MKTG 409 – Chapter 15: Marketing Channels and Supply Chain

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, the right locations and the right time.
Goal of Supply Chain Management
To achieve optimal levels of efficiency and service.
Key Tasks in Supply Chain Management
Operations Management

Supply Management

Logistics Management

Channel Management

Operation Management
Organizational and system-wide coordination of operations and partnerships to meet customers’ product needs.
Supply Management
Sourcing of necessary resources, products, and services from suppliers to support all supply-chain members.
Logistics Management
All activities designed to move the product through the marketing channel to the end user, including warehousing and inventory management.
Channel Management
All activities related to selling, service, and the development of long-term customer relationships.
Supply Chain Management Issues

Technology has improved service

Effective supply-chain management is closely linked to a market orientation

Information technology has created almost seamless distribution processes.

Information sharing has reduced costs

Increased speed, flexibility, and cooperation

Technology has improved service
Increasing number of innovative goods

Increased involvement of firms in management supply chain.

The Role of Marketing Channels in Supply Chains
Marketing Channel

Marketing Intermediaries

Marketing Channel
A group individual and organizations that direct the flow of products from producers to customers withing the supply chain.
Marketing Intermediaries
Middlemen (channel members) than link producers to other intermediaries or ultimate consumers through the purchase and reselling of products.
Marketing Channel Activities Performed by Intermediaries
Marketing Information

Marketing Management

Facilitating Exchanges



Physical Distribution

Marketing Information
Analyze sales data and other information in databases and information systems

Perform or commission marketing research

Marketing Management
Establish strategic and tactical plans for developing customer relationships and organizational productivity.
Facilitating Exchanges
Choose product assortments that match the needs of customers.

Cooperate with channel members to develop partnerships.

Set promotional objectives

Coordinate advertising, personal selling, sales promotion, publicity, and packaging

Establish pricing policies and terms of sales
Physical Distribution
Manage transportation, warehousing, materials handling, inventory control, and communication
The Significance of Marketing Channels
Channel decisions determine a product’s market preference and the buyer’s accessibility to the product

Entail long-term commitments among a variety of films

Difficult to change or undo marketing channel decisions

Marketing Channels Create Utility
Time Utility (when)

Place Utility (where)

Possession Utility (how; access now vs. later)

Form Utility (how; in what combination)

Typical Marketing Channels for Consumer Products
Producer — Consumers

Producer — Retailers — Consumers

Producer — Wholesalers — Retailers — Consumers

Producer — Agents or Brokers — Wholesalers — Retailers — Consumers

Channels for Business Products
Industrial Distributor: An independent business that takes title to products and carries inventories.

Manufacturers’ Agent: An independent businessperson who sells complementary products and is compensated by commissions (Does not acquire or take possession)

Typical Marketing Channel for Business Products
Producer — Consumers

Producer — Industrial Distributor — Consumers

Producer — Agent — Consumer

Producer — Agent — Industrial Distributor — Consumers

Multiple Marketing Channels and Channel Alliances
Dual Distribution: The use of two or more marketing channels to distribute the same product to the same target market.

Strategic Channel Alliance: The product of one organization are distributed through the marketing channels of another.

Selecting Marketing Channels
Customer Characteristics

Product Attributes

Type of Organization


Marketing Environment Forces

Characteristics of Intermediaries

Intensity of Market Coverage



Convenience products such as Coke, Pringles, and Duracell batteries

Available in many retail outlets

Shopping products such as iPods, televisions, DVD players, and shoes

Available in some outlets

Specialty products such as haute couture, Mont Blanc pens, BMWs, and Fendi handbag

Available in very few outlets

Strategic Issues in Markets Channels
Competitive Priorites

Channel Leadership, Coordination, and Conflict

Channel Integration

Channel Leadership
Channel Captain (Channel Leader): The dominant leader of a supply chain who may be a producer, wholesaler, or retailer

Channel Power: The ability of one member to influence other channel members’ goal achievements.

Channel Cooperation
Enables retailers, wholesalers, suppliers and logistics providers to speed up inventory replenishment, improve customer service, cut the costs of bringing products to customers
Channel Conflict occur when
Self-interest creates misunderstanding about role expectations of channel members

Communication is poor between channel members

There is increased use of multiple channels has increased the chance for miscommunication and conflict

Vertical Channel Integration
Combines two or more stages of the marketing channel under one management

Often effective against competition because of increased bargaining power and shared information and responsibilities.

Vertical Marketing Systems (VMSs): A single channel member coordinates or manages channel activities to achieve low-cost distribution aimed at satisfying target market customers.

Takes on corporate, administered, or contractual forms.

Horizontal Channel Integration
Combines organizations at the same level of operation under one management

Creates economies of scale

Not the best method for improving distribution

Large size may decrease flexibility, increase coordination problems and require additional research and planning

Inventory Management
Development and maintaining adequate assortment of product to meet customers’ needs.

Just in Time

Development and Maintaining Adequate Assortment
Stockouts: Shortages of inventory level that can result in loss of customers

Reorder Point: The inventory level that signals the need to place a new order.

Order Lead Time: The average time lapse between placing the order and receiving it.

Usage Rate: The rate at which inventory is used/sold

Safety Stock The extra inventory a firm keeps

Just In Time
An inventory-management approach in which supplies arrive just when needed for production or resale.
Materials Handling
Involves transportation from point of production to points of consumption

Efficient materials handling can reduce costs, the number of times a good is handled, improve customer service and increase customer satisfaction

Radio Frequency ID: Radio waves are used to track materials using scanners.

Legal Issues in Channel Management
Dual Distribution

Restricted Sales Territories

Exclusive Dealing

Tying Agreements

Refusal to Deal

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