Distribution Management
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Hugo van Zyl
•
•
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Representative – SA Druggist, Knoll, Roche
Product and Brand Manager - Roche
Senior Marketing and Sales Manager – AstraZeneca
General Manager – Bausch & Lomb
• Director – Knowledge Warehouse
• Managing Director – Hugo van Zyl & Associates
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Housekeeping
• Cell phones switched off.
• Being on time is a matter of choice
• Lecture structure
– 10min – Quiz on previous week’s lecture
(Points to count for semester
mark)
– 50min lecture
– 10min break
– 50min lecture
• Text book – Distribution management – Strydom, Grove et al.
Second edition
• Van Schaik!!
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Lecture program
Week
Chapter - topic
16th July
Chapter 1 – The Supply chain, Value chain and Distribution
23rd July
Chapter 2 – South African Channel participants
30th July
Chapter 3 – Behavioral process in Distribution channels
6th Aug
Chapter 4 – Channel design & selection of Channel members
13th Aug
Revision
20th Aug
Test week
27th Aug
Chapter 5 – Logistics Management
3rd Sept
Chapter 5 – Logistics Management
10th Sept
Chapter 6 – Electronic Marketing channels
17th Sept
Chapter 6 – electronic Marketing channels
24th Sept
Chapter 7 – Managing the distribution channel
1st Oct
Chapter 7 – Managing the distribution channel
8th Oct
Revision
15th Oct
Revision
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Distribution Management
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Distribution Management
Getting the right product to the right place in the right
quantity with the right quality at the best possible price in
order to present it to customers where they want when
they want it.
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Chapter 1 – Supply chain, Value chain and Distribution
1.Supply Chain
2.Value
Chain
analysis
3.Typical
Distribution
channel
Distribution
4.Intermediaries
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
5.Trends /
Issues
Marketing 2B
Distribution Management
6.Distribution
Structure
decisions
Chapter 1 – Supply chain
• What is a Supply chain?
• What is Supply chain Management?
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Chapter 1 – Supply chain
Primary decisions
Development
Transport
logistics
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Planning
Inventory
Marketing 2B
Distribution Management
Sourcing
Production
Principles of SCM
1. Communication
• Raw material to End-product flow is critical in SCM
– The info flow that support this is the basis of success
– Sharing of “demand data” between suppliers and producers
Dell Direct model
•Most efficient path to customer
•Single point of accountability
•Build to order
•Low cost leader
•Standards based technology
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Principles of SCM
2. Flexibility, Inventory and Customer service.
• Customer satisfaction
– Typically measured in “fill rate”, “ on time delivery” and “not
delivered on time”
• Inventory
– Inventory is dead money.
• Flexibility
– Ability to respond to changes in the environment
– Flexibility buffer = Safety Stock
So…… it’s a trade off between keeping customers
happy and the cost involved
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Principles of SCM
3. Decision making
Decision are made on 3 levels:
• Strategic – Long term decisions
– Location, production, transportation and inventory
• Tactical – Medium term decisions.
– Demand forecasts, Distribution planning, production planning and
materials requirement
• Operational level – Day to day decisions
– Changes in internal environment – e.g. staff shortages
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Telecoms giant BT has joined
the growing band of Western
firms to transfer call centre
operations to India, at a cost
of 2,000 UK jobs.
The firm has said it is to open two
Indian call centers - in Bangalore
and Delhi - employing 2,200 people
by 2004.
The shake-up is part of plans which
will see BT's UK-based centers drop
from about 100 to 31, with the
number of workers falling from
16,000 to 14,000.
BT said no permanent UK
employees would be made
redundant as a result of the move,
and there would be no compulsory
lay-offs among agency staff.
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Principles of SCM
4. Metrics and Data collection
“Modern supply chains are to complex to make decisions
without Data”
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Back order reports
Cycle times
DPMO
Fill rate
Inventory accuracy
Inventory ABC
Inventory turns
On time delivery %
www.supplychainmetrics.com
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Principles of SCM
4. Metrics and Data collection
Performance dimension 1 – Quality
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–
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Functionality
Conformance
Reliability
Durability
Safety
Serviceability
Aesthetics
• Measure aspects that coincide with customer expectations or
requirements
• Measured by tools such as DPMO
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Principles of SCM
4. Metrics and Data collection
Performance dimension 2 - Delivery
• Speed
– Time, from order receipt to delivery
• Reliability
– Deliver products in agreed time frame
• Measured with:
– Fill rate reports
– Back order reports
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Principles of SCM
4. Metrics and Data collection
Performance dimension 3 – Flexibility
•
•
•
•
Mix flexibility
Change over flexibility
Design flexibility
Volume flexibility
•
Measured with
– Inventory accuracy reports
– Cycle time reports
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Principles of SCM
4. Metrics and Data collection
Performance dimension 4 – Cost
•
•
Supply chain or Distribution cost is part of P&L
Measures the effectiveness of the spend on the distribution function
•
Measure with:
– Inventory turn reports
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Principles of SCM
4. Metrics and Data collection
Performance dimension 5 – After sales support
•
•
Especially important in high price goods, goods where ASS is sales tool and
“upgradeable” products.
Effectiveness can be measured as part of Supply chain Management
metrics
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Supply chain management
• Pitfalls in Inventory management
• Globalization and the supply chain
• Improving SCM
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Value - Chain analysis
• The Supply chain is a value adding process.
10c / Kg
R2.50 / Kg
R35.00 / Kg
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
R12.50 / Kg
R18.00 / Kg
Marketing 2B
Distribution Management
Value-chain analysis
9 Value creating stages - Porter
• Primary activities
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Inbound logistics
Operations goods
Outbound logistics
Marketing / Sales
Service
• Support activities
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–
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Procurement function
Tech Development
Human resources
Infrastructure
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
The Typical distribution channel
Selecting a distribution channel.
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Customer satisfaction – Product availability, convenience, price
Marketing objectives of the company
Cost of the channel
Nature of the product – Perishables, electronics…
Intermediaries
Competitors
Legal / regulatory environment
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
The Typical distribution channel
Importer
Producer
Manufacturer
Wholesaler
Retailer
Consumer
Supplier
Importer
Producer
Retailer
Manufacturer
Consumer
Supplier
Global
company
Local
Manufacturer
Local
Wholesaler
Local Retailer
Local
Consumer
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Distribution channels for
Services
4 Characteristics of Services
• Intangibility
• Inseparability of Production and Consumption
– Same time
– Customer participation
• Perishable nature.
• Heterogeneity
• Little need for logistical functions – Inventory, Transportation
• Little need for Intermediaries – direct from supplier to
consumer
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Functions and activities of Intermediaries
• Intermediaries = Wholesalers and Retailers
• Resolve Discrepancies
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Geographically dispersed Supply sources
Manufacturer volumes
Production timing
Quantity and assortment
Transferring ownership
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Functions and activities of Intermediaries
• Close Gaps
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Quantity
Assortment
Spatial
Knowledge
Ownership
• Provide Utility
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Form
Time
Place
Possession
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Functions and activities of Intermediaries
• Distribution
– Transactional – Buying, selling (Risk taking)
– Operational - Warehousing, transporting, order processing
– Financing, grading.
• Specialization
– Functional – Transport, warehousing, Order fulfillment.
– Support – Financial, Information, Insurance.
• Efficiencies of exchange
– More efficient to have intermediaries involved in distribution than
going directly to end consumer.
– Or is it?
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Trends and issues.
• Social trends
– A change in social trends impact the preference for products and
the channels through which they are distributed.
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Trends and issues.
• Economic environment
– A change in the economic environment creates different
demands on a existing distribution network.
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Trends and issues.
• Competition in Distribution channels
– Porter’s five forces:
Substitute
products
Supplier
power
Competitive
rivalry
Threat of
Potential
competitors
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Buyer power
Trends and issues.
• Supply chain issues in SAF
– High cost of Transport in SAF, due to being road based not rail
based.
– Mining generates more demand than other sectors due to weight
– Geographical position of Steel industry related to harbors add
cost
– Geographic distribution of Agricultural sector adds complexity
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Distribution and Structure
decisions
•
Intensive distribution
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Selective distribution
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Convenience products
Large number of locations
Many intermediaries
Strategy = low cost and high convenience
Specialized products
Less locations
Few intermediaries
Differentiation strategy with medium to high cost.
Exclusive distribution
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Specialized / exclusive products
Few locations
Strategy is focused on exclusivity
Sales support is important
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Distribution and Structure
decisions
• Cost leadership Strategy
– Producing and distributing at very low per unit cost.
– Focused on price sensitive consumers
– Convenience products
• Differentiation Strategy
– Uniqueness
– Non price sensitive consumers
• Focus strategy
– Focused on a particular segment of the market
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Distribution and Structure
decisions
• Innovative structures
– Due to changes in demand in the traditional marketplace
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management
Distribution and Structure
decisions
• Vertical marketing system arrangements
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Corporate VMS – Motor dealerships
Contractual VMS – Franchises
Alliance VMS – SPAR
Administered VMS – SAB-Miller and Liquor retailers
Hugo van Zyl
083 629-2069
hugovnzyl@yahoo.co.uk
Marketing 2B
Distribution Management