Chapter 15 – Marketing Channels and Supply-Chain Management

the decision and activities that make products available to customers when and where they want to purchase them
supply chain
all the activities associated with the flow and transformation of products from raw material through to the end customer
operations management
total set of managerial activities used by an organization to transform resource inputs into products
logistics management
planning, implementing, and controlling the efficient and effective flow and storage of products and information from the point of origin to consumption to meet customers’ needs and wants
supply management
in its broadest form, refers to the processes that enable the progress of value from raw material to final customer and back to redesign and final disposition
supply-chain management
a set of approaches used to integrate the functions of operations management, logistics management, supply management, and marketing channel management so products are produced and distributed in the right quantities, to the right locations, and at the right time
marketing channel
group of individuals and organization that direct the flow of products from producers to customers within the supply chain
marketing intermediaries
middlemen that link producers to other intermediaries or ultimate consumers through contractual arrangements or through the purchase and resale of products
marketing intermediary activities
marketing information, marketing management, facilitating exchanges, promotion, price, physical distribution
4 types of utility from marketing channels
time, place, possession, and form
critics who suggest eliminating wholesalers would lower customer prices
fail to recognize that this would not eliminate the need for the services the wholesalers provide
producer to consumer
marketing channel A – attorneys
producer to retailers to consumers
marketing channel B – Kmart, Walmart
producer to wholesalers to retailers to consumers
marketing channel C – Wrigley’s chewing gum
producers to agents/brokers to wholesalers to retailers to consumers
marketing channel D – process foods
producer to organizational buyers
marketing channel E – Dell
producer to industrial distributors to organizational buyers
marketing channel F – W.W. Grainger (standardized items such as maintenance supplies, production tools, and operating equip)
industrial distributor
independent business organization that takes title to industrial products and carries inventories
manufacturer’s agent
independent businessperson who sells complementary products and is compensated by commission
producer to agents to organizational buyers
marketing channel G – manufacturing agent does not acquire title or take possession
producer to agents to industrial distributors to organizational buyers
marketing channel H – producer wishes to cover large area but maintains no sales force
dual distribution
use of two or more marketing channels to distribute same products to same target market
strategic channel alliance
agreement whereby the products of one organization are distributed through the marketing channels of another
selecting marketing channels
customer characteristics, product attributes, type of organization, competition, marketing environmental forces, characteristics of intermediaries
intensive distribution
using all available outlets to distribute a product (convenience products, multiple channels may be used)
selective distribution
using only some available outlets in an area to distribute a product (shopping products, desirable when special effort important to customer)
exclusive distribution
using single outlet in a fairly large geographic area to distribute a product (products purchased infrequently consumer over long period or requiring service/information, only authorize dealers used)
channel captain
dominant leader of a marketing channel or a supply channel
channel power
the ability of one channel member to influence another member’s goal achievement
channel cooperation
enables retailers, wholesalers, suppliers and logistics providers to speed up inventory replenishment improve customer service and cut costs
channel conflict
occurs when: self-interest creates misunderstanding, communication poor, increased use of multiple channels
vertical channel integration
combining two or more stage of marketing channel under one management
vertical marketing systems (VMSs)
marketing channel manage by a single channel member to achieve efficient, low-cost distribution aimed at satisfying target market customers
corporate VMS
combines all stage of marketing channel under single owner
administered VMS
channel members are independent, informal coordination used
contractual VMS
channel members linked by legal agreements spelling out each member’s rights
horizontal channel integration
combines organization at same level of operation under one management
physical distribution
activities used to move products from producers to consumer and other end users
contracting of physical distribution tasks to third parties
order processing
receipt and transmission of sales order information
electronic data interchange (EDI)
computerized means of integrating order processing with production, inventory, accounting, and transportation
goals of physical distribution
right goods, right place, right time, right price, right quantity, right support system, cycle time
inventory management
developing and maintaining adequate assortments of products to meet customers’ needs
just-in-time (JIT)
inventory-management approach in which supplies arrive just when needed for production or resale
unit loading
1+ boxes placed on pallet, then loaded by forklift, truck or conveyor
consolidation of many items into single, large container
design and operation of facilities for storing and moving goods
heavy, bulky freight; long distances over land; most freight miles
most flexible schedules/routes; more expensive and vulnerable to weather; size/weight restrictions; second most freight miles
cheapest method; heavy, low-value non-perishables; markets be have water access; fourth most freight miles
most automated; dependable; contents subject to shrinkage; third most freight miles
fastest but most expensive; high-value, low-bulk, or perishable goods; least freight miles
intermodal transportation
2+ transportation modes used in combo
truck trailers and railway flatcars
truck trailers and water carriers
truck trailers and air carriers
freight forwarders
organizations that consolidate shipments from several firms into efficient lot sizes
freight transportation firms that provide several modes of shipment (fedex, ups)
tying agreement
agreement in which a supplier furnishes a product to a channel member with the stipulation that the channel member must purchase other products as well
exclusive dealing
situation in which a manufacturer forbids an intermediary to carry products of competing manufacturers (considered legal if deal blocks competitors from less than 15% of market, sales volume is small, and producer is smaller than retailer)
refusal to deal
producers have right to choose channel members
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