channel flows and efficiency
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CHANNEL FLOWS AND EFFICIENCY

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CHANNEL FLOWS AND EFFICIENCY. Generic channel flows Sharing of tasks among Manufacturers Intermediaries Retailers Consumers Rewards and terms to participants. Generic Channel Flows. Physical possession Ownership Promotion Negotiation Financing Risking Ordering Payment. COLA.

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channel flows and efficiency
CHANNEL FLOWS AND EFFICIENCY
  • Generic channel flows
  • Sharing of tasks among
    • Manufacturers
    • Intermediaries
    • Retailers
    • Consumers
  • Rewards and terms to participants
generic channel flows
Generic Channel Flows
  • Physical possession
  • Ownership
  • Promotion
  • Negotiation
  • Financing
  • Risking
  • Ordering
  • Payment

COLA

ownership and possession
Physical possession

Has physical custody

Carries holding costs

Probably responsible for damage or loss

Ownership

Holds title

Has not yet been paid but may collect finance charge

May or may not have to accept returns

Ownership and Possession
promotion and negotiation
Promotion

Advertising for product

Through media

Point-of-Purchase (POP)

Demonstrations

Display/shelf space

Personal selling

Negotiation

Settling terms of deal

Price

Responsibilities of each side

Promotion

Quantities sold and offered

Delivery schedule

Miscellaneous (e.g., replacement of spoilage)

Promotion and Negotiation
financing and risk taking
Inventory financed by

Seller (manufacturer)

Buyer (e.g., wholesaler or retailer)

Third party (e.g., bank holds title to cars on dealer lot)

Terms (e.g., discount for prompt payment)

Ability to raise capital and cost of capital

Risk taking

Damage, spoilage

Obsolescence

Over-estimated demand

Financing and Risk Taking
ordering and payment
Ordering

Automatic

Routine—review of whether to do straight reorder

Re-evaluated

Payment

Timeliness

Method

Cash/certified check

Check/electronic transfer

Credit cards (small retailers)

Payment by third party

Financier

Customer

Flow through channel

Ordering and Payment
zero based channel design
Zero-Based Channel Design
  • Achieves target segment’s requirements
  • Least expensive method of achieving objectives
  • Equity principle: Rewards should be given proportionally to share of functions performed
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