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CHAPTER 15 Creating Value Through Supply Chain Management: Channels of Distribution, Logistics, Wholesaling - PowerPoint PPT Presentation

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M A R K E T I N G. Real People, Real Choices. CHAPTER 15 Creating Value Through Supply Chain Management: Channels of Distribution, Logistics, & Wholesaling. Chapter Objectives. Understand the concept of the value chain & elements in a supply chain

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Real People, Real Choices

CHAPTER 15Creating Value Through Supply Chain Management: Channels of Distribution, Logistics, & Wholesaling

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Chapter Objectives

  • Understand the concept of the value chain & elements in a supply chain

  • Explain what a distribution channel is & what functions distribution channels perform

  • Describe the types of wholesaling intermediaries found in distribution channels

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Chapter Objectives

  • Describe the types of distribution channels & the steps in planning distribution channel strategies

  • Explain how logistics is used in the supply chain

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Supply Chain Management

  • The supply chain includes all firms that engage in activities that are necessary to convert rawmaterials into a good or service

  • Supply chain management is the management of flows among the firms in a supply chain to maximize profitability

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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

      • Manufacturer -> Customer

    • Indirect

      • Intermediaries: from wholesalers to retailers

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Functions of Distribution Channels

  • Time, place, & ownership utilities

  • Logistics functions

  • Transportation & storage functions

  • Efficiency creation

  • Facilitating functions

  • Repair & maintenance functions

  • Risk-taking

  • Communication & transaction functions

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Creating Efficiencies

  • Breaking bulk – channel members purchase large quantities from manufacturers & sell smaller quantities to many different customers

  • Creating assortments – channel members provide a variety of products in one location

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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

      • Work with lots of manufacturers

    • Manufacturer owned

      • Single manufacturer

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Merchant wholesalers



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

Independent Intermediaries

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Manufacturer-Owned Intermediaries

  • Sales branches

  • Sales offices

  • Manufacturers’ showrooms

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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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Distribution Systems

  • Conventional – multi-level distribution channel in which members work independently of one another

  • Vertical – channel in which there is cooperation among channel members at two or more different levels of the channel

  • Horizontal – two or more firms at the same channel level agree to work together

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Vertical Marketing Systems

  • Administered – channel members remain independent but voluntarily work together

  • Corporate – single firm owns manufacturing, wholesaling, and retailing operations

  • Contractual – cooperation is enforced by contracts that spell out member rights and the terms of cooperation

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Contractual VMS

  • Wholesaler-sponsored – wholesalers get retailers to work together under their leadership in a voluntary chain

  • Retailer-cooperative – group of retailers with a wholesaling operation to help them compete more effectively with large chains

  • Franchise organizations – cooperation is explicitly defined and strictly enforced by franchiser

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Distribution Intensity

Decision Factors:




Constraints, and


Intensive, Exclusive, or Selective Distribution

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Implementing the Value Chain

  • Process of designing, managing, & 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, & inventory control

    • objective to deliver product at lowest cost

  • Now, customers’ goals become the logistics provider’s goals

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Logistics Functions

  • Order processing

  • Warehousing

  • Materials handling

  • Transportation

  • Inventory Control

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Modes of Physical Transportation

  • Rail

  • Water

  • Truck

  • Air

  • Pipeline

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Transportation Mode Considerations

  • Dependability

  • Cost

  • Speed of Delivery

  • Accessibility

  • Capability

  • Traceability