Distribution and Supply Chain Management

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MARKETING STRATEGYO.C. FERRELL MICHAEL D.
HARTLINE
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Distribution and Supply Chain Management
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Distribution 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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Marketing Channel Functions

• Channel Function Specializations
• Sorting
• Breaking Bulk
• Maintaining Inventories
• Maintaining Convenient Locations
• Providing Services

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• Marketing channel decisions are among the most
  complex challenging facing the firm
  
• Each channel creates different level of sales
  costs
  
• Firm usually committed to decision for long time
• Middlemen used when the can perform functions
  more efficiently than manufacturers can
  

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Channel Design Decisions

• Types of intermediaries retailers, wholesalers,
  food brokers, etc.
  
• Number of intermediaries
• Exclusive one or a select few
• Selective more than a few, less than all
• Intensive as many outlets as possible
• How many retailers? Wholesalers?
• Administrative arrangement

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Types/Number of Intermediaries
Manufacturer
Mfg
Mfg
Mfg
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Corporate Common Ownership at Different Levels
of the Channel
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Exhibit 14.11Vertical Marketing Systems
Corporate VMS (e.g., Sherwin Williams Paints)
Administered VMS (e.g., General Electric Applia
nces)
Relational VMS (e.g., 3M and Wal-mart
Contractual VMS
Retailer- sponsored coops (e.g., Asso- ciated G
rocers)
Wholesaler- sponsored voluntary chains (e.g., I
GA)
Franchise systems
Manufacturer- retailer franchise system (e.g.,
Chrysler)
Manufacturer- wholesaler franchise system (e.g.
, Coca-Cola)
Wholesaler- retailer franchise system (e.g., Re
xall)
Service sponsor- retailer franchise system (e.g
., Holiday Inns)
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• What type of distribution strategy does Clinique
  cosmetics ?
  
• What is the motivation for using this strategy
  for this type of product line? What are the
  apparent benefits that Clinique receives from
  this strategy?

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• What type of distribution strategy does Coca Cola
  cosmetics ?
  
• What is the motivation for using this strategy
  for this type of product line? What are the
  apparent benefits that Coca Cola receives from
  this strategy?

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Trends in Marketing Channels (1 of 2)

• Advancing Technology
• Growth of Internet and e-commerce
• Radio frequency identification (RFID)
• 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
  
• Outsourcing Channel Functions
• Outsourcing is growing rapidly

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Trends in Marketing Channels (2 of 2)

• The Growth of Direct Distribution and Nonstore
  Retailing
  
• Examples of Nonstore Channels
• Catalog and Direct Marketing
• Direct Selling
• E-Commerce
• Home Shopping Networks
• Vending
• Direct Response Advertising
• The Growth of Dual Distribution