apd17656

VIEWS: 18 PAGES: 31

More Info
									Distributing Products in a Timely
       and Efficient Manner


          Chapter 15
Chapter 15 Learning Goals
1. What are physical distribution (logistics)
   and logistics management?
2. What are distribution channels and their
   functions?
3. How can channels be organized?
4. When would a marketer use exclusive,
   selective, or intensive distribution?
5. What is wholesaling, and what are the
   types of wholesalers?
Chapter 15 Learning Goals (cont’d.)
6. What are the different kinds of retail
   operations?
7. What are the components of a
   successful retailing strategy?
8. What are the functions of physical
   distribution?
9. What are the trends in distribution?
Learning Goal 1
• What are physical distribution (logistics) and
  logistics management?
   – Physical distribution
      • Movement of products from the producer to industrial users and
        consumers
   – Logistics management is managing the
      • Movement of raw materials
      • Movement of materials and products within plants and warehouses
      • Movement of finished goods to intermediaries and buyers
   – Supply chain management
      • Helps increase the efficiency of logistics service by minimizing
        inventory and moving goods efficiently
Physical Distribution (logistics):
 The movement of products from
 the producer to industrial users
 and consumers
Supply Chain Management:
 Management of activities in a
 supply chain to minimize
 inventory and move goods
 efficiently
Logistics Management:
 Management of the physical
 distribution process:
 – movement of raw materials
 – movement of materials and products
   within plants and warehouses
 – movement of finished goods to
   intermediaries and buyers
    Supply Chain for Compact Discs

 Suppliers of
raw materials



                Wholesaler or    Retailers,
Compact disc
                 Distribution   Wholesalers,   Customers
  factory
                   Center       Distribution
Learning Goal 2
• What are distribution channels and their
  functions?
  – Distribution channels are the series of
    marketing entities through which goods and
    services pass on their way from producers to
    end users
  – Channels
     • Reduce the number of transactions
     • Ease the flow of goods
     • Increase channel efficiency
Distribution Channels:
 A series of marketing entities
 through which goods and
 services pass on their way from
 producers to end users
   Some Different Distribution Channels

• Agents & brokers
  – electronic marketplaces on the Internet are
    doing what brokers have traditionally done
     • requests for proposals, verifying credit, lining
       up financing, arranging inspections,
       scheduling deliveries, collecting payment
      (Source: Entrepreneur, Jan. 2000, p. 22)

• Industrial distributors
• Wholesalers
• Retailers
  Functions of Distribution Channels

• Reduce number of transactions
• Ease the flow of goods
  – account numbers help keep track of goods
    • individual digits can indicate type of account,
      locations & addresses, & delivery routes
    • 15-digit numbers provide a quadrillion unique
      combinations (Source: Fortune, Sept. 28, 1998, p. 66)
• Perform needed functions
  Learning Goal 3
• How can channels be organized?
  – Vertical marketing systems
     • Corporate system
         – One firm owns the entire channel
     • Administrative system
         – A strong organization takes over as leader
         – Sets channel policies
     • Contractual system
         – Independent firms coordinate their distribution activities by written contract
  – Forward integration
     • When a manufacturer acquires a marketing intermediary closer to the
       customer
  – Backward integration
     • When wholesaler or retailer gains control over the production process
Vertical Marketing System:
 An organized, formal
 distribution channel in which
 firms are aligned in a hierarchy
 from manufacturer to
 wholesaler to retailer
         Types of Vertical
        Marketing Systems

• Corporate Distribution Systems
  – forward integration, backward
    integration
• Administrative Distribution Systems
• Contractual Distribution Systems
  Learning Goal 4
• When would a marketer use exclusive, selective,
  or intensive distribution?
  – Exclusive distribution (one or two dealers in an area)
     • Used when products are in high demand in the target market
  – Selective distribution
     • Limited number of dealers per area, but more than one or two
     • Used for consumer shopping goods, some specialty goods, and
       some industrial accessories
  – Intensive distribution
     • Manufacturer sells its products in virtually every store willing to
       carry them
     • Used mainly for consumer convenience goods
    Levels of Market Coverage

• Exclusive distribution
  – 1-2 dealers market all products
• Selective distribution
  – a few dealers market all products
• Intensive distribution
  – products sold wherever possible
  Learning Goal 5
• What is wholesaling, and what are the types of
  wholesalers?
  – Wholesalers sell finished products to retailers or other
    institutions such as manufacturers, schools, and hospitals
  – Provide a wide variety of services such as storing
    merchandise, financing inventory, breaking bulk, providing
    rapid delivery, and supplying market information
  – Types of wholesalers
     • Merchant wholesalers
         – Buy from manufacturers and sell to other businesses
     • Agents and Brokers
         – Independents who provide buying and selling services
         – Receive commissions according to their sales
Wholesalers:
 Channel members that buy
 finished products from
 manufacturers and sell the
 products to consumers
 –merchant wholesalers
 –agents and brokers
                   Wholesaling
                                     Wholesaling
Manufacturer
                                    Intermediaries



                              Merchant          Agents &
                             Wholesalers        Brokers


                    Full-service   Limited service


  Retailers or
industrial users

  Customers
  Learning Goal 6
• What are the different kinds of retail operations?
   – In-store operations
      •   Department stores
      •   Mass-merchandising shopping chains
      •   Specialty stores
      •   Discount stores
      •   Off-price retailers
      •   Factory outlets
      •   Catalog showrooms
   – Nonstore retailing
      •   Vending machines
      •   Direct sales
      •   Direct-response marketing
      •   Internet retailing (e-commerce)
           Types of Retailers
In-store:             Non-store:
• department store    • vending machine
• specialty store     • direct selling
• variety store       • direct-response
• convenience store     marketing
• supermarket         • home shopping
• discount store        network
• factory outlet      • e-commerce
• hypermart
  Learning Goal 7
• What are the components of a successful retailing
  strategy?
  –   Defining a target market
  –   Developing a product offering
  –   Creating an image and a promotional strategy
  –   Choosing a location
  –   Setting prices
  –   Important factors in creating a store’s atmosphere:
       •   Employee types and density
       •   Merchandise type and density
       •   Fixture type and density
       •   Sound and odors
Components of Retailing Strategy

• Define target market
• Develop product offering
  – efficient consumer response (ECR)
• Create image & promotional strategy
• Choose location
• Set prices
             Gillette’s Retailing Strategy

     Gillette’s retail strategy involves:
         – targeting a new market overseas
         – open the new market with shaving
           products
         – distributing several other Gilette
           products through the same pipeline
         • the strategy steadily reduces
           distribution costs in the new market

Source: Neff & Citrin, Lessons from the Top, 1999, p. 348.
  Learning Goal 8
• What are the functions of physical
  distribution?
  – Choosing a warehouse location and type
  – Setting up a materials-handling system
  – Choosing modes of transportation
     • Criteria for selecting a mode of transportation include:
         –   Cost
         –   Transit time
         –   Reliability
         –   Capability
         –   Accessibility
         –   Traceability
Physical Distribution to Increase
   Efficiency & Satisfaction
• Choose warehouse location & type
• Set up materials-handling system
• Make transport decisions
  – cost           –capability
  – transit time   –accessibility
  – reliability    –traceability
          Efficiency Afforded by FedEx

    • FedEx can trace packages so well
      that it has replaced the need for
      some companies to store goods in
      warehouses at all
    • This enables direct distribution to
      customers, a strategy that was
      pioneered by Dell Computers

Source: Neff & Citrin, Lessons from the Top, 1999, p. 278.
 Comparing Modes of Transportation

                Highest                           Lowest
Relative cost   air       truck   rail    pipe    water
Transit time    water     rail    pipe    truck   air
Reliability     pipe      truck   rail    air     water
Capability      water     rail    truck   air     pipe
Accessibility   truck     rail    air     water   pipe
Traceability    air       truck   rail    water   pipe
  Learning Goal 9
• What are the trends in distribution?
  – Stocklifting or buyback
     • Company buys all of its competitor’s stock from a retailer
     • Replaces inventory with its own merchandise
  – Physical distribution for services
     • Becoming increasingly important
     • Service providers must build good relationships with customers
         – Minimizing wait times
         – Managing service capacity
         – Improving service delivery through new distribution channels
  – E-Commerce
     • Web shopping is safe, quick, and convenient
     • Enables consumers to compare product features and prices easily
     • Consumers can use the Internet to shop all over the world
         Trends in Distribution
 Increase in stocklifting practice
   purchasing all of a competitor’s products &
    replacing it with their own
   CAM International sells stocklifted
    automotive parts to wholesalers at 30%-
    75% discount (Source: CAM International,
    www.caminternational.com)

 Growth in service distribution
   minimize waiting, increase capacity, new
    distribution channels

								
To top