Distribution and Supply Chain Management

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APPLIED MARKETING MANAGEMENT
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Distribution and Supply Chain Management
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Overview

• Distribution Channel Considerations
• Marketing Channels
• Supply Distribution Channels
• Channel Functions
• Strategic Issues
• Conflict Collaboration

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Distribution Channel Considerations

• Is a products path to market.
• Provides customers with time and place utility.
• Each channel member should be able to perform its
  functions more effectively and efficiently than
  any other channel member.

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Typical Marketing Channels for Consumer Goods and
Services
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Typical Marketing Channels for Industrial Goods
and Services
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Distribution andSupply Chain Concepts

• Marketing Channels
• An organized system of marketing institutions
  through which products, resources, information,
  funds, and/or product ownership flow from the
  point of production to the final user.
• Physical Distribution
• Coordinating the flow of information and
  products among members of the channel to ensure
  that products are available in the right places,
  in the right quantities, at the right times, and
  in a cost-efficient manner.

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Graphical Depiction of a Supply Chain
Exhibit 9.1
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Absolute Channel Functions

• Physical Distribution
• Ownership
• Promotion
• Negotiation
• Financing
• Risking
• Ordering
• Payment

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Discussion Question

• Some manufacturers and retailers advertise that
  customers should buy from them because they
  eliminate the middleman. Evaluate this comment
  in light of the functions that must be performed
  in a marketing channel.
• Does a channel with fewer members always deliver
  products to customers at lower prices?
• What about service levels (who performs the
  8-functions).

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Strategic Issues in Channels of Distribution

• Channel Length is a function of the service
  levels demanded
• More service requires longer channels
• Channel Structure reflects the needs of the
  product and market
• Exclusive Distribution
• Selective Distribution
• Intensive Distribution
• Channel Relationships range from contractual to
  mutually dependent. The nature of these
  relationships is reflected in the levels of
  connectivity, community and collaboration among
  channel members.

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Marketing in Action

• Clinique cosmetics uses a selective distribution
  strategy as their primary marketing channel
  structure.
• What is the motivation for using this strategy
  for this type of product line? What are the
  benefits that Clinique seeks from this strategy?

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Conflict and Collaboration (1 of 2)

• Conflict arises because of differences in goals
  (self interest seeking), violation of
  expectations, varying sources, degrees and uses
  of power.
• Emersons 5 sources of power
• Legitimate Power
• Reward Power
• Coercive Power
• Information/Expert Power
• Referent Power
• If not properly managed, Conflict, not
  Collaboration, will pervade channel relationships.

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Collaborative Relationships Involve
Exhibit 9.3
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Trends in Marketing Channels (1 of 3)

• Shifting Power in the Channel
• Discount mass merchandise retailers
• Wal-Mart, Kmart, and Target
• Category focused retailers (category killers)
• Toys R Us, Lowes, Office Depot, AutoZone,
  and Best Buy

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Category Killers - AutoZone
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Trends in Marketing Channels (2 of 3)

• Outsourcing Channel Functions
• International Outsourcing is growing rapidly
• Why outsource?
• From a strategic perspective, what channel
  functions should, and should not, be outsourced?

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The Trend in Outsourcing
Exhibit 9.5
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Trends in Marketing Channels (3 of 3)

• Advancing Technology
• Growth of Internet and e-commerce
• Radio frequency identification (RFID)
• The Growth of Direct Distribution, Dual
  Distribution and Nonstore Retailing
• Examples of Nonstore Channels
• Catalog and Direct Marketing
• Direct Selling
• E-Commerce
• Home Shopping Networks
• Vending
• Direct Response Advertising

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Discussion Question

• What are some of the differences youve
  experienced in buying similar products through
  different retail formats (e.g., a physical retail
  store, a manufacturers outlet store, a catalog,
  and an online merchant)?

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Legal and Ethical Issuesin the Supply Chain

• Plural Distribution
• Exclusive Channel Arrangements
• Tying Arrangements
• Counterfeit Products

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FDA Against Counterfeit Drugs