chapter
fifteen
supply chain and
channel management
Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
LEARNING OBJECTIVES
LO 15-1 Understand the importance of marketing
channels and supply chain management.
LO 15-2 Understand the difference between direct
and indirect marketing channels.
LO 15-3 Describe how marketing channels are
managed.
LO 15-4 Describe the flow of information and
merchandise in the marketing channel.
15-2
Supply Chain Management
15-3
Marketing Channels Add Value
Reduce number of
transactions
Increase value for
consumers
©Brand X Pictures/PunchStock
More efficient and
effective
FedEx commercial
with John Moschitta
15-4
Designing Marketing Channels
Direct Channel
Direct Channel
One Intermediary
Direct Channel
Two Intermediaries
Manufacturer
Manufacturer
Manufacturer
Wholesaler
Customer
Retailer
Retailer
Customer
Customer
15-5
Horizontal Conflict
Managing the Marketing Channel
and Supply Chain
Manufacturer
Retailer 1
Retailer 2
Retailer 3
Horizontal Conflict
15-6
Managing the Marketing Channel
and Supply Chain through Vertical
Marketing Systems
Independent or conventional supply chain
Independent marketing
channel
Vertical marketing
channel
15-7
Types of Vertical Marketing Systems
Administered
vertical
marketing
system
Contractual
vertical
marketing
system
Corporate
vertical
marketing
system
15-8
Power
Power
Reward
Coercive
Referent
Expertise
Information
Legitimate
15-9
Managing Marketing Channels and Supply
Chains Through Strategic Relationships
Common Goals
Open
Communications
Mutual Trust
Interdependence
Strategic
Relationships
Credible
Commitments
15-10

check yourself
1. What are the differences between an indirect
and a direct marketing channel?
2. What are the differences among the three
types of vertical marketing systems?
3. How do firms develop strong strategic
partnerships with their marketing channel
partners?
15-11
Making Information Flow
through Marketing Channels
15-12
Data Warehouse
15-13
Electronic Data Interchange
Photo by Cabela’s
Cycle time
Easily analyzed
and used
Quality of
communications
15-14
Vendor-Managed Inventory
DH Kong/Plush Studios/Getty Images
15-15
Pull and Push Supply Chain
Pull
•Orders based on sales
data
•More accurate
inventory
•Better when demand
is uncertain
Push
•Merchandise
allocated based on
forecast
•Does not need
sophisticated IS
system
•Good for steady
demand items
15-16

check yourself
1. What are the marketing channel links associated
with each information flow?
2. How do marketing channel members use data
warehouses to make decisions?
3. What is EDI and how is it used?
4. Why do some marketing channels use VMI, while
others do not?
5. What is the difference between a push and pull
marketing channel?
15-17
Making Merchandise Flow
Through Marketing Channels
15-18
The Distribution Center
Inbound Transportation
• Dispatcher
coordinates deliveries
• Manufacturer may pay
transportation
expenses or retailers
may negotiate directly
with trucking
companies and pay
expenses
Steve Cole/Photodisc/Getty Images
15-19
The Distribution Center
Receiving and Checking
Receiving
Arrival
receipt
Checking
Undamaged
Radio
Frequency
Distribution
(RFID) Tags
Container
computer
chips
David Buffinton/Getty Images
Ordered =
received
Photo by Scott Olson/Getty Images
15-20
The Distribution Center
Storing and Cross-Docking
Traditional
Cross-docking
Combinations
Walter Hodges/Digital Vision/Getty Images
15-21
The Distribution Center
Getting Merchandise Floor-Ready
Ticketing and marking
Increasingly firms are forcing
suppliers to ship floor ready
merchandise
15-22
The Distribution Center
Shipping Merchandise to Stores
• Shipping merchandise
to stores is complex
for multi-store chains
• Distribution centers
use sophisticated
routing and
scheduling systems
Ryan McVay/Getty Images
15-23
Courtesy Tubular Steel, Inc.
The Distribution Center
Inventory Management
Through Just-In-Time Systems
Just-in-time (JIT)
Quick response (QR)
Zappos Website
15-24

check yourself
1. How does merchandise flow through a
typical marketing channel?
2. Why have just-in-time supply chain systems
become so popular?
15-25