Key Concepts
Marketing
Channels
A set of interdependent
ORGANIZATIONS that
ease the transfer of
ownership as products
move from producer to
business user or
consumer.
Supply Chain
The connected chain of
all the business entities,
both internal and external
to the company, that
perform or support the
LOGISTICS function.
Specialization and division of labor
Overcoming discrepancies
Providing contact efficiency
 Creates greater efficiency
 Provides lower costs
 Achieves economies of scale
 Aids producers who lack resources to
market directly
 Builds good relationships with customers
Who are the channel intermediaries and what
value do they provide?
Retailer
A channel intermediary that
sells mainly to FINAL USERS.
Merchant
Wholesaler
An institution that BUYS goods
from manufacturers, takes title
to goods, stores them,
and RESELLS and ships them.
Agents and
Brokers
Wholesaling intermediaries who
facilitate the sale of a product by
REPRESESNTING channel
members.
Retailers
Take Title to Goods
Merchant
Wholesalers
Take Title to Goods
Agents
and
Brokers
Do NOT Take Title to Goods
Product characteristics
Buyer considerations
Market characteristics
Contacting/Promotion
Transactional
Functions
Negotiating
Risk Taking
Physically distributing
Logistical
Functions
Storing
Sorting
Facilitating
Functions
Researching
Financing
Logistics
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.
CHANNEL
INTERMEDIARIES
CHANNEL
FUNCTIONS
Perform
Retailers
Transactional
Wholesalers
Logistical
Agents and Brokers
Facilitating
Direct
Channel
Retailer
Channel
Wholesaler
Channel
Agent/Broker
Channel
Producer
Producer
Producer
Producer
Agents or
Brokers
Consumers
Wholesalers
Wholesalers
Retailers
Retailers
Retailers
Consumers
Consumers
Consumers
Direct
Channel
Direct
Channel
Producer
Producer
Agent/Broker
Industrial Agent/Broker Industrial
Distributor
Channel
Channel
Producer
Producer
Producer
Agents or
Brokers
Agents or
Brokers
Industrial
Distributor
Industrial
Distributor
Industrial
User
Govt.
Buyer
Industrial
User
Industrial
User
Industrial
User
Multiple channels
Nontraditional channels
Strategic channel alliances
CONSUMER
CHANNELS
BUSINESS
CHANNELS
ALTERNATIVE
CHANNELS
Direct
Direct
Multiple
Retail
Industrial
Nontraditional
Wholesaler
Agent/broker
Agent/broker
Agent/broker
industrial
Strategic
alliances
Supply Chain
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, resulting in
enhanced customer and economic
value.
Communicator
of customer demand
from point of sale
to supplier
Physical flow process that engineers the
movement of goods
Means of differentiation
Reduced costs
Greater supply chain flexibility
Improved customer service
Higher revenues
Factors
Affecting
Channel
CHOICE
Level of
Distribution
INTENSITY
Market Factors
Intensive Distribution
Product Factors
Selective Distribution
Producer Factors
Exclusive Distribution
Customer profiles
Consumer or Industrial
Customer
Market
Factors
That Affect
Channel
Choices
Size of market
Geographic location
Product Complexity
Product Price
Product Standardization
Product
Factors
That Affect
Channel
Choices
Product Life Cycle
Product Delicacy
Customer profiles
Consumer or Industrial
Customer
Market
Factors
That Affect
Channel
Choices
Size of market
Geographic location
Product Complexity
Product Price
Product Standardization
Product
Factors
That Affect
Channel
Choices
Product Life Cycle
Product Delicacy
Producer Resources
Number of Product Lines
Producer
Factors
That Affect
Channel
Choices
Desire for Channel Control
Intensity
Level
Objective
Number of
Intermediaries
Intensive
Achieve mass market
selling.
Convenience goods.
Many
Selective
Work with selected
intermediaries.
Shopping and some
specialty goods.
Several
Exclusive
Work with single
intermediary. Specialty
goods and industrial
equipment.
One
What are the issues
that influence
channel strategy?
Power
Control
Leadership
Conflict
Partnering
Channel
Power
A channel member’s capacity to CONTROL OR
INFLUENCE the behavior of other channel members
Channel
Control
A situation that occurs when one marketing
channel member INTENTIONALLY AFFECTS another
member’s behavior
Channel
Leader
A member of a marketing channel that EXERCISES
AUTHORITY/POWER over the activities of other
members
Channel
Conflict
Channel
Partnering
LO6
A clash of goals and methods
between distribution channel
members
The joint effort of all channel
members to create a supply chain
that serves customers and
creates a competitive advantage
Conflicts may occur if channel
members:

Have CONFLICTING goals

Fail to fulfill EXPECTATIONS of other channel members

Have IDEOLOGICAL differences

Have different PERCEPTIONS of reality
Transaction-Based
Partnership-Based
Supplier /
Manufacturer
Relationships
Short-term
Adversarial
Independent
Price important
Long-term
Cooperative
Dependent
Value-added services
Number of
Suppliers
Many
Few
Information
Sharing
Minimal
High
Investment
Required
Minimal
High
Channel Power,
Control, Leadership
Channel
Partnering
Channel
Relationship
Synergy
Channel Conflict
Horizontal
Vertical
Supply
Chain
Team
Logistics Information System
Sourcing & Procurement
Production Scheduling
Order Processing
Inventory Control
Warehouse & Materials Handling
Transportation
The Role of Purchasing:

Plan purchasing strategies

Develop specifications

Select suppliers

Negotiate price and service levels

Reduce costs
Traditional Focus
Customer Focus
Push / Pull
Strategy
Push
Pull
Start of
Production
InventoryBased
Customer-Order
Based
Manufacturing
Mass Production
Mass Customization
JIT
A process that redefines and
simplifies manufacturing by
reducing inventory levels and
delivering raw materials JUST
WHEN THEY ARE NEEDED on
the production line.





Reduces raw material inventories
Shortens lead times
Creates better supplier relationships
Reduces production and storeroom
costs
Reduces paperwork
Receive high-quality parts
Meet supplier delivery commitments
Have a crisis management plan
Electronic
Data
Interchange
INFO TECHNOLOGY that
replaces paper documents that
accompany business
transactions with electronic
transmission of the information.
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.
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.
RECEIVE goods into
warehouse
Identify, sort, and label
goods
DISPATCH the goods to
temporary storage
Recall, select, or pick the
goods for shipment
Lowest
Highest
Relative
Cost
Transit
Time
Air
Truck
Rail
Pipe
Water
Water
Rail
Pipe
Truck
Air
Reliability
Pipe
Truck
Rail
Air
Water
Capability
Water
Rail
Truck
Air
Pipe
Accessibility
Truck
7
LO
Rail
Air
Water
Pipe
Traceability
Truck
Rail
Water
Pipe
Air
Advanced computer technology
Outsourcing of logistics functions
Electronic distribution

Automatic identification
systems
- Bar coding
- Radio frequency technology

Communications technology

Supply chain software systems
Outsourcing Benefits

Reduce inventories

Locate stock at fewer plants and
distribution centers

Provide same or better levels of
service
Channels and Distribution
Decisions for Global Markets
Global Channel
Development
Channel structure
and type differ
Gray marketing channels
Awareness of trade legalities
Global Supply
Chain Management
Transportation Issues
Channels and Distribution Decisions
for Services
Minimizing wait times
Managing service capacity
Improving service delivery
Distribution in Service Organizations