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Chapter 12 - Distribution Channels
Chapter 12 - Distribution Channels
Distribution Centres – a facility for the receipt, storage, and redistribution of goods to company stores
or customers; may be operated by retailers, manufacturers, of distribution specialists.
Distribution centres are an important component in adding value (each party in the SC adds value):
- Buying: retailers of wholesalers
- Selling: manufacturers or wholesalers
- Facilitation of exchange: transportation companies
Functions Performed by Intermediaries (main goal being: reduce the number of marketplace contacts,
resulting in more efficient systems)
Transactional
- Buying – purchase goods for resale to other intermediaries or consumers
- Risk taking – own inventory that can be outdated
- Promotion – promote products to attract consumers
- Selling – transact with potential customers
Logistical
- Physical Distribution – transport goods to point of purchase
- Risk Taking – maintain inventory and protect goods
Facilitating
- Gathering Info – share competitive intelligence about customers or other channel members
- Financing – extend credit and other financial services to consumers
Channel Conflict – when channel members are not in agreement about their goals, roles, or rewards,
channel conflict results
Horizontal Conflict – conflict at the same level of the SC
Vertical Conflict – conflict between different levels of the SC. More formal, less conflict.
To avoid vertical channel conflicts: open, honest communication. Conflict is more likely in
independent channels rather than vertical.
Distribution Intensity – the number of channel members to use at each level or the SC
Intensive – designed to get products into as many outlets as possible
Exclusive - granting exclusive rights to sell to one or very few retail customers so no other customers
can sell a particular brand.
Selective – lies between the intensive and exclusive, uses a few selected customers in a territory.
Vendor-managed Inventory
- An approach for improving marking channel efficiency in which the manufacturer is
responsible for maintain the retailer’s inventory levels in each of its stores.
Floor-ready merchandise
- Ready to be placed on the selling floor
- Create price & ID labels
- Suppliers sometimes ship floor-ready
Shipping to stores
- A complex process for multistore chains
- Sophisticated computer systems are used
JIT (or QR) - inventory management system aimed to reduce waste within the organization by
producing only what is needed when it is needed.
- Reduced lead time
- Increased product availability and lower inventory investment