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

2. 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

3. Chapter Objectives • Describe the types of distribution channels & the steps in planning distribution channel strategies • Explain how logistics is used in the supply chain

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

5. 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 -> Customer • Indirect • Intermediaries: from wholesalers to retailers

6. 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

7. 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

8. 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

9. 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 Independent Intermediaries

10. Manufacturer-Owned Intermediaries • Sales branches • Sales offices • Manufacturers’ showrooms

11. Types of Distribution Channels • Consumer channels • Direct • Manufacturer-retailer-consumer • Manufacturer-wholesaler-retailer-consumer • Business-to-business channels • Direct • Manufacturer-industrial distributor-business customer

12. 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

13. 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

14. 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

15. Distribution Intensity Decision Factors: Company, Customers, Channels, Constraints, and Competition Intensive, Exclusive, or Selective Distribution

16. Implementing the Value Chain • Process of designing, managing, & improving the movement of products through the supply chain • purchasing • manufacturing • storage • transport

17. 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 provider’s goals

18. Logistics Functions • Order processing • Warehousing • Materials handling • Transportation • Inventory Control

19. Modes of Physical Transportation • Rail • Water • Truck • Air • Pipeline

20. Transportation Mode Considerations • Dependability • Cost • Speed of Delivery • Accessibility • Capability • Traceability