Marketing Channels and
Supply Chain Management
chapter
10
Chapter 10 Version 3e
Prepared by
Deborah Baker
Texas Christian University
©2003 South-Western
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Learning Objectives
1. Explain what a marketing channel is and
why intermediaries are needed.
2. Define the types of channel intermediaries
and describe their functions and activities.
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Learning Objectives (continued)
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10
3. Describe the channel structures for
consumer and business-to-business
products and discuss alternative channel
arrangements.
4. Define supply chain management and
discuss its benefits.
5. Discuss the issues that influence channel
strategy.
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Learning Objectives (continued)
6. Explain channel leadership, conflict, and
partnering.
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7. Describe the logistical components of the
supply chain.
8. Discuss the concept of balancing logistics
service and cost.
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Learning Objectives (continued)
10
10. Discuss channels and distribution
decisions in global markets.
chapter
9. Discuss new technology and emerging
trends in supply chain management.
11. Identify the special problems and
opportunities associated with distribution
in service organizations.
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Learning Objective
Explain what a marketing channel
is and why intermediaries are needed.
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Marketing Channels
Marketing
Channel
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.
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Marketing Channel Functions
Specialization and
Division of Labor
Channels
Fulfill
Three
Important
Functions
Overcoming
Discrepancies
Providing Contact
Efficiency
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Specialization and
Division of Labor
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 Provides economies of scale
 Aids producers who lack resources to
market directly
 Builds good relationships with
customers
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Overcoming Discrepancies
Discrepancy
of
Quantity
Discrepancy
of
Assortment
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The difference between the amount
of product produced and the
amount an end user wants to buy.
The lack of all the items a
customer needs to receive full
satisfaction from a product or
products.
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Overcoming Discrepancies
Temporal
Discrepancy
A situation that occurs when a
product is produced but a
customer is not ready to buy it.
Spatial
Discrepancy
The difference between the
location of a producer and the
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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Channel Intermediaries
Retailer
A channel intermediary that
sells mainly to customers.
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
representing channel member.
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Channel Intermediaries
Retailers
Take Title to Goods
Merchant
Wholesalers
Take Title to Goods
Agents
and
Brokers
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Do NOT Take Title to Goods
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Channel Functions
Performed by Intermediaries
2
Contacting/Promotion
Transactional
Functions
Negotiating
Risk Taking
Physically distributing
Logistical
Functions
Storing
Sorting
Facilitating
Function
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Researching
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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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Channels for Consumer Products
Direct
Channel
Producer
Retailer
Channel
Producer
Wholesaler Agent/Broker
Channel
Channel
Producer
Producer
Agents or
Brokers
Retailers
Wholesalers
Wholesalers
Retailers
Retailers
Consumers
Consumers
Consumers
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Consumers
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Channels for Business-toBusiness Products
Direct
Channel
Producer
3
Industrial Agent/Broker Agent/Broker Direct
Distributor
Channel
Channel
Industrial
Channel
Producer
Producer
Producer
Producer
Agents or
Brokers
Industrial
Distributor
Industrial Industrial
User
User
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Agents or
Brokers
Industrial
Distributor
Industrial Government
Industrial
User
User
Buyer
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Alternative Channel Arrangements
Multiple Channels
Different
Channels
May be Used
Nontraditional
Channels
Adaptive Channels
Strategic Channel
Alliances
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Learning Objective
Define supply chain management
and discuss its benefits.
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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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Supply Chain Management
Focus on Innovative Solutions
Competitive with focus on
Customer Satisfaction
Results
of
Supply Chain
Management
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Synchronized Flow
Customer Value
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Role of Supply Chain Management
Role of
Supply Chain
Management
Communicator of
customer demand from
point of sale to supplier
Physical flow process
that engineers the
movement of goods
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4
Supply Chain Management
Activities
4
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
Supply Chain Management
4
Reduced Costs
Improved Service
Common Benefits
of Supply Chain
Management
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Enhanced Revenues
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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
Affecting
Channel
Choice
Levels of
Distribution
Intensity
Market Factors
Intensive Distribution
Product Factors
Selective Distribution
Producer Factors
Exclusive Distribution
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Market Factors
Customer Profiles
Consumer or Industrial
Customer
Market Factors
That Affect
Channel
Choices
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Size of Market
Geographic Location
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Product Factors
Product Complexity
Product Price
Product Factors
That Affect
Channel
Choices
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Product Life Cycle
Product Delicacy
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5
Producer Factors
Producer Resources
Number of Product Lines
Producer Factors
That Affect
Channel
Choices
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Desire for Channel Control
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5
Levels of Distribution Intensity
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
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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,
Control, and Leadership
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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.
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6
Channel Conflict
A clash of goals and methods between
distribution channel members.
Horizontal
Conflict
Occurs among channel members
on the same level
Vertical
Conflict
Occurs among channel members
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.
Partnership-Based Firms
Transaction-Based
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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
area interaction
Extensive functional
area interaction
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7
Learning Objective
Describe the logistical components
of the supply chain.
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Integrated Logistical
Components of the Supply Chain
7
Supply
Chain
Team
Logistics Information System
Sourcing & Procurement
Production Scheduling
Order Processing & Customer Service
Inventory Control
Warehouse & Materials Handling
Transportation
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Sourcing and Procurement
Plan
Purchasing Strategies
Develop
Specifications
Role of
Purchasing
Departments
Select
Suppliers
Negotiate
Price
Negotiate
Service Levels
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Production Scheduling
Traditional Focus Customer Focus
Push/Pull
Strategy
Push
Pull
Start of
Production
Inventory-Based
Customer-Order
Based
Manufacturing
Mass Production Mass Customization
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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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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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Electronic Data Interchange
Information technology
that replaces paper
documents that accompany
business transactions.
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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
Materials-Handling
7
Receive goods into
warehouse
Functions
of
Materials
Handling
Identify, sort and
label goods
Dispatch the goods to
temporary storage
Recall, select, or pick the
goods for shipment
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Transportation
Cost
Transit Time
Reliability
Criteria
for
Transportation
Mode
Choice
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Capability
Accessibility
Traceability
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Criteria for Ranking
Modes of Transportation
7
Lowest
Highest
Relative
Cost
Air
Truck
Rail
Pipe
Water
Transit
Time
Water
Rail
Pipe
Truck
Air
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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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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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
Supply Chain Management
Trends
Affecting the
Logistics
Industry
9
Advanced
Computer Technology
Outsourcing of
Logistics Functions
Electronic
Distribution
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Learning Objective
10
Discuss channels and distribution
decisions in global markets.
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Channels and Distribution
Decisions for Global Markets
10
Channel structure differs
Global Channel
Development
Channel types differ
“Gray” marketing channels
Awareness of trade legalities
Global Supply
Chain Management
Transportation Infrastructure
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Learning Objective
11
Identify the special problems and
opportunities associated with
distribution in service organizations.
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Channels and Distribution
Decisions for Services
11
Minimizing wait times
Managing service capacity
Areas of Focus
for
Service Distribution
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Improving delivery
through new channels
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