BBB4M Distribution and Logistics
Channels of Distribution • All businesses need to distribute their product either • to a place where a consumer can find it OR • directly to the consumer • IF the consumer has the product, the marketer has been SUCCESSFUL • There are two components to distribution • selecting, developing, and managing distribution channels • physically distributing goods through those channels
Channels of Distribution • are the paths of ownership that goods follow as they pass from the producer to the consumer Channel Selection • deciding what path a product should take to reach the target consumer
Distribution Policies • Intensive Distribution • Used if the product is sold everywhere • Ex: Coca-cola is found in schools, bus stations, parks, malls, arenas, cafeterias, grocery stores, drugstores, retail outlets, planes, trains, movie theatres, restaurants, etc.
Distribution Policies • Selective Distribution • Try to control and select the distribution of their product • May seek to avoid conflicts in positioning/brand image • If a retailer orders a manufacturer’s product, by law the manufacturer cannot refuse to sell the product to the store without a valid reason
Distribution Channels 3) Exclusive Distribution • The manufacturer has made a deal with one or two retailers in a particular area to sell the manufacturer’s product exclusively • This allows the product to have a prestige image and allows the manufacturer to dictate some of the retail strategies. • Ex: High fashion clothing, famous-name watches, luxury giftware
Distribution Channels 4) Integrated Distribution • a manufacturer, distributor, or retailer owns both distribution outlets and manufacturing facilities for a product • Ex: IKEA, Lee Valley tools – own and operate their own manufacturing & retail stores
Logistics • The management of the flow of goods and services both into and out of an organization, from the point of origin to the point of consumption. • It consists of transportation, inventory management, warehousing and storage, and packaging.
Supply chain The sum total of all activities involved in moving raw materials, processed goods, and finished products into an organization, and moving the semi-processed or finished goods out of the organization toward the end-consumer.
Supply Chain Vertical Integration • A business grows by buying their supply chain (suppliers, distributers, etc.)
Supply Chain Horizontal Integration • a company expands by acquiring its competitors (same industry)
Supply Chain The main links in the supply chain are: • Inventory management • Storage • Cash flow • Supplier co-ordination • Information processing • Physical distribution
Supply Chain Inventory management • For retailers, this requires a system that records sales • Usually a point-of-sale terminal, a system that tracks retail sales by recording the code or stock number of each stock-keeping unit (SKU) • In larger companies, this becomes more complex, particularly if they design and manufacture the products they sell
Supply Chain Companies are reluctant to be responsible for storage of goods because it takes up valuable space and increases the possibility that they will have to deal with damage or theft. Each link in the supply chain tries to pass goods on as quickly as possible.
Supply Chain • Just-in-time (JIT) inventory systems are used to eliminate storage altogether. • JIT requires suppliers to make and ship the materials that are needed quickly enough that the goods and materials arrive at the workstation, factory floor, or retail store just as they are needed.
Follow-up • We will continue with Logistics next class . • You are to work on your Market Research assignments for the remainder of the class. • Remember: assignments are due Wednesday.