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Chapter 11 - Deliver The Goods

This document provides an overview of distribution channels and logistics. It discusses the different types of distribution channels including direct, indirect, and online channels. It describes the functions of intermediaries and why adding intermediaries to a channel must provide value to consumers. The document also outlines key logistics functions like order processing, warehousing, transportation, and inventory control. It provides examples of how companies are using these functions and considering future innovations.

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Karina Gabriella Sanchez
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135 views28 pages

Chapter 11 - Deliver The Goods

This document provides an overview of distribution channels and logistics. It discusses the different types of distribution channels including direct, indirect, and online channels. It describes the functions of intermediaries and why adding intermediaries to a channel must provide value to consumers. The document also outlines key logistics functions like order processing, warehousing, transportation, and inventory control. It provides examples of how companies are using these functions and considering future innovations.

Uploaded by

Karina Gabriella Sanchez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chapter 11- Deliver the Goods

Saturday, September 29, 2018 12:31 PM

LO1 Distribution Channel

Distribution defined
• Physical distribution- all activities
that move finished goods from
manufactures to final costumers.
• Simplelest form is the "Direct Channel"
where the manufacturer sells it
directly to the consumer.
• An indirect channel can have one or
more intermediaries.

• *The supply chain extends before this


point.
• **Note: Retail is part of the
distribution channel.

Why not have all direct?


• Break bulk: Purchase large quantities
of goods from producers but only sell
one or a few at a time to many
Why not have all direct?
• Break bulk: Purchase large quantities
of goods from producers but only sell
one or a few at a time to many
different customers.
• Transport and store: Retailers and
other channel members move the goods
from the production point to other
locations where they can hold them
until consumers want them.
• Create assortments: Provides a variety
of products in one location, some
customers can conveniently buy many
different items from one seller.

Fewer Transactions

25 transactions
25 transactions

10 transactions

Online distribution
• The internet has changed how channel
members coordinate supply chains.
○ Knowledge management of customers,
vertical channel, delivery status,
returns, etc.
• Use of Internet as a distribution
channel.
○ Previously physical good(books, DCs,
DVDs)have been turned into digital
products.
○ Though, digital distribution makes
channel.
○ Previously physical good(books, DCs,
DVDs)have been turned into digital
products.
○ Though, digital distribution makes
piracy (illegal copying) easier.

Key types of intermediaries

• Independent:

○ Merchant wholesaler: buy goods from


manufacturers and sell to
retailers. They take title to goods,
so can suffer losses if the products
are damaged, become obsolete, or
just don’t sell.

○ Merchandise agent/ brokers: provide


service in exchange for commissions
but don’t take title to product (and
may not ever possess the product).

• Manufacturer-Owned: owned business


units that perform the functions of
independents but maintain complete
control over the channel.
Each step
• Each additional touchpoint in the
channel adds:
○ Time: More steps can induce
"Bullwhip effect".
○ Risk: Spoilable, shrinkage, fads
fade.
○ Cost: each firm marks up the price
of the good

• Because there are costs, adding a firm


to the channel must be justified by
value to the consumer.
• Because there are costs, adding a firm
to the channel must be justified by
value to the consumer.

Example B2C channels

• "Hybrid" distribution is when


manufacturer uses more than one of
these. Ex: Starbucks.

Example B2B channels


Place and the 3 Ps

Tough Decisions

• Slotting allowances are fees paid by


producers to large retailers for access
to premium shelf space.
• Product diversion is the distribution
of a product through one or more
• Slotting allowances are fees paid by
producers to large retailers for access
to premium shelf space.
• Product diversion is the distribution
of a product through one or more
channels (into the "grey market") not
authorized by the manufacturer of the
product.
• Selection of large intermediaries like
Walmart can have detrimental effects on
smaller retailers.

LO2 Channel Strategy


Distribution Planning

1. Identify objectives and three-P


tradeoffs with distribution.
2. Considers factors such as speed,
perishability. Also competitive: e.g.
Intensive, selective, or exclusive
access.
3. Covered in the following slides
4. Covered in the following slides
3 Types of channel
4 Channel power

• The channel leader or "channel captain"


is the dominant firm that controls the
channel. Channel power derives from
different potential sources:
○ Economic power: ability to control
resources.
○ Legitimate power: legal authority
(e.g. franchiser)
○ Coercive power: ability to give
(hold) profitable products, typical
in exclusive distribution.
• Step 4: Tactics, comes down to
selecting and managing channel
partners.

Size/intensity of channel

• How many wholesalers and retailers


Size/intensity of channel

• How many wholesalers and retailers


should the firm "allow" (if they have
that kind of control) to carry the
product within a given market?
○ Intensive distribution: maximize
coverage by selling through as many
outlets as possible. EX: convenience
goods.
○ Exclusive distribution: Limit
distribution to a single outlet in a
particular region. Ex: Luxury good.
○ Selective distribution: Seeks to
strike a balance between intensive
and exclusive distribution. Ex:
fashion.

LO3 Logistics and Supply


chain
Logistics and supply chain defined
• Logistics is the process of designing,
managing, and improving the movement of
products through a supply chain.
○ Logistics plays a crucial role in
firms efforts to deliver on their
brand's promise.
• Supply chain is all activities needed
to turn raw materials into product
delivered to a customer (and, some say,
dispose of the product).

Logistics functions
to turn raw materials into product
delivered to a customer (and, some say,
dispose of the product).

Logistics functions

• Order Processing: Activities between


time an order comes in and the product
goes out. Automated with ERP software.
• Warehousing: Storage anticipating a
sale (or transfer to another firm in
the channel).
• Materials handling: Movement of
products into, within, and out of
warehouse. Reduce touches (lowers
damage and cost).
• Transportation: assesses dependability,
cost, speed of delivery, accessibility,
capability, traceability.
• Inventory control: ensures goods are
available to meet customers demands.
Service levels (stock outs). JIT.
Transportation

• Transporters offers values in many


ways:
○ Dependability: safe and on time
○ Speed of delivery: moves goods
quickly.
○ Accessibility: number/type of access
points
○ Capability: handling a variety of
products. Large, small, fragile,
chilled.
○ Traceability: Can locate goods in
shipment.

Inventory Control

• Ensures goods are available and


suitable to meet customers needs.
• Manages service levels (stock outs).
• Can reduce costs by "just in time"
inventory delivery.
• Ensures goods are available and
suitable to meet customers needs.
• Manages service levels (stock outs).
• Can reduce costs by "just in time"
inventory delivery.
• Can also manage quality control
(suitable).
○ After exposing many customers to E.
coli, Chipotle now requires
suppliers to use "DNA Based Tests"
on shipments to ensure they are free
from bacteria.

Imagine a future when…

• Dominos delivers via self-driving car


• Your car runs your errands while you
work.
• You get in a self-driving Lyft and can
choose:
○ Drive to a restaurant you choose
○ The car will take you to a new Thai
place that picks up the Lyft charge
there and home.

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