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Chapter 13:
Marketing Channels
and Supply-Chain
Management
Pride/Ferrell
Foundations of Marketing
Fourth Edition
Prepared by Milton Pressley
University 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.
Objectives
1. 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 supplychain 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
Supply
Management
Operations
Management
Logistics
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.
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
Management
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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
Performed by Intermediaries
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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.
Discussion Question
• 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.
© 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
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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
Business Products
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.
Discussion Question
• 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.
© 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 Channels
Coca-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
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Supply Chain Concerns
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Discussion Question
• 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?
© 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 Distribution
Most 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
Competitive
Priorities
Strategic Issues
Channel
Integration
Channel
Leadership,
Coordination, and
Conflict
© 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 member’s goal
achievement
Channel Leadership
The producer of Candie’s 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
• Horizontal Channel
Integration
- Combining organizations at the
same level of operation 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
© 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 Distribution
in 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.
Proportional Cost of Each Physical Distribution
Function as a Percentage of Total Distribution
Costs
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 Management
This 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
Transportation Modes by Selection
Criteria
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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
•
Exclusive distribution
•
Supply chain
•
Channel captain
•
Operations management
•
Channel power
•
Logistics management
•
Vertical channel integration
•
Supply management
•
Vertical marketing systems
•
Supply-chain management
•
Horizontal channel integration
•
Marketing channel
•
Physical distribution
•
Marketing intermediaries
•
Outsourcing
•
Industrial distributor
•
Cycle time
•
Dual distribution
•
Order processing
•
Strategic channel alliance
•
Electronic data interchange (EDI)
•
Intensive distribution
•
Inventory management
•
Selective distribution
•
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
© 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.