Chapter 12: Marketing Channels and Supply Chain Management

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Supply Chain Management
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Seamless management of all activities through which raw materials are transformed into products and made available to final consumers.
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Marketing Channels
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A set of interdependent organizations involved in transfer of ownership as finished products move from producer (mfg) to consumer.
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Channel Intermediaries
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– Retailer – Merchant Wholesaler – Agent and/or broker
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Retailer
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sells mainly to final consumers.
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Merchant Wholesaler
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•Buys and takes title to goods from mfg. •Stores, ships, and sells to other businesses
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Agent and/or Broker
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Facilitates sale between mfg and others. Does not take title
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Marketing Channel Functions
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– Specialization and division of labor – Overcoming discrepancies – Providing contact efficiency
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Discrepancy of Quantity
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Difference between efficient production volumes and volume desired by end customer
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Discrepancy of Assortment
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Difference between mix of items produced by one manufacturer and mix of items desired by customer.
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Temporal Discrepancy
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Difference between time when item is produced and time when consumer wants to buy it.
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Spatial Discrepancy
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Difference between place where item is produced and place consumer wants to buy it.
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Key Functions of Channel Members
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Transactional, logistical, facilitating
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Channels for Consumer Products
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– Direct Channels – Indirect Channels
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Direct Consumer Product Channel
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products go straight from the producer to the consumer
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Indirect Consumer Product Channels
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Product goes from: 1) Producer to retailers to consumers 2) Wholesaler to retailers to consumers 3) Agents or Brokers to Wholesaler to retailers to consumers
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Factors in deciding number of levels
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• Market characteristics • Size, geographic dispersion, buying patterns • Product factors • Complexity, cost, ease of movement • Company (mfg) factors • Size, desire for control, diversity in consumers/retailers
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General Rule in Deciding Number of Levels
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– Shorter, more direct channel for: • Complex, expensive, customized items • Many B2B products – Longer, more indirect channel for: • Low cost, standard items • Most consumer products
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Levels of Distribution Intensity
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– Intensive – Selective – Exclusive
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Intensive Level of Distribution Intensity
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– Convenience goods – Many Intermediaries
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Selective Level of Distribution Intensity
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– Shopping and some specialty goods. – Several Intermediaries
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Exclusive Level of Distribution Intensity
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– Specialty goods and industrial equipment. – One intermediary
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Disintermediation
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Elimination or reduction in the number of levels
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Logistics
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Management of physical flow of raw materials, components, and products across the supply chain.
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Objective of logistics
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To give the customer (channel member or consumer) the needed level of customer service at the lowest cost.
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Logistical Components of the Supply Chain
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– Sourcing & Procurement – Production Scheduling – Order Processing – Inventory Control – Warehouse & Materials Handling – Transportation – Logistics Information System
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Production Scheduling
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– Determining method and timing of the manufacturing of a mix of products. – Build to stock (push) versus build to order (pull)
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Order Processing
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a system for easily receiving orders and accurately and quickly filling them
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Inventory control
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– Maintaining the correct amount of inventory • Goal is to meet product availability standards while keeping costs low • MRP, DRP systems
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Transportation
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– Railroads – Motor Carriers – Pipelines – Water – Airways

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