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2C - Distribution Channels and Logistics Management
2C - Distribution Channels and Logistics Management
2C - Distribution Channels and Logistics Management
12-1
Distribution Channels
and
Logistics Management
What
What is
is aa Distribution
Distribution Channel?
Channel?
A set of interdependent organizations
(intermediaries) involved in the process of
making a product or service available for
use or consumption by the consumer or
business user.
Channel decisions are among the most
important decisions that management
faces and will directly affect every other
marketing decision.
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Why
Why are
are Marketing
Marketing Intermediaries
Intermediaries
Used?
Used?
Greater efficiency in making goods
available to target markets.
Offer the firm more than it can achieve on
its own through the intermediaries:
Contacts
Experience
Specialization
Scale of operation
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Distribution
Distribution Channel
Channel Functions
Functions
All
Risk
Risk Taking
Taking
Information
Information
Financing
Financing
Promotion
Promotion
Physical
Physical
Distribution
Distribution
Contact
Contact
Negotiation
Negotiation
Matching
Matching
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Consumer
Consumer Marketing
Marketing Channels
Channels &
& Levels
Levels
Channel Level - A Layer of Intermediaries that Perform Some Work in
Bringing the Product and its Ownership Closer to the Buyer.
Channel 1
Direct
Direct
M
M
CC
Indirect
Indirect
Channel 2
M
M
RR
CC
RR
CC
RR
CC
Channel 3
M
M
W
W
Channel 4
M
M
W
W
JJ
Channel
Channel Behavior
Behavior &
& Conflict
Conflict
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Types
Types of
of Vertical
Vertical Marketing
Marketing Systems
Systems
Greater
Corporate
Corporate
Common
Common Ownership
Ownership at
at Different
Different
Levels
Levels of
of the
the Channel
Channel
Degree
Degree
of
of
Direct
Direct
Control
Control
Contractual
Contractual
Contractual
Contractual Agreement
Agreement Among
Among
Channel
Channel Members
Members
Administered
Administered
Lesser
Leadership
Leadership is
is Assumed
Assumed by
by One
One or
or
aa Few
Few Dominant
Dominant Members
Members
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Vertical
Vertical Marketing
Marketing Systems
Systems
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Vertical
Vertical
Marketing
Marketing
Systems
Systems (VMS)
(VMS)
Contractual
Contractual
VMS
VMS
Corporate
Corporate
VMS
VMS
Wholesaler
Wholesaler
Sponsored
Sponsored
Voluntary
VoluntaryChain
Chain
Retailer
Retailer
Cooperatives
Cooperatives
ManufacturerManufacturerSponsored
Sponsored
Retailer
Retailer
Franchise
Franchise System
System
ManufacturerManufacturerSponsored
Sponsored
Wholesaler
Wholesaler
Franchise
FranchiseSystem
System
Administered
Administered
VMS
VMS
Franchise
Franchise
Organizations
Organizations
Service-FirmService-FirmSponsored
Sponsored
Franchise
FranchiseSystem
System
Innovations
Innovations in
in Marketing
Marketing Systems
Systems
Horizontal
HorizontalMarketing
Marketing
System
System
Hybrid
HybridMarketing
Marketing
System
System
Two or More
Companies at One
Channel Level Join
Together to Follow a
New Marketing
Opportunity.
Example:
Example:
Banks in Grocery
Stores
Retailers, Catalogs,
and Sales Force
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Channel
Channel Design
Design Decisions
Decisions
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Analyzing
Analyzing Consumer
Consumer Service
Service Needs
Needs
Setting
Setting Channel
Channel Objectives
Objectives &
& Constraints
Constraints
Identifying
Identifying Major
Major Alternatives
Alternatives
Intensive
Intensive
Distribution
Distribution
Selective
Selective
Distribution
Distribution
Exclusive
Exclusive
Distribution
Distribution
Evaluating
Evaluating the
the Major
Major Alternatives
Alternatives
Channel
Channel Management
Management Decisions
Decisions
Motivating
Motivating
Evaluating
Evaluating
FEEDBACK
Selecting
Selecting
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Nature
Nature and
and Importance
Importance of
of Marketing
Marketing
Logistics
Logistics
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Goals
Goals of
of the
the Logistics
Logistics System
System
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12-13
Logistics
Logistics Systems
Systems
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12-14
Order
OrderProcessing
Processing
Costs
Costs
Submitted
Submitted
Processed
Processed
Shipped
Shipped
Minimize
MinimizeCosts
Costsof
of
Attaining
AttainingLogistics
Logistics
Objectives
Objectives
Logistics
Functions
Transportation
Warehousing
Warehousing
Storage
Storage
Distribution
Distribution
Water, Truck,
Rail,
Pipeline & Air
Inventory
Inventory
When
Whento
toorder
order
How
Howmuch
muchto
toorder
order
Just-in-time
Just-in-time
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Transportation
Transportation Modes
Modes
Rail
Rail
Nations
Nationslargest
largestcarrier,
carrier,cost-effective
cost-effective
for
forshipping
shippingbulk
bulkproducts,
products,piggyback
piggyback
Truck
Truck
Flexible
Flexiblein
inrouting
routing&&time
timeschedules,
schedules,efficient
efficient
for
forshort-hauls
short-haulsof
ofhigh
highvalue
valuegoods
goods
Water
Water
Low
Lowcost
costfor
forshipping
shippingbulky,
bulky,low-value
low-value
goods,
goods,slowest
slowestform
form
Pipeline
Pipeline
Ship
Shippetroleum,
petroleum,natural
naturalgas,
gas,and
andchemicals
chemicals
from
fromsources
sourcesto
tomarkets
markets
Air
Air
High
Highcost,
cost,ideal
idealwhen
whenspeed
speedis
isneeded
neededor
orto
to
ship
shiphigh-value,
high-value,low-bulk
low-bulkitems
items
Choosing
Choosing Transportation
Transportation
Modes
Modes
Checklist for Choosing
Transportation Modes
1. Speed.
2. Dependability.
3. Capability.
4. Availability.
5. Cost.
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Integrated
Integrated Logistics
Logistics Management
Management
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