McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives

 What is supply chain management?

 What benefits does supply chains
management provide?
 How is a supply chain managed?

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-2
 Concepts

 Supply chain management

 A set of approaches and techniques employed to integrate
suppliers, manufacturers, warehouses, stores, and
transportation intermediaries into a seamless operation, as well
as to minimize systemwide costs while satisfying the service
levels that customers require.
 Marketing channel
 Consists of all the institutions involved in moving goods from
the point of production to the point of consumption

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-3
 Supply Chain Management

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-4
 Supply Chains Streamline
Distribution

Reduce number
of transactions

Increase value
for consumers

More efficient
and effective

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-5
Reduce Number of Transactions

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-6
 Information Flows

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-7
 Managing Supply Chains

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-8
 Types of Vertical Marketing Channels
(VMC)

 Administered VMC
 No ownership or contractual relationships
 Contractual VMC
 Contract-based rights and responsibilities
 Corporate VMC
 A firm owns and has complete control over the system

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-9
 Administered VMC

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-10
© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
15-11
 Learning Objectives

 What are the differences among distribution channels at

different intensity levels?
 What are the benefits of having multiple retailing channels?
 Why is multichannel marketing becoming such a prevalent
channel strategy?

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-12
 Distribution Intensity

Q. Describe the differences

among the distribution
strategies of the
products below. (18%)
(1) soaps
(2) notebook computers
(3) luxury watches

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-13
 Intensive Distribution

 Coverage: as many stores

as possible
 Maximize convenience for
customers
 Maximize brand exposure
 Least selling support
provided by the
manufacturer
 Least control from the
manufacturer

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-14
 Selective Distribution

 Coverage: 1 < X < many

(good market coverage)
 Good control from the
manufacturer
 Expect better-than-
average selling support
provided by the
manufacturer
 Less costly to manage
than intensive distribution

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-15
 Exclusive Distribution

 Coverage: 1 retailer per

area
 Prestige image
 Maximum control from
the manufacturer
 Maximum selling support
provided by the
manufacturer
 Protects intermediary

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-16
 Red Bull is sold at convenience stores,
supermarkets and warehouse clubs. Red Bull
has _________ distribution

A. selective
B. exclusive
C. intermediate
D. intensive
E. limited

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-17
 Different retailers: food retailers

 Supermarkets
 A self-service food store offering groceries, meat, and produce
with limited sales of nonfood items, such as health and beauty aids
and general merchandise.
 Convenience stores
 Provide a limited variety and assortment of merchandise at a
convenient location with speedy checkout.
 Supercenters = supermarket + a discount store
 Warehouse clubs (100,000-150,000 square feet)
 Limited and irregular assortment of food and general merchandise
with little service at low prices
© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
15-18
 Different retailers: general
merchandise retailers

 Department stores
 A broad variety and deep assortment, offer services, and organize
their stores into distinct departments for displaying merchandise.
 Full-line discount stores
 A broad variety of merchandise, limited services, and low prices.
 Specialty stores
 A limited number of complementary merchandise and provide a
high level of service in relatively small stores
 Drug stores
 Concentrate on pharmaceuticals and health and personal
grooming merchandise
© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin
15-19
 Different retailers: general
merchandise retailers
 Category killers
 Offer a narrow but deep assortment of merchandise

 Extreme value retailers

 Off-price retailers

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-20
 Benefits of Different Channels

Stores Catalogs Internet

Browsing Convenience Broader selection

Touching and feeling Information More information

Personal service Safety Personalization

Cash and credit Touch and feel attributes

Entertainment and social

interaction

Instant gratification

Risk reduction

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-21
Benefits of Multichannel Retailing

Overcome the
Expanding market
limitations of an
presence
existing format

Goals for
Retailers

Insights into
Increasing share of
customer’s shopping
wallet
behaviors

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-22
 Disintermeditation

 a manufacturer sells  Retailers are efficient in

directly to consumers, dealing with customers
bypassing retailers. directly
 Retailers can provide a
broader assortment of
products and services
 Retailers can effectively
collect and use information
about customers

© McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

15-23