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Chapter 12

Management and Organizational Studies 2320A/B Chapter 12: Chapter 12


Department
Management and Organizational Studies
Course Code
MOS 2320A/B
Professor
Ben Marcus
Chapter
12

This preview shows pages 1-2. to view the full 6 pages of the document.
DISTRIBUTION CHANNELS
Distribution channel - the institutions that transfer the ownership of and move goods
from the point of production to the point of consumption
Supply chain management - refers to the set of approaches and techniques firms
employ to efficiently and effectively integrate their suppliers, manufacturers,
warehouses, stores, and transportation intermediaries into a seamless value chain in
which merchandise is produced and distributed in the right quantities, to the right
locations, and at the right time
Focuses on the relationships among members of the supply chain and the need
to coordinate efforts to provide customers with the best value
-
Wholesalers - those firms engaged in buying, taking title to, and often storing and
physically handling goods in large quantities, and then reselling the goods to retailers
or industrial users
Retailers - sell products directly to consumers
Logistics management - the integration of two or more activities for the purpose of
planning, implementing, and controlling the efficient flow of raw materials, in-process
inventory, and finished goods from the point of origin to the point of consumption
May include customer service, demand forecasting, inventory control, etc.
-
Traditionally focused on operations (distribution management more focused on
marketing)
-
Goal to keep costs low
-
DESIGNING DISTRIBUTION CHANNELS
Channel Structure
When first starting not really an option of the "best" structure
-
See exhibit 12.2
-
Direct distribution - allow manufacturers to deal directly with consumers
Some companies may be forced to this if they can't afford retail space
-
Indirect distribution - one or more intermediaries work with manufacturers to provide
goods and services to consumers
Wholesalers often used when a company does not buy a sufficient quantity to
make it cost-effective for a manufacturer to deal directly with a retailer
Common for low cost, low unit value products
-
Multichannel distribution - use a combination of direct and indirect channels
Best to reach both consumers and business customers
-
Push vs. Pull Distribution Strategies
Push marketing strategy - designed to increase demand by focusing on wholesalers,
distributors, or salespeople, who push the product to consumers via distribution
channels
Pull marketing strategy - designed to get consumers to pull the product into the
supply chain by demanding retailers carry it
Usually used if channel members are reluctant to stock a product
-
Distribution Intensity
The number of channel member to use at each level of the supply chain
-
Commonly divided into 3 levels…
-
Intensive distribution - a strategy designed to get products into as many outlets as
possible
Hoping for exposure to directly increase sales
-
Exclusive distribution - strategy of granting exclusive rights to sell to one or very few
retail customers so no other customers can sell a particular brand
Benefits manufacturers by assuring the most appropriate customers represent
their products
-
Ensures sufficient inventory
-
Selective distribution - lies between intensive and exclusive, uses a few selected
customers in a region
DISTRIBUTION CHANNELS ADD VALUE
Each participant in the supply chain adds value
-
Distribution centre - a facility for the receipt, storage, and redistribution of goods to
company stores or customers
May be operated by retailers, manufacturers, or distribution specialists
-
Managing Distribution Channels
Channel conflict - results when supply chain members are not in agreement about
their goals, roles, or rewards
Avoiding requires open communication
-
Vertical marketing systems - a supply chain in which the members act as a unified
system
Conflict happens more when the members are independent entities
-
Administered: no common ownership and no contractual relationships, but the
dominant channel member controls the channel relationship
-
Contractual: independent firms at different levels of the supply chain join
together through contracts to obtain economies of scale and coordination to
reduce conflict
Most common
-
Franchising: a contractual agreement between a franchisor and a franchisee to
operate a retail outlet, using a name and a format developed and supported by
the franchisor
Franchisee pays a lump sum plus a royalty on all sales in return for the
right to operate a business in a specific location
Also have to operate under certain regulations
-
Corporate: parent company has complete control and can dictate the priorities
and objectives of the supply chain
May own facilities such as manufacturing plants, warehouse facilities,
retail outlets, and design studios
-
LOGISTICS MANAGEMENT: INFORMATION FLOWS
Flow 1: Customer to Store
UPC codes
-
Flow 2: Store to Buyer
POS terminal records
Sales info incorporated into inventory management
-
Flow 3: Buyer to Manufacturer
Purchase information from each retail location aggregated to create a
new order of merchandise to manufacturer
-
Flow 4: Store to Manufacturer
Transaction data sent directly to manufacturer
-
Flow 5: Store to Distribution Centre
Coordinate deliveries and keep track of inventory
-
Data Warehouse
Consumers' purchase data collected at POS going into a huge database
-
Can be accessed based on level of merchandise aggregation or level of the
company or by point in time
-
Electronic Data Interchange (EDI)
The computer to computer exchange of business documents from a retailer to a
vendor and back
-
Enables vendors to transmit info about on-hand inventory status, vendor
promotions, cost changes, etc.
-
Advanced shipping notice - an electronic document that the supplier sends the
retailer in advance of a shipment to tell the retailer exactly what to expect in the
shipment
Managing Supply Chain Through Strategic Relationships
Strategic relationship - a supply chain relationship that the members are committed
to maintaining long term, investing in opportunities that are mutually beneficial
Requires mutual trust, open communication, common goals, and credible
commitments
-
When vendors and buyers trust each other, they're more willing to share
relevant ideas, clarify goals, and communicate efficiently
-
Supply chain members need to understand what is driving each others'
businesses, their roles in the relationship, each firm's strategies, and any
problems that may arise over the course of the relationship
-
Shared goals give both members of the relationship and incentive to pool their
strengths and abilities and exploit potential opportunities together
-
Credible commitments include spending money to improve the products or
services offered to the customer
-
LOGISTICS MANAGEMENT: MERCHANDISE FLOWS
Inbound Transportation
Dispatcher - the person who coordinates deliveries to distribution centres
Receiving and Checking
Receiving - the process of recording the receipt of merchandise as it arrives to a
distribution centre or store
Checking - the process of going through the goods upon receipt to ensure they arrived
undamaged and that the merchandise ordered was the merchandise received
Most systems use EDI or RFID tags
Eliminates need to handle goods individually
-
Storing and Cross-Docking
Most modern distribution centres combine the two
-
Storing - traditional distribution centre, warehouse in which merchandise is unloaded
and stored on shelves
When needed in stores, material-handling equipment transports it to a staging
area where it's consolidated and made ready for stores
-
Cross-docking - Vendors ship merchandise prepackaged in the quantity required for
each store
Merchandise already contains price and theft detection tags
-
Merchandise ready for sale and goes directly to staging rather than storage
-
Getting Merchandise Floor-Ready
Ticketing, marking, etc.
-
More efficient to be done at a distribution centre rather than in stores
-
Shipping Merchandise to Stores
Complex for multistore chains
-
Use sophisticated routing and scheduling computer systems
-
Just-In-Time (JIT) Inventory Systems
Inventory management systems designed to deliver less merchandise on a more
frequent basis than traditional inventory systems
-
The firm gets the merchandise just in time for it to be used in the manufacture
of another product
-
Reduces lead time - the amount of time between the recognition that an order
needs to be placed and the arrival of the needed merchandise at a seller's store,
ready for sale
-
Chapter 12
Sunday, March 18, 2018
2:41 PM

Only pages 1-2 are available for preview. Some parts have been intentionally blurred.

DISTRIBUTION CHANNELS
Distribution channel - the institutions that transfer the ownership of and move goods
from the point of production to the point of consumption
Supply chain management - refers to the set of approaches and techniques firms
employ to efficiently and effectively integrate their suppliers, manufacturers,
warehouses, stores, and transportation intermediaries into a seamless value chain in
which merchandise is produced and distributed in the right quantities, to the right
locations, and at the right time
Focuses on the relationships among members of the supply chain and the need
to coordinate efforts to provide customers with the best value
-
Wholesalers - those firms engaged in buying, taking title to, and often storing and
physically handling goods in large quantities, and then reselling the goods to retailers
or industrial users
Retailers - sell products directly to consumers
Logistics management - the integration of two or more activities for the purpose of
planning, implementing, and controlling the efficient flow of raw materials, in-process
inventory, and finished goods from the point of origin to the point of consumption
May include customer service, demand forecasting, inventory control, etc.
-
Traditionally focused on operations (distribution management more focused on
marketing)
-
Goal to keep costs low
-
DESIGNING DISTRIBUTION CHANNELS
Channel Structure
When first starting not really an option of the "best" structure
-
See exhibit 12.2
-
Direct distribution - allow manufacturers to deal directly with consumers
Some companies may be forced to this if they can't afford retail space
-
Indirect distribution - one or more intermediaries work with manufacturers to provide
goods and services to consumers
Wholesalers often used when a company does not buy a sufficient quantity to
make it cost-effective for a manufacturer to deal directly with a retailer
Common for low cost, low unit value products
-
Multichannel distribution - use a combination of direct and indirect channels
Best to reach both consumers and business customers
-
Push vs. Pull Distribution Strategies
Push marketing strategy - designed to increase demand by focusing on wholesalers,
distributors, or salespeople, who push the product to consumers via distribution
channels
Pull marketing strategy - designed to get consumers to pull the product into the
supply chain by demanding retailers carry it
Usually used if channel members are reluctant to stock a product
-
Distribution Intensity
The number of channel member to use at each level of the supply chain
-
Commonly divided into 3 levels…
-
Intensive distribution - a strategy designed to get products into as many outlets as
possible
Hoping for exposure to directly increase sales
-
Exclusive distribution - strategy of granting exclusive rights to sell to one or very few
retail customers so no other customers can sell a particular brand
Benefits manufacturers by assuring the most appropriate customers represent
their products
-
Ensures sufficient inventory
-
Selective distribution - lies between intensive and exclusive, uses a few selected
customers in a region
DISTRIBUTION CHANNELS ADD VALUE
Each participant in the supply chain adds value
-
Distribution centre - a facility for the receipt, storage, and redistribution of goods to
company stores or customers
May be operated by retailers, manufacturers, or distribution specialists
-
Managing Distribution Channels
Channel conflict - results when supply chain members are not in agreement about
their goals, roles, or rewards
Avoiding requires open communication
-
Vertical marketing systems - a supply chain in which the members act as a unified
system
Conflict happens more when the members are independent entities
-
Administered: no common ownership and no contractual relationships, but the
dominant channel member controls the channel relationship
-
Contractual: independent firms at different levels of the supply chain join
together through contracts to obtain economies of scale and coordination to
reduce conflict
Most common
-
Franchising: a contractual agreement between a franchisor and a franchisee to
operate a retail outlet, using a name and a format developed and supported by
the franchisor
Franchisee pays a lump sum plus a royalty on all sales in return for the
right to operate a business in a specific location
Also have to operate under certain regulations
-
Corporate: parent company has complete control and can dictate the priorities
and objectives of the supply chain
May own facilities such as manufacturing plants, warehouse facilities,
retail outlets, and design studios
-
LOGISTICS MANAGEMENT: INFORMATION FLOWS
Flow 1: Customer to Store
UPC codes
-
Flow 2: Store to Buyer
POS terminal records
Sales info incorporated into inventory management
-
Flow 3: Buyer to Manufacturer
Purchase information from each retail location aggregated to create a
new order of merchandise to manufacturer
-
Flow 4: Store to Manufacturer
Transaction data sent directly to manufacturer
-
Flow 5: Store to Distribution Centre
Coordinate deliveries and keep track of inventory
-
Data Warehouse
Consumers' purchase data collected at POS going into a huge database
-
Can be accessed based on level of merchandise aggregation or level of the
company or by point in time
-
Electronic Data Interchange (EDI)
The computer to computer exchange of business documents from a retailer to a
vendor and back
-
Enables vendors to transmit info about on-hand inventory status, vendor
promotions, cost changes, etc.
-
Advanced shipping notice - an electronic document that the supplier sends the
retailer in advance of a shipment to tell the retailer exactly what to expect in the
shipment
Managing Supply Chain Through Strategic Relationships
Strategic relationship - a supply chain relationship that the members are committed
to maintaining long term, investing in opportunities that are mutually beneficial
Requires mutual trust, open communication, common goals, and credible
commitments
-
When vendors and buyers trust each other, they're more willing to share
relevant ideas, clarify goals, and communicate efficiently
-
Supply chain members need to understand what is driving each others'
businesses, their roles in the relationship, each firm's strategies, and any
problems that may arise over the course of the relationship
-
Shared goals give both members of the relationship and incentive to pool their
strengths and abilities and exploit potential opportunities together
-
Credible commitments include spending money to improve the products or
services offered to the customer
-
LOGISTICS MANAGEMENT: MERCHANDISE FLOWS
Inbound Transportation
Dispatcher - the person who coordinates deliveries to distribution centres
Receiving and Checking
Receiving - the process of recording the receipt of merchandise as it arrives to a
distribution centre or store
Checking - the process of going through the goods upon receipt to ensure they arrived
undamaged and that the merchandise ordered was the merchandise received
Most systems use EDI or RFID tags
Eliminates need to handle goods individually
-
Storing and Cross-Docking
Most modern distribution centres combine the two
-
Storing - traditional distribution centre, warehouse in which merchandise is unloaded
and stored on shelves
When needed in stores, material-handling equipment transports it to a staging
area where it's consolidated and made ready for stores
-
Cross-docking - Vendors ship merchandise prepackaged in the quantity required for
each store
Merchandise already contains price and theft detection tags
-
Merchandise ready for sale and goes directly to staging rather than storage
-
Getting Merchandise Floor-Ready
Ticketing, marking, etc.
-
More efficient to be done at a distribution centre rather than in stores
-
Shipping Merchandise to Stores
Complex for multistore chains
-
Use sophisticated routing and scheduling computer systems
-
Just-In-Time (JIT) Inventory Systems
Inventory management systems designed to deliver less merchandise on a more
frequent basis than traditional inventory systems
-
The firm gets the merchandise just in time for it to be used in the manufacture
of another product
-
Reduces lead time - the amount of time between the recognition that an order
needs to be placed and the arrival of the needed merchandise at a seller's store,
ready for sale
-
Chapter 12
Sunday, March 18, 2018 2:41 PM
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