Place: the final frontier
Supply chain: All the activities necessary to turn raw materials into a good or service and put it in
the hands of the consumer or business customer.
Links in the supply chain
Supply chain management: The management of flows among firms in the supply chain to
maximize total profitability.
Insourcing: A practice in which a company contracts with a specialist firm to handle all or
part of its supply chain operations.
Channel of distribution: The series of firms or individuals that facilitates the movement of a
product from the producer to the final customer.
Distribution channels: get it there
Channel intermediaries: Firms or individuals such as wholesalers, agents, brokers, or
retailers who help move a product from the producer to the consumer or business user; an
older term for intermediaries is middlemen.
Functions of distribution channels
Breaking bulk: Dividing larger quantities of goods into smaller lots in order to meet the
needs of buyers.
Creating assortments: Providing a variety of products in one location to meet the needs of
Facilitating functions: Functions of channel intermediaries that make the purchase process
easier for customers and manufactures.
The internet in the distribution channel
Disintermediation (of the channel of distribution): The elimination of some layers of the
channel of distribution in order to cut costs and improve the efficiency of the channel.
Knowledge management: A comprehensive approach to collecting, organizing, storing, and
retrieving a firm’s information assets.
Online distribution piracy: The theft and unauthorized repurposing of intellectual property
via the internet.
Wholesaling intermediaries: Firms that handle the flow of products from the manufacturer
to the retailer or business user.
Independent intermediaries: Channel intermediaries that are not controlled by any
manufacturer but instead do business with many different manufacturers and many
Merchant wholesalers: Intermediaries that buy goods from manufacturer (take title to them)
and sell to retailers and other B2B customers.
Take tile: To accept legal ownership of a product and assume the accompanying rights and
responsibilities of ownership.
Merchandise agents or brokers
Merchandise agents or brokers: Channel intermediaries that provide services in exchange
for commissions but never take title to the product.
Types of distribution channels
Channel levels: The number of distinct categories of intermediaries that populate a channel
Dual and hybrid distribution systems
Hybrid marketing system: A marketing system that uses a number of different channels and
communication methods to serve a target market.
Plan a channel strategy
Step1: develop distribution objectives
Step2: evaluate internal and external environmental influences
Step3: choose a distributions strategy
Conventional, vertical, or horizontal marketing system? Conventional marketing system: A multiple-level distribution channel in which channel
members work independently of one another.
Vertical marketing system (VMS): A channel of distribution in which there is formal
cooperation among members at the manufacturing, wholesaling, and retailing levels.
Horizontal marketing system: An arrangement within a channel of distribution in which two
or more firms at the same channel level work together for a common purpose.
Intensive, exclusive, or selective distribution?
Intensive distribution: Selling a product through all suitable wholesalers or retailers that are
willing to stock and sell the product.
Exclusive distribution: Selling a product only through a single outlet in a particular region.
Selective distribution: Distribution using fewer outlets than intensive distribution but more
than exclusive distribution.
Step4: Develop distribution tactics
Manage the channel
Channel leader: A firm at one level of distribution that takes a leadership role, establishing
operating norms and processes based on its power relative to other channel members.
Logistics: implement the supply chain
Logistics: The process of designing, managing, and improving the movement of products
through the supply chain; it includes purchasing, manufacturing, storage, and transport.
Physical distribution: The activities that move finished goods from manufacturers to final
customers, including order processing, warehousing, materials handling, transportation, and
Order processing: The series of activities that occurs between the time an order comes into
the organization and the time a product goes out the door.
Enterprise resource planning (ERP) system: A software system that integrates information
form across the entire company, including finance, order fulfillment, manufacturing, and
transportation and then facilitates sharing of the data throughout the firm.
Warehousing: Storing goods in anticipation of sale or transfer to another member of the
channel of distribution.
Materials handling: The moving of products into, within, and out of warehouses.
Transportation: The mode by which products move among channel members.
Inventory control: JIT, RFID, and fast fashion
Inventory control: Activities to ensure that goods are always available to meet customers’
Radio frequency identification (RFID): Product tags with tiny chips containing information
about the item’s content, origin, and destination.
Just in time (JIT): Inventory management and purchasing processes that manufacturers and
resellers use to reduce inventory to very low levels and ensure that deliveries from suppliers
arrive only when needed.
Retailing: special delivery
Retailing: The final stop in the distribution channel in which organizations sell goods and
services to consumers for their personal use.
The evolution of retailing
The wheel of retailing
Wheel-of-retailing hypothesis: A theory that explains