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Chapter 12
Distribution and Supply Chain Management
Copyright © 2013 Pearson Canada Inc.
Distribution Planning
“Planning the physical movement and transfer of
ownership of goods and services from producers
to consumers.”
• Intermediaries play a key role in the
distribution of goods and services. An
intermediary may take possession of
goods, store goods, and resell goods to
the target market.
• Intermediaries include distributors such
as wholesalers
and retailers.
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Providing Contact Efficiency
Marketing Channels
Marketing
Channels
A set of
interdependent
organizations that
ease the transfer of
ownership as products
move from producer to
business user or
consumer.
Manufacturer to Wholesaler to Retailer to Customer
Channels of Distribution
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Channel Functions
Performed by Intermediaries
Contacting/Promotion
Transactional
Functions
Negotiating
Risk Taking
Physically distributing
Logistical
Functions
Storing
Sorting
Facilitating
Functions
Researching
Financing
You can evaluate a new distribution channel or
improve your channel marketing /
management at any time.
It’s especially important to think about
distribution when you’re going after a new
customer segment, releasing a new product,
or looking for ways to aggressively grow your
business.
Wholesaling Functions
A wholesaler may perform some or all of
these functions:
• Provide Market Coverage
• Hold Inventory
• Process Orders
• Perform Market Intelligence
• Provide Customer Service
• Provide Merchandise
Assortment
• Break Bulk
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Channel Length and Width
Channel length refers to the number of intermediaries
or levels in the channel.
Example: Inexpensive, frequently purchased
packaged goods typically use long channels and
expensive but less frequently purchased business
goods use short channels.
In longer channels control shifts from the
producer to channel members.
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Channel Length and Width
Channel width refers to the number of intermediaries
at any one level of the channel.
Example: Packaged goods seek widespread
distribution in different kinds of retail
outlets (convenience stores, drug stores,
supermarkets, etc.). Shopping goods seek a
narrower or more selective list of retailers
to sell to consumers.
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Multi-Channelling
A company uses different types of
intermediaries at the same level in the
channel to reach various customer groups.
Apple uses
multiple
channels to
reach
consumers.
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Evaluate how your end-users need to buy
• Your distribution strategy should deliver the
information and service your prospects need.
• How and where they prefer to buy
• Do they need personalized education and training?
• Do they need additional products or services to be
used along with yours?
• Does your product needs to be customized or
installed?
• Servicing product needs
Match end-user needs to a distribution strategy
• If your end-users need a great deal of information and
service, your company can deliver it directly through a
sales force.
• You can also build a channel of qualified resellers or
consultants.
• The size of the market and your price will probably
dictate which scenario is best.
Match end-user needs to a distribution strategy
• If the buying process is fairly straightforward, you can
sell direct via a website/catalog or perhaps through a
wholesale/retail structure.
• You may also use an inbound telemarketing group or
a field sales team.
• If you need complete control over your product’s
delivery and service, adding a channel probably isn’t
right for you.
Build your distribution channel
• If you’re setting up a distribution channel with one or
more partners, treat it as a sales process:
• Approach the potential channel partner and “sell” the
value of the partnership.
• Establish goals, service requirements and reporting
requirements.
• Deliver inventory (if necessary) and sales/support
materials.
• Train the partner.
• Run promotions and programs to support the partner
and help them increase sales.
Channels and Competitive Advantage
The pursuit of new or non-traditional channels
presents profitable opportunities for a company.
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Factors Influencing Channel Selection
Factors to consider:
Should the
channel
be a direct
or indirect
channel?
• Product and Service
Characteristics
• Competition
• Company Resources
• Desired Intensity of
Distribution
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Market Factors
Customer profiles
Consumer or Industrial
Customer
Market
Factors
That Affect
Channel
Choices
Size of market
Geographic location
Product Factors
Product Complexity
Product Price
Product Standardization
Product
Factors
That Affect
Channel
Choices
Product Life Cycle
Product Delicacy
Intensity of Distribution
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Channel Control
A channel captain integrates and coordinates the
objectives and policies of other members in the
channel.
Control can be at any level of the
channel:
• Manufacturer Control
Economic clout
often
• Distributor (Wholesaler) Control determines who
controls the
• Retailer Control
channel.
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Channel Control
A few examples:
• General Motors (manufacturer) demonstrated its control
when it eliminated some 200 Pontiac and Saturn dealers in
Canada.
• Five large grocery wholesalers control 80% of grocery sales in
Canada. These wholesalers operate under many different
retail banners. Product suppliers must meet their financial
expectations in terms of discounts.
• Walmart (retailer) is an 800-pound gorilla that places a lot of
pressure on suppliers to lower costs and provide more
marketing funds. Such pressure causes financial hardship for
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suppliers.
Logistics Marketing
“Planning the physical flow of materials, finished
goods and information.”
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Logistics Marketing
• Order Processing – Accepting orders and ensuring
sufficient stock is available to fill and deliver orders.
Stockouts do occur some time.
• Warehousing – A distribution centre that receives,
sorts and redistributes merchandise to customers.
• Inventory Management – A system that ensures
continuous flow of needed goods by matching goods
in inventory with demand so that neither too much
or too little stock is carried.
The Think Marketing box on
p. 243 outlines the need for
efficient warehouse
operations.
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Logistics Marketing
Transportation – A manager must determine the most
efficient mode of transportation to ship goods to customers
near and far. Options include truck, rail, air, water and the
Internet.
To improve efficiency firms will employ combinations of
transportation modes.
• Intermodal transportation involves two or more modes:
air to truck, rail to truck, etc.
• Piggybacking involves placing an entire load of a truck
trailer on a rail flatcar.
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Transportation Alternatives
Outsourcing the transportation function is becoming more
common. Many organizations believe this task should be in
the hands of a specialist.
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Supply Chain Management
Technology is playing a key role in improving distribution
systems . Supply chain management programs involve all
members of the channel.
• Supply Chain – A sequence of companies that perform activities
related to the creation and delivery of goods to customers.
• Supply Chain Management – The integration of information
among members of a supply chain to facilitate efficient
production and distribution of good to customers.
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ERP - Electronic Resource Planning
Materials
Requirement
Planning
(MRP)
An inventory control system that manages
the replenishment of raw materials,
supplies, and components from the
supplier to the manufacturer.
Distribution
Resource
Planning
(DRP)
An inventory control system that manages
the replenishment of goods from the
manufacturer to the final consumer.
A Seamless Supply Chain
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Supply Chain Management
System
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Visual Model
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• http://www.marketingmo.com/strategicplanning/sales-process-management/