MAR 3023 Ch. 16

Chapter 16: Supply Chain and Channel Management Supply Chain Management is all about getting the product to the customer in the right place and the right time in the most efficient way possible. Marketing Channels Add Value: Convincing wholesalers and retailers to carry new products is difficult. Wholesalers are firms that buy products from manufacturers and resell them to retailers. Retailers sell products directly to consumers. Every participant in the marketing channel adds value because it streamlines what could take a long time in an agrarian economy. Supply Chain Management Affects Other Marketing Decisions: A distribution center , a facility for the receipt, storage, and redistribution of goods to company stores, may be operated by retailers, manufacturers, or distribution specialists. Like a distribution center, instead of shipping to stores, fulfillment centers are used to ship directly to customers. Just-in-time (JIT) Manufacturing is inventory management systems that deliver less merchandise on a more frequent basis than in traditional inventory systems. Designing Marketing Channels: Although there are various constraints on marketing channel partners regarding the design of the best channel structure, all marketing channels take the form of a direct channel, an indirect channel, or some combination thereof.  Direct Marketing Channel: Here, there are no intermediaries between the buyer and seller.  Indirect Marketing Channel: Here, one or more intermediaries work with manufacturers to provide goods and services to customers.  Franchising: This is a contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchisor. This would be considered a hybrid of direct and indirect. Managing the Marketing channel and Supply Chains : If a marketing channel is to run efficiently, the participating members must cooperate. Often, however, supply chain members have conflicting goals, and this may result in channel conflict. There are two types of conflict to keep in mind.  Vertical Channel Conflict: When supply chain members that buy and sell to one another are not in agreement about their goals, roles, or rewards.  Horizontal Channel Conflict: When there is disagreement or discord among members at the same level in a marketing channel, such as two competing retailers or two competing manufacturers. Power in a Marketing Channel: This exists when one firm has the means or ability to dictate the actions of another member at a different level of distribution. There are several bases of power:  Rewards - incentives.  Coercive - punishment  Referent - taking advantage of desperation  Leverage - making decisions based on their experience, shutting the other partner out.  Information - providing or withholding important marketing info.  Legitimate - enforcing a contractual agreement between the two partners.

Successful strategic relationships: they require mutual trust, open communication, common goals, interdependence, and credible commitments. Making Information Flow Through Marketing Channels: this can be from  Customer to Store: UPC's and RFID's  Store to Buyer: POS terminals  Buyer to Manufacturer  Store to Manufacturer  Store to Distribution Center  Manufacturer to Distribution Center & Buyer: ASN's Making Merchandise flow: In general, these are the merchandise flow steps. 1. Sony to Best Buy's distribution centers, or 2. Sony directly to stores. 3. If the merchandise goes through distribution centers, it is then shipped to stores, 4. and then to the customer. 5. Or fulfillment center ships to customers. Decisions that impact the merchandise flow steps include:  Distribution Centers versus Direct Store Delivery  Getting merchandise to customers - this can be done via o Shipping merchandise to stores o Customer store pickup o Delivering merchandise directly to customers from fulfillment center.