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
Organizational and system-wide coordination of operations and partnerships to meet customers’ product needs.
Sourcing of necessary resources, products, and services from suppliers to support all supply-chain members.
All activities designed to move the product through the marketing channel to the end user, including warehousing and inventory 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
A group individual and organizations that direct the flow of products from producers to customers withing the supply chain.
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
Analyze sales data and other information in databases and information systems
Perform or commission marketing research
Establish strategic and tactical plans for developing customer relationships and organizational productivity.
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
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
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
Channel Leadership, Coordination, and Conflict
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.
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
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.
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
Restricted Sales Territories
Refusal to Deal