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Channels of Distribution. Channel of Distribution The path a product takes from producer or manufacturer to the final user Businesses who perform these functions allow products to be in the right place at the right time. How does an IPHONE get to the customer?

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channels of distribution
Channels of Distribution
  • Channel of Distribution
    • The path a product takes

from producer or manufacturer

to the final user

    • Businesses who perform these functions allow products to be in the right place at the right time

How does an IPHONE get to the customer?

How does a Suave Shampoo get to the customer?

who s who
Who’s Who
  • Intermediaries – channel members that move products from producer to final user
    • Middlemen
  • Merchant Intermediaries – take ownership (sharper Image)
  • Agent Intermediaries
merchant intermediaries
Merchant Intermediaries
  • Wholesalers
    • Buy large quantities of goods, store them, and resell to other businesses at a profit (holiday wholesale) Retailers
    • Sells goods and services through their own store to consumers

What is SAM’S CLUB?

Wholesaler or Retailer?

BOTH

agent intermediaries
Agent Intermediaries
  • Negotiate the ownership of goods
  • Work on commission (% of sale)
    • Work for both parties (broker)
    • Work to sell product (manufacturers agent)
slide5

Types of Distribution

  • Direct distribution—straight from the producer to the ultimate consumer or industrial user
  • Indirect distribution—involves intermediaries
  • Look @ pg _3_ for photo distribution options
consumer distribution channels
Consumer Distribution Channels
  • A – Manufacturer  Consumer
  • B – Manufacturer Retailer  Consumer
  • C – Man  Wholesaler  Ret.  Cons.
  • D – Man. Agent WholeRet.Cons.
  • E - Man.AgentRetailer  Consumer
distribution intensity
Distribution Intensity
  • You Sell the Following Products, What would be the best way to get your products to your customer?
  • Digital Camera – Camera Store or Website?
  • Hiking Shoes – Custom Shoe store,National Chain, or Web?
  • Soccer Cleats – Custom Shoe Store, National Chain, or Web?
  • Intensive Distribution
    • Use of all suitable outlets for a product. (motor oil, soda)
  • Selective Distribution
    • Limited # of outlets. Less competition, more willing to promote product. (Ralph Lauren)
distribution intensity1
Distribution Intensity
  • Exclusive Distribution
    • Protected territories of a product.
    • 1 dealer per geographic area, high profit margin, prestige, image control
    • (NAPA, Snap-on, Culvers,other franchises, UGG boots, COACH)
siding pg
Siding- pg
  • Window Distribution – Champion, Feldco?
  • http://www.youtube.com/watch?v=EOH0iLX2W4Q
  • http://www.youtube.com/watch?v=D1y1uQcP7fM&feature=related
  • What is their Distribution channel?
    • Sales Reps meet in your home.
  • List new ideas(3) for distributing siding to contractors?
  • Pro’s and con’s of each…then make one recommendation
physical distribution
Physical Distribution
  • Process of transporting, storing and handling goods to make them available to customers.
  • Transportation of goods- is the marketing function of moving goods from a seller to a buyer
types of transportation
Types of Transportation
  • Trucking
  • Rail Transportation
  • Water
  • Pipeline
  • Air
adv vs dis for trucking
Convenient

Door-to-door

Reduce packaging costs

Rapid deliveries

Reduce large inventories

Traffic Jams

Equipment Maintenance

Accidents could cause delays

Size / Weight restrictions

Adv. vs. Dis. for Trucking
adv vs dis for rail
Low costs

Large quantities

Seldom slowed by weather

Lack of flexibility

Must use another form

Adv. vs. Dis. for Rail
adv vs dis for water
Low cost

Ship large/ heavy items

Speed, very slow

Must use another form once ship is in port

Affected by weather

Adv. vs. Dis. for Water
adv vs dis for pipeline
Operation costs are low

Low risk of failure

Weather does not delay

High initial cost

If damaged, can be expensive to repair

Adv. vs. Dis. for Pipeline
adv vs dis for air
Very fast

Reduces inventory expenses

Reduces storage expenses

Most expensive form of distribution

Mechanical breakdowns

Delays from weather

Adv. vs. Dis. for Air
shipping terms
Shipping Terms
  • Fishy Back
    • Boat to Truck
  • Piggy Back
    • Train to Truck
which method would you ship the following
Which Method would you ship the following
  • Coal
  • Small box that needed to be at destination quickly
  • Fruit
  • Coffee to be shipped abroad
  • Roses from France
  • Computer Equipment
purchasing
Purchasing
  • Great career area: Professional Shopper!
  • Important function of marketing because the costs associated with running a business are the direct result of the person who’s in charge of buying the goods/services
  • List all the things that you would need to purchase if you were to open a retail gift store.
planning purchases
Planning Purchases
  • Organizational Buyer – purchase products for a business.
    • In large quantities
    • Requires technical knowledge of industry
  • Two types of buyers
    • Industrial- for use in business
    • Resale
layaway 17
Layaway #17

99.99

125.99

36.99

18.50

=_____________

*.20 = _________

Bal due? 281.47-56.29 = _________

281.47

56.29

228.15

returns 19
Returns #19
  • 195 – ___ = ___ owed plus tax
  • 45*1.06 = ___________

150

45

47.70

returns 22
Returns #22
  • She will owe
  • 95-75 = 20.00 plus tax
  • 20.00*1.07= ____________

#24

Mr. Chow Discount

39.99-3 = ________

21.40

36.99

purchase order
Purchase Order
  • Gives permission to purchase product on account. (business to business).
  • Read all of #25 and complete. Check yours with the Key before continuing on!
  • (Instructions, Date, Totals…etc)
invoice
Invoice
  • Bills for goods that have been received. Before paying, make sure it’s correct.

Total due….

dating terms
Dating Terms
  • To get businesses to pay their bills on time, we have TERMS.
  • Sometimes N30…bill due in 30 days…if not, you can be charged interest
  • 2/10 N 30 ….2% discount if you pay in 10 days, otherwise 30 days for full payment.
dating terms 27

13=5/31

30=6/30

2=7/2

5/28

20

980

26=7/31

4=8/4

7/15

14.70

720.30

Dating Terms-#27
distribution
Distribution
  • Your group is a new product distribution team hired by Mattel. You have been given the task of selecting the appropriate target market for the product and getting it into the hands of customers. You will need to develop a plan for distribution.

ON Notecard

  • Product ____________________________________
  • Target Market- (Age, Gender, Education, Income, Hobbies)
  • How will you get your product to the consumers? Choose a channel from pg 4. (direct? Wholesalers? retailers?) WHY?
  • What type of distribution will you use? (selective, exclusive, intensive) WHY?
  • What types of physical distribution will you use to move your product in these channels (Plane, Trane, Auto, Truck, Pipe, Water) WHY?
  • Find a company in Madison who can help you.
shipping 30
Shipping -30
  • Package 19lbs 4 oz. Zone 6 = _______
  • Invoice is $322.44
  • Sales Tax = 7%
  • Total Due?$10.22+ (322.44*1.07) = _________

10.22

355.23

shipping pg 14
Shipping pg 14
  • FOB= Free on Board
  • FOB destination or Store = Seller Pays
  • FOB Shipping point= Buyer Pays
  • FOB Factory prepaid- Seller Pays
  • FOB Destination Reversed = Buyer Pays
slide31
#35
  • Dated 3/28 received 4/4
  • Eligible for discount? _____
  • FOB Dest rev? Who Pays ______
  • $79,324*(.98) =$________ + 652.66 = $78,390.18

NO

buyer

77,737.52

slide32
#37
  • $5672.35 Dated July 25 1/15 n45
  • Discount Date=Aug 9
  • 1%=56.72 savings
  • NO, took too large of discount
  • Payment should’ve been $5615.63
industrial markets
Industrial Markets
  • Industrial Buyer=Buys materials used to make a product that is sold
  • Company’s master production schedule will help provide details for ordering and shipments.
  • Sell 500 leather coats
    • Must know how much fabric, insulation, thread, and zippers are needed to produce.
    • This information is provided on the BILL OF MATERIALS=Itemized list of goods needed to produce a product
  • Send bids (RFP) to vendors for Price Quotes
resellers
Resellers
  • Wholesale and Retail buyers purchase goods for resale
  • Forecast consumers needs and buy the necessary products to meet them.
  • Use planned sales figures to determine quantity to buy
    • Planned Sales = Using economic forecasts, take last year’s sales x your projected amount this year
types of purchasing
Types of Purchasing
  • Worksheet pg 17
how much to order
How Much to order
  • Totaling Totes

1. Last Years Sales ______

+ Increase (x.05)______

+ Classes (5x12) ______

= Ant. Sales _____ totes

Cost (3*98.40) + (2*25.08)+(6*2.15)

295.20+50.16+12.90=$358.26

120

6

60

186

buying distribution
Buying & Distribution
  • Planned Sales – anticipated sales for next year.
  • Sales X increase
  • #1 Sales = $10,000 Increase 10%

=

  • #3 Sales = 8000, Costs up 5%

=

bom 5
BOM #5
  • Beginning of Month Stock

Month Sales BOM Stock to Sales

Feb 4000 16,000 _________

March 4,500 11,250 _________

April 6,000 18,000 _________

slide39
#9

Month Last Sales Last BOM StoS PS Planned BOM

Feb 5,000 17,500 ____ _______ _______

March 7,000 21,000 ____ ______ ________

April 7,500 18,750 ____ _______ ________

reductions
Reductions
  • Planned Reductions – discounts , shortages, markdowns
  • #12 Sales were $20,000 Reductions are 2%
    • PR = 20,000 X .02 = _______
  • #14 Sales $30,000 PR=6,000 what is %
    • 6,000/30,000 = ____________
planned purchases
Planned Purchases
  • How much should you buy each month!
  • Take Planned Sales
  • + EOM (how much you need for next)
  • +Reductions
  • - BOM (what you started with)
  • = What you need to buy
planned purchases 20
Planned Purchases #20

Month PS -BOM +PR +EOM =PP

March 9,900 29,500 900 ______ ______

April 12,100 39,300 1,200 ______ ______

May 8,800 35,200 800 ______ ______

June 13,200 33,000 1,300 ______ ______

July 6,000 19,000 600 _______ ______

Aug ---- 24,000 ---- ________ _____

selecting suppliers
Selecting Suppliers
  • Production Capabilities
  • Past Experiences
  • Special Buying Arrangements
    • Consignment buying-paid for only after they are sold
    • Memorandum buying –take back unsold product
  • Special Services
29 how much can u buy
#29 How much can u buy?
  • PS-BOM+PR+EOM-Received-ordered

_________

  • _________

+__________

+ _________

  • __________
  • _________

=_____________ Open to Buy

11,000

31 six month merch plan
Planned Sales + 20% = *1._

Planned BOM = PS * _

Planned Reduct = 15%=*.__

Planned Purchase At Cost

If Markup is 45%.Cost is __%

PP@Retail X.__= 12,012

***REVIEW***

PP at Retail

= Planned Sales 9600

+ EOM (Next BOM) 39600

(to get this must do next month BOM)

+ Planned Reductions 1440

- BOM -28800

= PP at Retail = 21840

#31 -Six Month Merch Plan
31 six month merch plan1
#31 -Six Month Merch Plan

Aug Sept Oct Nov Dec Jan

Last Year 8000 11000 9000 12000 15000 1000

PS x( ) ____ _____ ____ _____ _____ ____

BOM x( ) ____ _____ ____ _____ _____ ____

PR X( ) ____ _____ ____ _____ _____ ____

PP @ R ____ _____ ____ _____ _____ ____

PP@C X( ) ____ _____ ____ _____ _____ ____

dating terms1
Dating Terms
  • Net 30 –from date on invoice
  • 2/10 Net 30-
    • 2% discount if paid in 10 days otherwise full payment due in 30 days
  • 4/15 net 60 –
    • 4% discount if paid in 15 days otherwise full payment due in 60 days
  • 2/10 EOM- End of Month
    • –from end of Month,2% discount 10 days,full payment due at end of Next Month
  • 2/10 net 45 ROG –
    • Full payment due 45 days from the date you receive the goods.
33 dating terms
#33-Dating Terms
  • Extra Dating, Adds that # of Days to Original Date…
  • March 17, 2/10 net 30, 60 extra…
  • 1st – add 60 days to March 17
    • 14-End march, April –30 , May 16
    • May 16 + _____ days for Discount = May __
    • Final Payment +30 = June ______
dating terms pre quiz
Dating Terms Pre-Quiz

6+28+26 = 3/26

8000*.98 = 7840

ordinary

2 / 14

21+9

4/9

6500*.96 =6240

3/25

advanced

29+1

6/1

6250*.98 = 6125

Receipt of goods

5/12

5/31+30

6/30

6/10

2500*.97=2425

End of Month

23+7

10/7

9/17

10,400*.98=10192

ordinary

bright ideas
Bright Ideas
  • Bar codes are everywhere today, on product packages and goods. They are so common you probably don’t even think twice about them. Created by Bernard Silver and Joseph Woodland, the first barcode was born in Troy, Ohio in 1974. What was the first product to carry a UPC barcode?
  • Wrigleys Gum!
  • Why are bar codes so important today?
  • http://www.dailymotion.com/video/x50stp_barcodes-barcodes-barcodes_tech
  • UPC= Universal Product Code
stock and inventory control
Stock and Inventory control
  • The process
    • Receiving Merchandise
    • Checking Merchandise
    • Marking Merchandise
    • Transferring Merchandise
marking merch
Marking Merch.
  • Attaching selling price and other information for customer
  • Source Marking – manufacturer marks with price before delivering to retailer (Frito Lay, apparel, little Debbie, gum)
  • Pre-retailing Marking – seller marks the suggested retail on the invoice (Pepsi)
inventory systems
Inventory Systems
  • Perpetual Inventory System
    • Tracks # of items on a consistent basis
  • Physical Inventory System
    • Visually inspected or counted periodically.
the future
The Future
  • Real-Time Inventory System
    • E-businesses, each time an item is ordered, is automatically deducted from inventory
    • Web site only lists the merchandise it actually has in inventory.
41 average inventory
#41 Average Inventory
  • 1,748,000
  • +150,000
  • =1,898,000
  • / ___ months
  • = ________ Average Inventory
45 stock turnover
45 Stock Turnover

BOM of

  • 34,750
  • 38250
  • 36842
  • 35158 = _________ /
  • Sales for period were $81,900 = ____
51 stock turnover at cost
#51 Stock turnover at cost
  • __Cost of Goods Sold___

Average inventory at Cost

Total COGS = 14,300+15,375+15,300+14,400=_______

Avg Inventory=

40,000+45,000+50,000+55,000/4=_______

shrink
Shrink
  • The difference between the company’s inventory records and what is actually in stock
  • Perpetual shows what you should have
    • Physical shows what you actually have
    • Inventory Shrinkage is the difference between them
what counts
What counts
  • Not Just your sales inventory
    • Could be raw materials
      • Sugar from a bakery
    • Could be supplies
      • post it notes from an office
    • Equipment
      • A saw from a construction co.
who causes shrink
Who causes Shrink
  • Employees
    • Not checking in merchandise properly
  • Customers
    • Breaking products, shoplifting
  • Vendors
    • Shorting on delivery
    • Over charging
    • Not giving proper credit for goods
calculating shrink
Calculating Shrink
  • $ or unit #’s from previous count
  • + purchases company has made
  • - Total Sales transactions
  • = if answer is 0, no shrinkage
  • Most companies expect some shrinkage and plan for it accordingly
59 inventory shrink
#59 Inventory Shrink

Begin Net merch Net Sales Perp. Count Shrink

A. $25,900 $15,000 _______ $26,000 _______ $14,850 _____

B. $26,000 $17,200 _______ $23,000 _______ $20,000 _____