Chapter 8 Distribution channels and logistics management The learning objectives The nature of distribution channels Channel behavior and organization Channel design decisions Channel management decision Physical distribution and logistics management 1.The nature of distribution channels What is distribution? Why are marketing intermediaries used? The function of distribution channel Channel level What is distribution channel? A set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. How a Distributor Reduces the Number of Channel Transactions 1 2 3 4 5 6 A. Number of contacts without a distributor MxC=3X3=9 7 8 9 = Manufacturer = Customer How a Distributor Reduces the Number of Channel Transactions 1 B. Number of contacts with a distributor MxC=3+3=6 4 Store 2 5 3 = Manufacturer 6 = Customer = Distributor Distribution Channel Functions Information Transfer Payments Physical Distribution Risk Taking Communication Negotiation Ordering Financing Consumer Marketing Channels 0-level channel Manufacturer Consumer 1-level channel Manufacturer Retailer Consumer Retailer Consumer Retailer Consumer 2-level channel Mfg Wholesaler 3-level channel Mfg Wholesaler Jobber Industrial distributors Manufacturer’s representative Manufacturer’s sales branch Consumer Manufacturer Industrial Marketing Channels Customers’ Desired Service Levels Lot size Waiting time Spatial convenience Product variety Service backup Why are marketing intermediaries used? Distribution channel function Information Promotion Contact Matching negotiation Channel level Channel behavior and organization Channel conflict Vertical marketing system Horizontal marketing system Hybrid marketing systems Types of Vertical Marketing Systems Corporate Common Ownership at Different Levels of the Channel Administered Leadership is Assumed by One or a Few Dominant Members Contractual Contractual Agreement Among Channel Members Conventional Distribution Channel vs. Vertical Marketing Systems Vertical marketing channel Manufacturer Manufacturer Wholesaler Retailer Wholesaler Conventional marketing channel Retailer Consumer Consumer Channel conflict Horizontal conflict Vertical conflict Vertical marketing systems Conventional distribution VMS Corporate VMS Contractual VMS Administered VMS Franchise organization Horizontal marketing system Hybrid marketing channel 2.channel design decision Analyzing consumer service needs Setting channel objectives and constraints Identifying major alternatives Evaluating the major alternatives Identifying major alternative Types of intermediaries Number of marketing intermediaries Responsibilities of channel members Break-Even Cost Chart Manufacturer’s sales agency Company sales force Selling costs (dollars) SB Level of sales (dollars) Number of marketing intermediaries Intensive distribution Exclusive distribution Selective distribution 3.Channel management Decision Selecting channel members Motivating channel members Evaluating channel members Channel Management Decisions Training Motivating Evaluating FEEDBACK Selecting 4.physical distribution and logistics management Physical distribution(marketing logistics) major logistics function Integrated logistics management Third-party logistics Major logistics function Order processing Warehousing Inventory transportation Integrated logistics management Cross-functional teamwork inside the company Building channel partnerships Third-party logistics An independent logistics provider that performs any or all of the functions required to get their clients’ product to market.