Marketing Channels and

Supply Chain Management

10
chapter

Prepared by
Deborah Baker
Texas Christian University

Chapter 10 Version 3e ©2003 South-Western 1

 Learning Objectives
1. Explain what a marketing channel is and
why intermediaries are needed.

10 2. Define the types of channel intermediaries

and describe their functions and activities.
chapter

Chapter 10 Version 3e ©2003 South-Western 2

 Learning Objectives (continued)
3. Describe the channel structures for
consumer and business-to-business
products and discuss alternative channel
arrangements.
10
4. Define supply chain management and
chapter

discuss its benefits.

5. Discuss the issues that influence channel

strategy.
Chapter 10 Version 3e ©2003 South-Western 3
 Learning Objectives (continued)
6. Explain channel leadership, conflict, and
partnering.

10 7. Describe the logistical components of the

supply chain.
chapter

8. Discuss the concept of balancing logistics

service and cost.

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 Learning Objectives (continued)
9. Discuss new technology and emerging
trends in supply chain management.

10 10. Discuss channels and distribution

decisions in global markets.
chapter

11. Identify the special problems and

opportunities associated with distribution
in service organizations.

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 1
Learning Objective

Explain what a marketing channel

is and why intermediaries are needed.

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 1
Marketing Channels

A set of interdependent organizations

Marketing that ease the transfer of ownership as
Channel products move from producer to
business user or consumer.

The connected chain of all the business

Supply entities, both internal and external to the
Chain company, that perform or support the
logistics function.

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 1
Marketing Channel Functions
Specialization and
Division of Labor
Channels
Fulfill
Three Overcoming
Important Discrepancies
Functions

Providing Contact
Efficiency
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Specialization and 1
Division of Labor

 Provides economies of scale

 Aids producers who lack resources to

market directly

 Builds good relationships with

customers

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 1
Overcoming Discrepancies

Discrepancy The difference between the amount

of of product produced and the
Quantity amount an end user wants to buy.

Discrepancy The lack of all the items a

customer needs to receive full
of satisfaction from a product or
Assortment products.

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 1
Overcoming Discrepancies

A situation that occurs when a

Temporal
product is produced but a
Discrepancy customer is not ready to buy it.

The difference between the

Spatial location of a producer and the
Discrepancy location of widely
scattered markets.

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 1
Contact Efficiency
Zenith Sony RCA Toshiba

Zenith Sony RCA Toshiba

Circuit City

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 2
Learning Objective

Define the types of channel

intermediaries and describe their
functions and activities.

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 2
Channel Intermediaries
A channel intermediary that
Retailer sells mainly to customers.

An institution that buys goods

Merchant from manufacturers, takes title
Wholesaler to goods, stores them,
and resells and ships them.

Wholesaling intermediaries who

Agents and
facilitate the sale of a product by
Brokers representing channel member.
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 2
Channel Intermediaries

Retailers Take Title to Goods

Merchant
Wholesalers Take Title to Goods

Agents
and Do NOT Take Title to Goods
Brokers

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Channel Functions 2
Performed by Intermediaries
Contacting/Promotion
Transactional
Negotiating
Functions
Risk Taking

Physically distributing
Logistical Storing
Functions
Sorting

Facilitating Researching
Function Financing
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 2
Logistics
The process of strategically
managing the efficient flow
and storage of raw
materials, in-process
inventory, and finished
goods from point of origin
to point of consumption.

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 3
Learning Objective

Describe the channel structures

for consumer and
business-to-business products
and discuss alternative
channel arrangements.

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 3
Direct Channel

A distribution channel in
which producers sell
directly to consumers.

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 3
Channels for Consumer Products
Direct Retailer Wholesaler Agent/Broker
Channel Channel Channel Channel
Producer Producer Producer Producer

Agents or
Brokers

Wholesalers Wholesalers

Retailers Retailers Retailers

Consumers
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Consumers Consumers
©2003 South-Western
Consumers
20
 Channels for Business-to- 3
Business Products
Direct Industrial Agent/Broker Agent/Broker Direct
Channel Distributor Channel Industrial Channel
Channel
Producer Producer Producer Producer Producer

Agents or Agents or
Brokers Brokers
Industrial Industrial
Distributor Distributor
Industrial Industrial Industrial Industrial Government
User User
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©2003 South-Western User Buyer
21
 3
Alternative Channel Arrangements
Multiple Channels

Nontraditional
Different Channels
Channels
May be Used
Adaptive Channels

Strategic Channel
Alliances
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 4
Learning Objective

Define supply chain management

and discuss its benefits.

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 4
Supply Chain Management
A management system that
coordinates and integrates
all of the activities
performed by supply chain
members into a seamless
process, from the source to
the point of consumption.

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 4
Supply Chain Management

Focus on Innovative Solutions

Competitive with focus on

Customer Satisfaction

Results Synchronized Flow

of
Supply Chain
Management Customer Value

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 4
Role of Supply Chain Management

Communicator of
customer demand from
Role of point of sale to supplier
Supply Chain
Management
Physical flow process
that engineers the
movement of goods

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Supply Chain Management 4
Activities
Determine channel strategy and
level of distribution intensity

Manage relationships
in the supply chain

Manage the logistical components

of the supply chain

Balance the costs of the supply chain

with the service level demanded by customer
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Benefits of 4
Supply Chain Management

Reduced Costs

Improved Service

Common Benefits
of Supply Chain Enhanced Revenues
Management

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 5
Learning Objective

Discuss the issues that

influence channel strategy.

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 5
Channel Strategy Decisions
Issues that Influence
Channel Strategy

Factors
Levels of
Affecting
Distribution
Channel
Intensity
Choice

Market Factors Intensive Distribution

Product Factors Selective Distribution
Producer Factors Exclusive Distribution
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 5
Market Factors
Customer Profiles

Consumer or Industrial
Customer

Market Factors Size of Market

That Affect
Channel
Choices Geographic Location

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 5
Product Factors
Product Complexity

Product Price

Product Life Cycle

Product Factors
That Affect
Channel
Choices Product Delicacy

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 5
Producer Factors

Producer Resources

Number of Product Lines

Producer Factors
That Affect
Channel Desire for Channel Control
Choices

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 5
Levels of Distribution Intensity
Number of
Intensity Level Objective
Intermediaries

Achieve mass market

Intensive selling. Many
Convenience goods.

Work with selected

intermediaries.
Selective Several
Shopping and some
specialty goods.
Work with single
intermediary. Specialty
Exclusive goods and industrial
One
equipment.
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 6
Learning Objective

Explain channel leadership,

conflict, and partnering.

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 6
Managing Channel Relationships
Channel Power

Channel Control
Social
Dimensions
of Channels Channel Leadership

Channel Conflict

Channel Partnering
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Channel Power, 6
Control, and Leadership
A channel member’s capacity to
Channel
control or influence the behavior
Power of other channel members

A situation that occurs when one

Channel marketing channel member
Control intentionally affects another
member’s behavior.

A member of a marketing channel

Channel
that exercises authority/power over
Leader the activities of other members.
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 6
Channel Conflict

A clash of goals and methods between

distribution channel members.

Horizontal Occurs among channel members

Conflict on the same level

Vertical Occurs among channel members

Conflict at different levels

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 6
Channel Partnering

The joint effort of all

channel members to create
a supply chain that serves
customers and creates a
competitive advantage.

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 Transaction- vs. 6
Partnership-Based Firms
Transaction-Based Partnership-Based
Short-term relationships Long-term relationships

Multiple suppliers Few suppliers

Adversarial relationships Cooperative partnerships

Price dominates Value-added services dominate

Minimal supplier investment High supplier/buyer investment

Minimal information sharing Extensive information sharing

Firms are independent Firms are interdependent

Minimal functional Extensive functional
area interaction area interaction
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 7
Learning Objective

Describe the logistical components

of the supply chain.

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Integrated Logistical 7
Components of the Supply Chain
Sourcing & Procurement

Logistics Information System

Production Scheduling

Supply Order Processing & Customer Service

Chain
Team Inventory Control

Warehouse & Materials Handling

Transportation

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 7
Sourcing and Procurement
Plan
Purchasing Strategies

Develop
Specifications
Role of
Purchasing Select
Departments Suppliers

Negotiate
Price

Negotiate
Service Levels
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 7
Production Scheduling

Traditional Focus Customer Focus

Push/Pull
Push Pull
Strategy
Start of Customer-Order
Inventory-Based
Production Based

Manufacturing Mass Production Mass Customization

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 7
Just-in-Time Manufacturing
A process that redefines
and simplifies
manufacturing by reducing
inventory levels and
delivering raw materials
just when they are needed
on the production line.

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 7
Benefits of JIT

 Reduces raw material inventories

 Shortens lead times
 Creates better supplier relationships
 Reduces production and storeroom costs
 Reduces paperwork

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 7
Electronic Data Interchange

Information technology
that replaces paper
documents that accompany
business transactions.

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 7
Inventory Control System

A method of developing
and maintaining an
adequate assortment of
materials or products to
meet a manufacturer’s or a
customer’s demand.

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Warehouse and 7
Materials-Handling
Receive goods into
warehouse

Identify, sort and

Functions label goods
of
Materials
Dispatch the goods to
Handling temporary storage

Recall, select, or pick the

goods for shipment
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 7
Transportation
Cost

Transit Time

Reliability

Criteria Capability
for
Transportation Accessibility
Mode
Choice Traceability
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 Criteria for Ranking 7
Modes of Transportation
Highest Lowest

Relative Truck Rail Pipe Water

Air
Cost
Transit
Water Rail Pipe Truck Air
Time

Reliability Pipe Truck Rail Air Water

Capability Water Rail Truck Air Pipe

Accessibility Truck Rail Air Water Pipe

Traceability Air Truck Rail Water Pipe

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 8
Learning Objective

Discuss the concept of

balancing logistics service and cost.

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 8
Logistics Service

Interrelated activities
performed by a member
of the supply chain to
ensure that the right
product is in the right
place at the right time.

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 8
Logistical Competencies
 Devise logistics service strategies as a
means of competitive differentiation
 Integrate members of supply chain to
achieve operating excellence
 Respond quickly to changing logistical
requirements
 Constantly monitor all aspects of the
supply chain
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 9
Learning Objective

Discuss new technology

and emerging trends in
supply chain management.

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Trends in 9
Supply Chain Management
Advanced
Computer Technology
Trends
Affecting the
Logistics Outsourcing of
Logistics Functions
Industry
Electronic
Distribution

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 10
Learning Objective

Discuss channels and distribution

decisions in global markets.

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 Channels and Distribution 10
Decisions for Global Markets

Channel structure differs

Global Channel Channel types differ
Development
“Gray” marketing channels

Awareness of trade legalities

Global Supply
Chain Management
Transportation Infrastructure

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 11
Learning Objective

Identify the special problems and

opportunities associated with
distribution in service organizations.

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 Channels and Distribution 11
Decisions for Services
Minimizing wait times

Managing service capacity

Areas of Focus Improving delivery

for
through new channels
Service Distribution

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