2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Chapter 13:Marketing Channels and Supply-Chain Management

Pride/FerrellFoundations of MarketingFourth Edition

Prepared by Milton PressleyUniversity of New Orleans

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Objectives1. Describe the foundations of supply-chain

management.2. Explore the role and significance of marketing

channels and supply chains.3. Identify types of marketing channels.4. Understand factors that influence marketing

channel selection.5. Identify the intensity of market coverage.6. Examine strategic issues in marketing channels,

including leadership, cooperation, and conflict.7. Examine physical distribution as a part of supply-

chain management.8. Explore legal issues in channel management.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Distribution The decisions and activities that make

products available to customers when and where they want to purchase them

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Foundations of the Supply Chain Supply Chain - all activities associated with the flow and

transformation of product from raw materials through to the end customer

OperationsManagement

LogisticsManagement

SupplyManagement

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Supply Chain Components Operations Management

Total set of managerial activities used to transform resource inputs into products

Logistics Management Planning, implementing, and controlling the

flow and storage of products and information from the point of origin to consumption

Supply Management The processes that enable the progress of

value from raw material to final customer and back

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Foundations of the Supply Chain

Supply-chain management - a set of approaches used to integrate the

functions of operations management, logistics management, supply management, and marketing channel management so that products are produced and distributed in the right quantities, to the right locations, and at the right time

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Key Tasks in Supply-Chain

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Technology Facilitates Supply-Chain Management

Technology Facilitates Supply-Chain Management

Technology-based tools help supply-chain managers improve efficiency and effectiveness.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Role of Marketing Channels in Supply Chains

Marketing channel (channel of distribution or distribution channel)

- A group of individuals and organizations that direct the flow of products from producers to customers within the supply chain

Marketing intermediaries - Middlemen that link producers to other

intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Marketing Channel Activities

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Marketing Channels Create Utility

Time utility - Having products available when the customer wants them Place utility - Making products available in locations where customers

wish to purchase them Possession utility - Giving the customer access to the product to use or to store

for future use Form utility - Assembling, preparing, or otherwise refining the product to

suit individual customer needs

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Visit the Apple Web Site by clicking on the @ symbol below. After reviewing the Site, discuss what type of utility this marketing channel is creating.

Discussion Question

@

http://www.store.apple.com/http://www.store.apple.com/

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Efficiency in Exchanges Provided by an Intermediary

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Typical Marketing Channels for Consumer Products

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Typical Marketing Channels for

Industrial distributor An independent business organization that takes title to industrial products and carries inventories

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Visit the Dell Web Site by clicking on the @ symbol below. After reviewing the Site, discuss which of the channels shown in Figure 13.3 best describes how Dell distributes its business products.

Discussion Question

@

http://www.dell.com/http://www.dell.com/

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Multiple Marketing Channels and Channel Alliances

Dual distribution - The use of two or more marketing

channels to distribute the same products to the same target market

Strategic channel alliance - An agreement whereby the products

of one organization are distributed through the marketing channels of another

Using Multiple Marketing ChannelsCoca-Cola products are available in

grocery stores and restaurants around the world.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Factors Affecting Channel Selection

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Supply Chain Concerns

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

If you were selecting the marketing channel for a new type of nail gun for building contractors, what would be the most important things to consider?

Would this change if the nail gun was also going to be sold to consumers?

Discussion Question

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Figure 13.5 Intensity of Market Coverage

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Intensity of Market Coverage

Intensive Distribution - Using all available outlets to distribute product

Selective Distribution - Using only some available outlets to distribute a

product

Exclusive Distribution - Using a single outlet in a fairly large geographic

area to distribute a product

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Intensive Distribution

Intensive DistributionMost brands of bottled

water, like Aquafina, are distributed through

intensive distribution.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Strategic Issues in Marketing Channels

Channel Integration

Channel Leadership,

Coordination, and Conflict

Competitive Priorities

Strategic Issues

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Channel Leadership Channel Captain - The dominant leader of a

marketing channel or a supply chain

Channel Power - The ability of one channel

member to influence another members goal achievement

Channel LeadershipThe producer of Candies products

provides channel leadership.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Channel Integration Vertical Channel

Integration - Combining two or more

stages of the marketing channel under one management

Vertical marketing systems (VMSs)

- A marketing channel managed by a single channel member to achieve efficient, low-cost distribution aimed at satisfying target customer

Horizontal Channel Integration

- Combining organizations at the same level of operation under one management

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Physical Distributionin Supply-Chain Management

Physical distribution (logistics) Activities used to move products from producers to

consumers and other end users Outsourcing

The contracting of physical distribution tasks to third parties who do not have managerial authority within the marketing channel

Cycle time The time needed to complete a process

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Source: From Davis Database, 2005, reprinted by permission of Establish Inc./Herbert W. Davis and Company

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Order Processing The receipt and transmission of sales

order information - Order entry - Order handling - Order delivery

Electronic data interchange (EDI) - A computerized means of integrating order processing with

production, inventory, accounting, and transportation

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Inventory Management Developing and

maintaining adequate assortments of products to meet customers needs

- Reorder point - Order lead time - Usage rate - Safety stock

Inventory ManagementThis handheld inventory management

device allows employees to have an instant overview of every item and its

price in the warehouse at any given time.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Just-In-Time An inventory-management approach in

which supplies arrive just when needed for production or resale

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Materials Handling

Physical handling of tangible goods, supplies, and resources Unit loading

One or more boxes are placed on a pallet or skid; these units then can be loaded efficiently by mechanical means such as forklifts, trucks, or conveyer systems

Containerization The consolidation of many items into a single, large

container that is sealed at its point of origin and opened at its destination

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Warehousing The design and operation of facilities for

storing and moving Enables firms to compensate for dissimilar

production and consumption rates Helps stabilize prices and the availability of

seasonal items

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Types of Warehousing Private warehouses - Company-operated facilities for storing and shipping

products Public warehouses - Storage space and related physical distribution

facilities that can be leased by companies Distribution centers - Large, centralized warehouses that focus on moving

rather than storing

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Transportation

The movement of products from where they are made to intermediaries and end users

Transport Modes Railroads: Heavy, bulky full carloads of freight Trucks: Flexible schedules, speed, and access Waterways: Heavy, low-value, nonperishable goods Airplanes: Perishable goods, high-value, low-bulk Pipelines: Petroleum products, chemicals

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Characteristics and Ratings of

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Waterway Transportation

Transportation

Waterway transportation is used to move heavy, nonperishable products, such as large equipment, grain, motor vehicles, and chemicals.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Coordinating Transportation Intermodal transportation

Two or more transportation modes used in combination Piggyback Fishyback Birdyback

Freight forwarders Organizations that consolidate shipments from several

firms into efficient lot sizes Megacarriers

Freight transportation firms that provide several modes of shipment

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Legal Issues in Channel Management

Dual distribution Restricted sales territories Tying agreements

An agreement in which a supplier furnishes a product to a channel member with the stipulation that the channel member must purchase other products as well

Exclusive dealing A situation in which a manufacturer forbids an intermediary to

carry products of competing manufacturers

Refusal to deal

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

After Reviewing This Chapter You Should:

Know how to describe the foundations of supply-chain management.

Be able to explore the role and significance of marketing channels and supply chains.

Be able to identify types of marketing channels. Understand factors that influence marketing channel

selection. Know how to identify the intensity of market coverage. Be able to examine strategic issues in marketing

channels, including leadership, cooperation, and conflict.

Be able to examine physical distribution as a part of supply-chain management.

Know how to explore legal issues in channel management.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Key Concepts Distribution

Supply chain

Operations management

Logistics management

Supply management

Supply-chain management

Marketing channel

Marketing intermediaries

Industrial distributor

Dual distribution

Strategic channel alliance

Intensive distribution

Selective distribution

Exclusive distribution

Channel captain

Channel power

Vertical channel integration

Vertical marketing systems

Horizontal channel integration

Physical distribution

Outsourcing

Cycle time

Order processing

Electronic data interchange (EDI)

Inventory management

Just-in-time (JIT)

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Key Concepts Materials handling

Warehousing

Private warehouses

Public warehouses

Distribution centers

Transportation

Intermodal transportation

Freight forwarders

Megacarriers

Tying agreement

Exclusive dealing