Managing Marketing Channels and Supply Chains

Jamie Bute

Caroline Mutonyi

Lisa Schoborg

Morgan Wortham

January 12, 2015

Agenda

Marketing Channels

Vertical Marketing Systems

Marketing Channel Choice Management

Marketing Logistics & Supply Chain Management

Distribution Channel Choice Management

Types of Distribution Strategies

Marketing Channel Marketing Channel: the transfer of the ownership of goods from production to

consumption

Channel Partners (distributors, wholesalers, and retailers) offer Three Functions:

Transactional

Work as an intermediary between the producer and the customer

Hold onto inventory at their location

Enhance your image by supply the goods to customers in a timely manner

Logistical

Store the products

Provide transportation

Buy in bulk and then split into smaller shipments

Combine product with other products to sell to consumer

Facilitating

Deal with customers

Negotiate Sales

Provide Customer Service

Consumer Product Channels

Direct: Producer sells directly to the end customer

Indirect

Retailers

Wholesalers – Retailers

Agents – Wholesalers – Retailers

Business Product Channels

Direct: Producer sells directly to the end customer

Indirect

Industrial Distributor

Agents

Agents – Industrial Distributor

Electronic Marketing Channels

Radio

Television

Computer

Telephone and Cell Phone

Fax Machine

Email

RSS

Electronic messaging

Direct Marketing Channels

Multichannel Marketing

The practice of interacting with customers using a combination of indirect and direct communication channels – websites, retail stores, mail order catalogs, direct mail, email, mobile, etc. – and enabling customers to take action in response – preferably to buy your product or service – using the channel of their choice. In the most simplistic terms, multichannel marketing is all about choice.

Dual Distribution

Involves an arrangement whereby a firm reaches different buyers by employing two or more different types of channels for the same basic product.

Vertical Marketing Systems

In normal systems, each piece of the distribution channel operates on its own for profit

Channel arrangement to bring together parts of the distribution channel for their mutual benefit

Combine resources

Three systems: Corporate, Contractual, and Administrated

Corporate Systems

A company purchases pieces of the distribution channel

Forward integration

Purchase the next level down in the channel

Backward integration

Purchase the previous level in the channel

Pro: more control

Con: takes a lot of capital

*Contractual Systems

Companies enter into contracts with pieces of the distribution channel

Wholesaler-sponsored voluntary

Retailer-sponsored cooperatives

Franchising

Administrated Systems

The company does not own or have contracts with pieces of the distribution channel, but controls activities of the other pieces with power of size or influence.

Factors Affecting Channel Choice and Management

Which channel and intermediaries will provide the best coverage of the target market?

Which channel and intermediaries will best satisfy the buying requirements of the target market?

Which channel and intermediaries will be the most profitable?

Marketing Channel Choice & Management

Intensive distribution

Place products/services in as many outlets as possible

Exclusive distribution

Place products/services in one retailer at specific geographic area

*Selective distribution

Place products/services in a few retailers in a specific geographic area

Market Logistics

The process of planning, implementing, and controlling the physical flow of goods, services, and related information from points of origin to points of consumption to meet consumer requirements at a profit.

Supply Chain

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, that perform or support the LOGISTICS function.

Logistics of Supply Chain

SupplySupplyChainChainTeamTeam

Sourcing & ProcurementSourcing & Procurement

Production SchedulingProduction Scheduling

Order ProcessingOrder Processing

Inventory ControlInventory Control

Warehouse & Materials HandlingWarehouse & Materials Handling

TransportationTransportation

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Supply Chain Process

Supply Chain Process Example

Supply Chain Partners

Supply Chain Management

A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value.

Role of Supply Chain Management

Communicator of customer demand from point of sale to supplier.

Physical flow process that engineers the movement of goods.

Benefits of Supply Chain Management

Means of differentiation

Reduced costs

Greater supply chain flexibility

Improved customer service

Higher revenues

Distribution Channel Choice Management

A marketing channel consists of individuals and firms involved in the process of making products or services available for use or consumption by consumers or industrial use.

Distribution is one of the key elements in the entire marketing strategy as they help expand your reach and grow revenue.

Distribution

Distribution is a vitally important activity that focuses on how to reach your target market and the:

location of your business

location of your target market

how to reach your target market

warehousing of your stock

transportation of your stock

Two Types of Distribution Strategies/Channels of Distribution

Direct Shipment Distribution Strategies

Intermediate Inventory Storage Point

Direct Shipment Distribution Strategies

Advantages:

The retailer avoids the expenses of operating a distribution center

Lead times are reduced

Disadvantages:

Risk-pooling effects are negated

Manufacturer and distributor transportation costs increase

Commonly used scenarios:

Prevalent in the grocery industry

Lead times are critical because of perishable goods

Retail store requires fully loaded trucks

Often mandated by powerful retailers

Manufacturer may be reluctant but may have no choice

Intermediate Inventory Storage Point Strategies

Traditional warehousing strategy

Distribution centers and warehouses hold stock inventory

Provide their downstream customers with inventory as needed

Cross-docking strategy

Warehouses and distribution centers serve as transfer points for inventory

No inventory is held at these transfer points

Centralized pooling and transshipment strategies

May be useful when there is a large variety of different products

Centralized vs. Decentralized Management

Centralized system

Decisions are made at a central location for the entire supply network.

Typical objective: minimize the total cost of the system subject to satisfying some service-level requirements.

Centralized control leads to global optimization.

At least as effective as the decentralized system.

Allow use of coordinated strategies.

Decentralized system

Each facility identifies its most effective strategy without considering the impact on the other facilities in the supply chain.

Leads to local optimization.

Central vs. Local Facilities

Centralized facilities

Employ both fewer warehouses and distribution centers.

Facilities are located further from customers.

Other factors

Safety stock: Lower safety stock levels with centralized facilities.

Overhead: Lower total overhead cost with centralized facilities.

Economies of scale: Greater economies of scale with centralized facilities.

Lead time: Lead time to market reduced with local facilities.

Service

Utilization of risk pooling better with centralized

Shipping times better with local

Transportation costs

Costs between production facilities and warehouses higher with local

Costs from warehouses to retailers lower with local

Cross-Docking

Warehouse functions as inventory coordination points rather than as inventory storage points.

Goods arriving at warehouse from the manufacturer:

- are transferred to vehicles serving the retailers

- are delivered to the retailers as rapidly as possible

Goods spend very little time in storage at the warehouse

Often less than 12 hours

Limits inventory costs and decreases lead times

Conclusion

Managing marketing channels and supply chains is a critical element of marketing – after all, marketing is about getting the right product, in the right quantity, to the right place, at the right time.

Questions?