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

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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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M A R K E T I N G

Real People, Real Choices

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

chapter objectives
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
chapter objectives3
Chapter Objectives
  • Describe the types of distribution channels & the steps in planning distribution channel strategies
  • Explain how logistics is used in the supply chain
supply chain management
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
what is a distribution channel
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
functions of distribution channels
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
creating efficiencies
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
types of wholesaling intermediaries
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
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

Independent Intermediaries
manufacturer owned intermediaries
Manufacturer-Owned Intermediaries
  • Sales branches
  • Sales offices
  • Manufacturers’ showrooms
types of distribution channels
Types of Distribution Channels
  • Consumer channels
    • Direct
    • Manufacturer-retailer-consumer
    • Manufacturer-wholesaler-retailer-consumer
  • Business-to-business channels
    • Direct
    • Manufacturer-industrial distributor-business customer
distribution systems
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
vertical marketing systems
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
contractual vms
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
distribution intensity
Distribution Intensity

Decision Factors:

Company,

Customers,

Channels,

Constraints, and

Competition

Intensive, Exclusive, or Selective Distribution

implementing the value chain
Implementing the Value Chain
  • Process of designing, managing, & improving the movement of products through the supply chain
    • purchasing
    • manufacturing
    • storage
    • transport
logistics and customer satisfaction
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
logistics functions
Logistics Functions
  • Order processing
  • Warehousing
  • Materials handling
  • Transportation
  • Inventory Control
modes of physical transportation
Modes of Physical Transportation
  • Rail
  • Water
  • Truck
  • Air
  • Pipeline
transportation mode considerations
Transportation Mode Considerations
  • Dependability
  • Cost
  • Speed of Delivery
  • Accessibility
  • Capability
  • Traceability
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