Making and Delivering Value

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Making and Delivering Value
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Generic Value Chain
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Supply Chain Management
Software programs help to manage the supply chain
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Supply Chain Management

• The supply chain includes all the firms that
  engage in activities that are necessary to
  convert raw materials into a good or service and
  put it in the hands of the consumer or business
  customer
• Supply chain management is the management of
  flows among the firms in a supply chain to
  maximize total profitability

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Supply Chain
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What is a Distribution Channel?

• Series of firms or individuals that facilitate
  the movement of a product from the producer to
  the final customer
• Direct
• Indirect

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Functions of Distribution Channels

• Time, place, and ownership utilities
• Logistics functions
• Transportation and storage functions
• Efficiency creation
• Facilitating functions
• Repair and maintenance functions
• Risk-taking
• Communications and transaction functions

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Supermarkets as Channel Members
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Creating Efficiencies

• Breaking bulk - channel members purchase large
  quantities from manufacturers and sell smaller
  quantities to many different customers
• Creating assortments - channel members provide a
  variety of products in one location

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Reducing Transactions
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The Internet

• Even small firms with limited resources can enjoy
  competitive advantages by making products
  available to customers around the globe at a very
  low cost
• Disintermediation - process by which traditional
  intermediaries are eliminated as companies
  question the value added by layers in the
  distribution channel

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Types of Wholesaling Intermediaries

• Wholesaling intermediaries are firms that handle
  the flow of products from the manufacturer to
  retailer or business user
• Independent
• Manufacturer owned

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Independent Intermediaries

• Merchant wholesalers
• Full-service
• Limited-service
• Cash-and-carry wholesalers
• Truck jobbers
• Drop shippers
• Mail-order wholesalers
• Rack jobbers

• Merchandise Agents or Brokers
• Manufacturers agents
• Selling agents
• Commission merchants
• Merchandise brokers

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Rack Jobbers
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Wholesalers
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Manufacturer-Owned Intermediaries
Sales Branches
Sales Offices
Manufacturers Showrooms
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Independent Intermediaries
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Types of Distribution Channels
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Types of Distribution Channels

• Consumer channels
• Direct
• Manufacturer-retailer-consumer
• Manufacturer-wholesaler-retailer-consumer
• Business-to-business channels
• Direct
• Manufacturer-industrial distributor-business
  customer

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Consumer Channels
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B2B Channels
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Dual Distribution Systems

• Multiple channel usage
• Example
• pharmaceutical industry sells to hospitals,
  clinics, and organizational customers directly
  and to consumers indirectly through drug retailers

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Dual Distribution Systems
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Steps in Distribution Planning
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Vertical System
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Vertical Marketing Systems
Administered
Corporate
Contractual
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Contractual VMS
Wholesaler-Sponsored
Retailer-Cooperative
Franchise Organizations
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Distribution Intensity
Decision Factors Company, Customers, Channels,
Constraints, and Competition
Intensive, Exclusive, or Selective Distribution
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Exclusive Distribution
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Selective Distribution
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Selective Distribution
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Intensive Distribution
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Managing the Channel

• Selecting channel partners
• Managing the channel of distribution
• Channel leader is the dominant firm that controls
  the channel
• Channel leaders have some form of power relative
  to other members

Economic
Reward
Legitimate
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Logistics

• Process of designing, managing, and improving the
  movement of products through the supply chain
• purchasing
• manufacturing
• storage
• transport

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Logistics and Customer Satisfaction

• Traditionally, logistics was thought of as
  physical distribution
• order processing, warehousing, materials
  handling, transportation, and inventory control
• objective to deliver product at lowest cost
• Now, customers goals become the logistics
  providers goals

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Logistics Functions
Order Processing
Warehousing
Materials Handling
Functions
Transportation
Inventory Control
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Transportation Mode Considerations
Dependability
Cost
Speed of Delivery
Accessibility
Capability
Traceability
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Modes of Transportation
Water
Internet
Truck
Pipeline
Rail
Air
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Water Transportation
Water transportation is best for large,
bulky, nonperishable goods