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Ch 16 Marketing

marketing channel management is also known as
supply chain management
supply chain management
set of approaches and techniques firms employ to efficiently and effectively integrate suppliers, manu, warehouses, stores, and transport intermediaries into a seamless operation in which merch is produced and dist in right q, right place, and right time
supply chain mgmt reduces
systemwide costs while satisfying the service levels customers require
supply chain mgmt adds value by
getting products to customers efficiently, quickly, and at a low cost
firms that buy products from manu and resell them to retailers
(retailers sell products directly to consumers)
*some retail chains function as both retailers and wholesales ie. costco
viral marketing program
encourages people to pass along a marketing message to other potential consumers
each participant in the marketing channel ___ ____
adds value
*but also increases costs
distribution center
facility for receipt, storage, and redistribution of goods to company stores, may be operated by retailers, manufacturers, retailers, or dist specialists
fulfillment center
used to ship directly to customers
types of marketing channels
direct marketing channel
indirect marketing channel
direct marketing channel
no intermediatiries btw buyer and seller
typically, seller is manu
indirect marketing channel
one or more intermediaries work w manu to provide goods and services to customers
wholesalers more common when
company does not buy in sufficient q to make it cost effective for manu to deal with them directly
or in less developed econ where retailers are rare
managing the marketing channel and supply chain
buying entities: retailers, wholesalers
sellers: manu or wholesaleres
facilitators of exchange: transport co

conflicting goals create conflict

vertical channel conflict
supply chain members that buy and sell to one another are not in agreement about their goals, roles, or rewards
common goals create incentive to cooperate
horizontal channel conflict
disagreement or discord among members at the same level in a marketing channel,, such as two competing retailers or two competing manufacturers
ways to manage supply chain (2)
1 – through vertical marketing systems
2 – develop strong relationships with partners
conflict is more pronounced when channel members are
independent entities
independent or conventional marketing channel
several independent members (manu, wholesaler, retailr) attempt to satisfy their own objectives and max their profits at the expense of other members
– none of members have control over the others
vertical marketing system
marketing channel in which the members act as a unified system
3 types: administered, contractual, corporate
diff types reflect increasing formalization and control
the more ______ the vertical marketing system, the ____ likely conflict is to ensue
more formal = less conflict
administered vertical marketing system
no common ownership or contractual relationships, dominant channel member controls or holds the balance of power
(see types of power)
types of power
exists when one firm has the means or ability to dictate the actions of another member at a different level of distribution
reward, coercive, referent, expertise, information, or legitimate (contract)
contractual vertical marketing system
indep firms at diff levels of the marketing channel join through contracts to obtain economies of scale and coordination and to reduce conflict
ie. franchising
most common type of CVMA
contractual agreement btw franchisor and franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the frachisor
top 10 franchises of 2014
anytime fitness, hampton hotels, subway, supercuts, jimmy johns, 7-11, servpro, dennys, pizza hut, dunkin donuts
franchise contract
franchisee pays lump sum plus royalty on sales in return for right to operate in specific location
franchisor provides assistance locating and developing, training and ads
a franchise system combines
the entrepreneurial adv of owning a biz with the efficiencies of a vertical marketing system that functions under single ownership
corporate vertical marketing system
parent company has complete control and can dictate the priorities and objectives of the marketing channel bc it owns multiple segments of the channel (manu plants, warehouses, retail outlets)
potential conflict is lessened
managing marketing channels and supply chains through strategic relationships
mutual trust
open communication
common goals
credible commitments
strategic relationship or partnering relationship
marketing channel members are committed to maintaining the relationship over the long term and investing in opps that are mutually beneficial
mutual trust
belief that a partner is benevolent and honest
will be more willing to share relevant ideas, clarify goals, and communicate efficiently
monitoring supply chain members becomes pertinent when suppliers
are located in less developed countries
open communication
share info, develop forecasts together, and coordinate deliveries
common goals
incentive to pool strengths and abilities to exploit potential ops together
develop deeper long-term relationships based on mutual benefits
credible commitments
involve spending money to improve the products or services provided to customer or the info tech
making info flow through marketing channels
6 flows
flow 1 (customer to store)
sales associate scan UPC tag
universal product code tag
13 digit code indicating manufacturer, descrip of item, info about packaging and promotions
may be replaced with RFID
flow 1 – customer to store
flow 2 (store to buyer)
POS terminal records purchase info and sends electronically to the buyer at the corporate office
-monitor and analyse sales
flow 3 (buyer to manufacturer)
purchase info aggregated by retailer as a whole, who then makes an order for new merch and sends it to the manufacturer
flow 4 (store to manufacturer)
sometimes sales data goes directly to manu so they can decide when to ship new merchandise to distribution centers
sometimes order process done automatically
flow 5 (store to distribution center)
coordinate deliveries nd check inventory status
flow 6 (manufacturer to distribution center & buyer)
ASN – advanced shipping notice
advanced shipping notice – electronic document that supplier sends the retailer in advance of a shipment to tell the retailer exactly what they expect in the shipment
Data warehouse
purchase data collected at POS (flow 2) foes into huge database known as warehouse
EDI and supply chain systems (vendor managed inventory)
Electronic data interchange
computer to computer exchange of business docs from a retailer to a vendor and back
-purchase orders, invoices, data about returned merch
-purchase order changes, order status, retail prices, transport routes
*quicker with fewer errors in data
vendor managed inventory
improves marketing channel efficiency in which the manufacturer is responsible for maintaining the retailers inventory levels in each of its stores
by sharing the data in the retailer’s data warehouse and communicating the info via EDI
the manuf automatically sends merch to retailers store or dist/ fulfillment center when the inventory at the store reaches a specified level
VMI can reduce
vendor and retailer costs
role shift – selling items instead of managing inventory at the stores
distribution centers vs direct store delivery
consider 1. total cost associated with each
2. customer service criterion of having the right merch at teh store when customer wants to buy it
(depends on nature of demand)
distribution centers
manufacturer to distribution center (to store)
distribution centers benefits
-more accurate sales forecasts when many stores are combined and serviced by one DC
-retailers carry less merch
-easier to avoid running out of stock, order from DC as needed
-retail store space more expensive
direct store delivery
manufacturer to store
direct store delivery benefits
-if retailer has few outlets or concentrated in metropolitan area
-perishable goods or trends
distributions (or fulfillment) center
performs: management of inbound transportation, receiving and checking, storing and cross docking, get merch floor ready, ticketing and marking, preparing to ship merch to store, shipping merch to store
management of inbound transportation (dist center)
buyers and planners coordinate physical flow of merch to stores
employees responsible for the financial planing and analysis of merch and its allocation to stores
person who coordinates deliveries to distribution center
retailers lower net merchandise cost if they negotiate directly with trucking co to consolidate shipments
receiving and checking using UPC or RFID (dist center)
use EDI to minimize processes
ASN tells dist center what should be in each carton, and UPC or RFID tags on carton automatically counts it as received and checked
process of recording the receipt of merch as it arrives at the dist center
process of going through the goods upon receipt to make sure they arrived undamaged and that merch ordered was the merch received
RFID tags
tiny computer chips that automatically transmit to a special scanner all the info about the containers contents or individual products
act as passive tracking devices
storing and cross docking (dist center)
merch sales rate and degree of perishability/ fashionability determine whether cartons are stored or cross docked
cross docking distribution center
merchandise cartons are prepackaged by the vendor for a specific store
UPC/RFID tags indicate where to send
ready for sale merch is routed from the unloading dock to the loading dock for that specific store
getting merch floor ready (dist center)
see floor ready merch and ticking and marking
floor ready merch
merch that is ready to be placed on the selling floor
entails ticketing, marking, and placing garments on hangers
ticketing and marking
affixing price and ID labels to the merch
more efficient for a retailer to perform these activities at a dist center bc they have special areas set aside
preparing to ship merch to a store (dist center)
pick ticket – document or display on a screen in a forklift truck indicating how much of each item to get from specific storage areas
shipping merch to store (dist center)
most dist centers run 50-100 outbound truck routes in one day
in 1990s even most innovative firms needed ___days to fulfill an order from the warehouse to the customer

involves order creation and physical delivery

JIT inventory systems AKA
QR (quick response) systems
JIT systems
deliver less merch on a more frequent basis than traditional inventory systems
3 benefits: lead time, increased porduct availability & lower inv investment, and costs
reduced lead time (JIT benefit)
shorter lead times allow for easier demand forecasts
inc product availability and lower inv investment (JIT benefit)
ability to satisfy demand can actually increase while inventory decreases
costs of JIT system
dist function becomes much more complicated with more freq deliveries
smaller orders are more expensive to transport
JIT require strong commitment w vendors

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