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CHAPTER
MarketingChannelsand
SupplyChainManagement
Chapter Objectives
1 Describethetypesof
marketingchannelsand
therolestheyplayin
marketingstrategy.
4 Identifyanddescribethe 7 Comparethemajor
differentvertical
modesoftransportation.
marketingsystems.
5 Explaintherolesof
8
Discusstheroleof
Outlinethemajorchannel
logisticsandsupplychain
transportation
2 strategydecisions.
managementinanoverall
intermediaries,combined
distributionstrategy.
Describetheconceptsof
transportationmodes,and
warehousingin
3 channelmanagement,
conflict,andcooperation. 6
improvingphysical
Identifythemajor
distribution.
componentsofaphysical
distributionsystem.
DistributionMovementofgoodsandservices
fromproducerstocustomers.
Marketing(distribution)channelSystemof
marketinginstitutionsthatenhancesthephysical
flowofgoodsandservices,alongwithownership
title,fromproducertoconsumerorbusinessuser.
LogisticsProcessofcoordinatingtheflowof
information,goods,andservicesamongmembers
ofthedistributionchannel.
SupplychainmanagementControloftheactivitiesofpurchasing,
processing,anddeliverythroughwhichrawmaterialsaretransformedinto
productsandmadeavailabletofinalconsumers.
PhysicaldistributionBroadrangeofactivitiesaimedatefficient
movementoffinishedgoodsfromtheendoftheproductionlinetothe
consumer.
DIRECTSELLING
Directchannelcarriesgoodsdirectlyfromaproducertothebusiness
purchaserorultimateuser.
Directsellingamarketingstrategyinwhichaproducerestablishesdirect
salescontactwithitsproductsfinalusers.
Internetanddirectmailarealsopotentiallyimportanttoolsfordirect
selling.
CHANNELSUSINGMARKETINGINTERMEDIARIES
Forsomeproducts,usingintermediariesmaybemoreefficient,less
expensive,andlesstimeconsuming.
DUALDISTRIBUTION
Movementofproductsthroughmorethanonechanneltoreachthefirms
targetmarket.
Usedtomaximizethefirmscoverageinthemarketplaceortoincreasethe
costeffectivenessofthefirmsmarketingeffort.
REVERSECHANNELS
Channelsdesignedtoreturngoodstotheirproducers.
Growingimportancebecauseofrisingpricesforrawmaterials,increasing
availabilityofrecyclingfacilities,andpassageofadditionalantipollution
andconservationlaws.
Alsousedforrecallsandrepairs.
DETERMININGDISTRIBUTIONINTENSITY
IntensivedistributionDistributionofaproductthroughallavailable
channels.
SelectivedistributionDistributionofaproductthroughalimitednumber
ofchannels.
ExclusivedistributionDistributionofaproductthroughasingle
wholesalerorretailerinaspecificgeographicregion.
Restrictionsareillegaliftheyreducecompetitionorcreateamonopoly.
WHOSHOULDPERFORMCHANNELFUNCTIONS?
Intermediarymustprovidebetterserviceatlowercoststhanmanufacturers
orretailerscanprovideforthemselves.
Consolidationofchannelfunctionscanrepresentastrategicopportunity
foracompany.
CHANNELCONFLICT
Horizontalconflictdisagreementsamongchannelmembersatthesame
level,suchastwocompetingdiscountstores.
Verticalconflictoccursamongmembersatdifferentlevelsofthechannel.
Thegraymarketgoodsproducedforoverseasmarketsthatreenterthe
U.S.marketandcompeteagainstdomesticversions.
ACHIEVINGCHANNELCOOPERATION
Bestachievedwhenallmembersofchannelseethemselvesasequal
components;channelcaptainshouldprovidethisleadership.
CORPORATEANDADMINISTEREDSYSTEMS
Corporatemarketingsystemsingleownerrunsorganizationsateach
stageofthemarketingchannel.
Administeredmarketingsystemdominantchannelmemberexercises
powertoachievechannelcoordination.
CONTRACTUALSYSTEMS
Contractualmarketingsystemcoordinatesdistributionthroughformal
agreementsamongchannelmembers.
Includewholesalersponsoredvoluntarychains,retailcooperatives,and
franchises.
RADIOFREQUENCYIDENTIFICATION(RFID)
Radiofrequencyidentification(RFID)Technologythatusesatinychip
withidentificationinformationthatcanbereadbyascannerusingradio
wavesfromadistance.
ENTERPRISERESOURCEPLANNING
Softwaresystemthatconsolidatesdatafromamongthefirmsunits.
TwothirdsofERPsystemusersaremanufacturersconcernedwith
productionissuessuchassequencingandscheduling.
LOGISTICALCOSTCONTROL
Distributionfunctionaccountforhalfofatypicalfirmsmarketingcosts.
Thirdpartylogistics(3PL)firmsspecializeinhandlinglogisticalactivity.
PHYSICAL DISTRIBUTION
THEPROBLEMOFSUBOPTIMIZATION
Resultswhenthemanagersofindividualphysicaldistributionfunctions
attempttominimizecosts,buttheimpactofonetaskontheothersleadsto
lessthanoptimalresults.
CUSTOMERSERVICESTANDARDS
Stategoalsanddefineacceptableperformanceforthequalityofservice
thatafirmexpectstodelivertoitscustomers.
Afterthesestandardsaredefined,designersassembleotherphysical
distributioncomponentstomeetthesestandards.
TRANSPORTATION
82percentofU.S.commoditiesrelyentirelyontruckingfordelivery.
Transportationanddeliveryaddapproximately10percenttoproduct
costs.
Classesofcarriersincludecommoncarriers,contractcarriers,andprivate
carriers.
Majortransportationmodesincluderailroads,motorcarriers,water
carriers,pipelines,andairfreight.
IntermodaloperationsCombinationoftransportmodessuchasrailand
highwaycarriers(piggyback),airandhighwaycarriers(birdyback),and
waterandaircarriers(fishyback)toimprovecustomerserviceandachieve
costadvantages.
Freightforwardersandsupplementalcarriersconsolidateshipmentsto
gainlowerratesandfasterdeliveryservicefortheircustomers.
WAREHOUSING
Storagewarehouseholdsgoodsformoderatetolongperiodsinan
attempttobalancesupplyanddemandforproducersandpurchasers.
Distributionwarehouseassemblesandredistributesgoods,keepingthem
movingasmuchaspossible.
Automatedwarehousetechnologycancutdistributioncostsandimprove
customerservice.
Warehouselocationsareinfluencedbywarehouseandmaterialshandling
costsanddeliverycostsfromwarehousestocustomers.
INVENTORYCONTROLSYSTEMS
Companiesmustbalancecustomerdemandwithcostsofcarryingexcess
inventory.
Firmsusejustintimedeliverysystems,RFIDtechnologyorvendor
managedinventorytohelpmanagecosts.
ORDERPROCESSING
Directlyaffectsfirmsabilitytomeetcustomerservicestandards.
Includesfourmajoractivities:
Conductingacreditcheck.
Keepingarecordofthesale.
Makingappropriateaccountingentries.
Locatingorders,shippingthem,andadjustinginventoryrecords.
PROTECTIVEPACKAGINGANDMATERIALS
HANDLING
Materialshandlingsystemactivitiesformovingproductswithinplants,
warehouses,andtransportationterminals.
Unitizingcombiningasmanypackagesaspossibleintoeach
loadthatmoveswithinoroutsideafacility.
Containerizingcombiningseveralunitizedloads.