Marketing Channels and

Supply Chain Management

chapter

12

Chapter 12 Version

Prepared by
Deborah Baker
Texas Christian University
2002 South-Western

Learning Objectives
1. Explain what a marketing channel is and
why intermediaries are needed.
2. Define the types of channel intermediaries
and describe their functions and activities.

chapter

12

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Learning Objectives (continued)

chapter

12

3. Describe the channel structures for

consumer and business-to-business
products and discuss alternative channel
arrangements.
4. Define supply chain management and
discuss its benefits.
5. Discuss the issues that influence channel
strategy.

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Learning Objectives (continued)

6. Explain channel leadership, conflict, and
partnering.

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12

7. Describe the logistical components of the

supply chain.
8. Discuss the concept of balancing logistics
service and cost.

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Learning Objectives (continued)

12

10. Discuss channels and distribution

decisions in global markets.

chapter

9. Discuss new technology and emerging

trends in supply chain management.

11. Identify the special problems and

opportunities associated with distribution
in service organizations.

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Learning Objective

Explain what a marketing channel

is and why intermediaries are needed.

Chapter 12 Version

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Marketing Channels

Marketing
Marketing
Channel
Channel

A
A set
set of
of interdependent
interdependent organizations
organizations
that
that ease
ease the
the transfer
transfer of
of ownership
ownership as
as
products
products move
move from
from producer
producer to
to
business
business user
user or
or consumer.
consumer.

Supply
Supply
Chain
Chain

The
The connected
connected chain
chain of
of all
all the
the business
business
entities,
entities, both
both internal
internal and
and external
external to
to the
the
company,
company, that
that perform
perform or
or support
support the
the
logistics
logistics function.
function.

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Marketing Channel Functions

Specialization
Specialization and
and
Division
Division of
of Labor
Labor
Channels
Channels
Fulfill
Fulfill
Three
Three
Important
Important
Functions
Functions

Overcoming
Overcoming
Discrepancies
Discrepancies
Providing
Providing Contact
Contact
Efficiency
Efficiency

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Specialization and
Division of Labor

Provides economies of scale

Aids producers who lack resources to
market directly
Builds good relationships with
customers

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Overcoming Discrepancies
Discrepancy
Discrepancy
of
of
Quantity
Quantity
Discrepancy
Discrepancy
of
of
Assortment
Assortment

Chapter 12 Version

The
The difference
difference between
between the
the amount
amount
of
of product
product produced
produced and
and the
the
amount
amount an
an end
end user
user wants
wants to
to buy.
buy.
The
The lack
lack of
of all
all the
the items
items aa
customer
customer needs
needs to
to receive
receive full
full
satisfaction
satisfaction from
from aa product
product or
or
products.
products.

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Overcoming Discrepancies
Temporal
Temporal
Discrepancy
Discrepancy

A
A situation
situation that
that occurs
occurs when
when aa
product
product is
is produced
produced but
but aa
customer
customer is
is not
not ready
ready to
to buy
buy it.
it.

Spatial
Spatial
Discrepancy
Discrepancy

The
The difference
difference between
between the
the
location
location of
of aa producer
producer and
and the
the
location
location of
of widely
widely
scattered
scattered markets.
markets.

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Contact Efficiency
Zenith
Zenith

Sony
Sony

RCA
RCA

Toshiba
Toshiba

Zenith
Zenith

Sony
Sony

RCA
RCA

Toshiba
Toshiba

Circuit
Circuit City
City
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Learning Objective

Define the types of channel

intermediaries and describe their
functions and activities.

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Channel Intermediaries
Retailer
Retailer

A
A channel
channel intermediary
intermediary that
that
sells
sells mainly
mainly to
to customers.
customers.

Merchant
Merchant
Wholesaler
Wholesaler

An
An institution
institution that
that buys
buys goods
goods
from
from manufacturers,
manufacturers, takes
takes title
title
to
to goods,
goods, stores
stores them,
them,
and
and resells
resells and
and ships
ships them.
them.

Agents
Agents and
and
Brokers
Brokers

Wholesaling
Wholesaling intermediaries
intermediaries who
who
facilitate
facilitate the
the sale
sale of
of aa product
product by
by
representing
representing channel
channel member.
member.

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Channel Intermediaries
Retailers
Retailers

Take
Take Title
Title to
to Goods
Goods

Merchant
Merchant
Wholesalers
Wholesalers

Take
Take Title
Title to
to Goods
Goods

Agents
Agents
and
and
Brokers
Brokers
Chapter 12 Version

Do
Do NOT
NOT Take
Take Title
Title to
to Goods
Goods
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Channel Functions
Performed by Intermediaries
Transactional
Transactional
Functions
Functions

Logistical
Logistical
Functions
Functions

Facilitating
Facilitating
Function
Function

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Contacting/Promotion
Negotiating
Risk Taking
Physically distributing
Storing
Sorting
Researching
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Financing

16

Logistics

The process of strategically

managing the efficient flow
and storage of raw
materials, in-process
inventory, and finished
goods from point of origin
to point of consumption.

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Learning Objective
Describe the channel structures
for consumer and
business-to-business products
and discuss alternative
channel arrangements.

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Direct Channel

A distribution channel in
which producers sell
directly to consumers.

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Channels for Consumer Products

Direct
Channel
Producer

Retailer
Channel
Producer

Wholesaler Agent/Broker
Channel
Channel
Producer
Producer
Agents or
Brokers

Retailers

Wholesalers

Wholesalers

Retailers

Retailers

Consumers Consumers
Consumers
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Consumers
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Channels for Business-toBusiness Products

Direct
Channel

Producer

Industrial Agent/Broker Agent/Broker Direct

Distributor
Channel
Channel
Industrial
Channel
Producer
Producer
Producer
Producer

Agents or
Brokers
Industrial
Distributor
Industrial Industrial
User
User
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Agents or
Brokers
Industrial
Distributor

Industrial Government
Industrial
User
User
Buyer
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Alternative Channel Arrangements

Multiple Channels

Different
Channels
May be Used

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Nontraditional
Channels
Adaptive Channels

Strategic Channel
Alliances

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Learning Objective
Define supply chain management
and discuss its benefits.

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Supply Chain Management

A management system that

coordinates and integrates
all of the activities
performed by supply chain
members into a seamless
process, from the source to
the point of consumption.
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Supply Chain Management

Focus
Focus on
on Innovative
Innovative Solutions
Solutions
Competitive
Competitive with
with focus
focus on
on
Customer
Customer Satisfaction
Satisfaction

Results
Results
of
of
Supply
Supply Chain
Chain
Management
Management
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Synchronized
Synchronized Flow
Flow
Customer
Customer Value
Value
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Role of Supply Chain Management

Role
Role of
of
Supply
Supply Chain
Chain
Management
Management

Communicator
Communicator of
of
customer
customer demand
demand from
from
point
point of
of sale
sale to
to supplier
supplier

Physical
Physical flow
flow process
process
that
that engineers
engineers the
the
movement
movement of
of goods
goods

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Supply Chain Management

Activities

Determine
Determinechannel
channelstrategy
strategyand
and
level
levelof
of distribution
distributionintensity
intensity
Manage
Managerelationships
relationships
in
in the
thesupply
supplychain
chain
Manage
Managethe
thelogistical
logisticalcomponents
components
of
ofthe
the supply
supplychain
chain
Balance
Balancethe
the costs
costsof
ofthe
thesupply
supplychain
chain
with
withthe
theservice
servicelevel
leveldemanded
demandedby
bycustomer
customer
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Benefits of
Supply Chain Management

Reduced
Reduced Costs
Costs

Improved
Improved Service
Service
Common
Common Benefits
Benefits
of
of Supply
Supply Chain
Chain
Management
Management
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Enhanced
Enhanced Revenues
Revenues

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Learning Objective
Discuss the issues that
influence channel strategy.

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Channel Strategy Decisions

Issues
Issues that
that Influence
Influence
Channel
Channel Strategy
Strategy
Factors
Factors
Affecting
Affecting
Channel
Channel
Choice
Choice

Levels
Levels of
of
Distribution
Distribution
Intensity
Intensity

Market
Market Factors
Factors

Intensive
Intensive Distribution
Distribution

Product
Product Factors
Factors

Selective
Selective Distribution
Distribution

Producer
Producer Factors
Factors

Exclusive
Exclusive Distribution
Distribution

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Market Factors
Customer
Customer Profiles
Profiles
Consumer
Consumer or
or Industrial
Industrial
Customer
Customer
Market
Market Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices
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Size
Size of
of Market
Market

Geographic Location
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Product Factors
Product
Product Complexity
Complexity

Product
Product Price
Price

Product
Product Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices
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Product
Product Life
Life Cycle
Cycle

Product
Product Delicacy
Delicacy
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Producer Factors
Producer
Producer Resources
Resources

Number
Number of
of Product
Product Lines
Lines
Producer
Producer Factors
Factors
That
That Affect
Affect
Channel
Channel
Choices
Choices
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Desire
Desire for
for Channel
Channel Control
Control

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Levels of Distribution Intensity

Intensity
Intensity Level
Level

Objective
Objective

Number
Number of
of
Intermediaries
Intermediaries

Intensive
Intensive

Achieve
Achievemass
massmarket
market
selling.
selling.
Convenience
Conveniencegoods.
goods.

Many
Many

Selective
Selective

Work
Workwith
withselected
selected
intermediaries.
intermediaries.
Shopping
Shoppingand
andsome
some
specialty
specialtygoods.
goods.

Several
Several

Exclusive
Exclusive

Work
Workwith
withsingle
single
intermediary.
intermediary.Specialty
Specialty
goods
goodsand
and industrial
industrial
equipment.
equipment.

One
One

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Learning Objective

Explain channel leadership,

conflict, and partnering.

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Managing Channel Relationships

Channel
Channel Power
Power

Social
Social
Dimensions
Dimensions
of
of Channels
Channels

Channel
Channel Control
Control
Channel
Channel Leadership
Leadership
Channel
Channel Conflict
Conflict
Channel
Channel Partnering
Partnering

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Channel Power,
Control, and Leadership
Channel
Channel
Power
Power

A
A channel
channel members
members capacity
capacity to
to
control
control or
or influence
influence the
the behavior
behavior
of
of other
other channel
channel members
members

Channel
Channel
Control
Control

A
A situation
situation that
that occurs
occurs when
when one
one
marketing
marketing channel
channel member
member
intentionally
intentionally affects
affects another
another
members
members behavior.
behavior.

Channel
Channel
Leader
Leader

A
A member
member of
of aa marketing
marketing channel
channel
that
that exercises
exercises authority/power
authority/power over
over
the
the activities
activities of
of other
other members.
members.

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Channel Conflict

A clash of goals and methods between

distribution channel members.
Horizontal
Horizontal
Conflict
Conflict

Occurs
Occursamong
amongchannel
channel members
members
on
onthe
the same
samelevel
level

Vertical
Vertical
Conflict
Conflict

Occurs
Occursamong
amongchannel
channel members
members
at
atdifferent
different levels
levels

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Channel Partnering

The joint effort of all

channel members to create
a supply chain that serves
customers and creates a
competitive advantage.

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Transaction- vs.
Partnership-Based Firms
Transaction-Based
Transaction-Based

Partnership-Based
Partnership-Based

Short-term
Short-termrelationships
relationships

Long-term
Long-termrelationships
relationships

Multiple
Multiplesuppliers
suppliers

Few
Few suppliers
suppliers

Adversarial
Adversarialrelationships
relationships

Cooperative
Cooperativepartnerships
partnerships

Price
Pricedominates
dominates

Value-added
Value-addedservices
servicesdominate
dominate

Minimal
Minimalsupplier
supplierinvestment
investment

High
Highsupplier/buyer
supplier/buyerinvestment
investment

Minimal
Minimalinformation
information sharing
sharing

Extensive
Extensiveinformation
informationsharing
sharing

Firms
Firmsare
areindependent
independent
Minimal
Minimalfunctional
functional
area
areainteraction
interaction

Firms
Firmsare
areinterdependent
interdependent
Extensive
Extensivefunctional
functional
area
areainteraction
interaction

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Learning Objective

Describe the logistical components

of the supply chain.

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Integrated Logistical
Components of the Supply Chain

Supply
Supply
Chain
Chain
Team
Team

LogisticsInformation
InformationSystem
System
Logistics

Sourcing
Sourcing&& Procurement
Procurement

Chapter 12 Version

Production
ProductionScheduling
Scheduling
Order
OrderProcessing
Processing&&Customer
CustomerService
Service
Inventory
InventoryControl
Control
Warehouse
Warehouse&& Materials
MaterialsHandling
Handling
Transportation
Transportation
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Sourcing and Procurement

Plan
Plan
Purchasing
Purchasing Strategies
Strategies
Develop
Develop
Specifications
Specifications

Role
Role of
of
Purchasing
Purchasing
Departments
Departments

Select
Select
Suppliers
Suppliers
Negotiate
Negotiate
Price
Price
Negotiate
Negotiate
Service
Service Levels
Levels

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Production Scheduling

Traditional
Traditional Focus
Focus Customer
Customer Focus
Focus
Push/Pull
Push/Pull
Strategy
Strategy

Push
Push

Pull
Pull

Start
Start of
of
Production
Production

Inventory-Based
Inventory-Based

Customer-Order
Customer-Order
Based
Based

Manufacturing
Manufacturing

Mass
Mass Production
Production Mass
Mass Customization
Customization

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Just-in-Time Manufacturing

A process that redefines

and simplifies
manufacturing by reducing
inventory levels and
delivering raw materials
just when they are needed
on the production line.
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Benefits of JIT
Reduces raw material inventories
Shortens lead times
Creates better supplier relationships

Reduces production and storeroom costs

Reduces paperwork

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Electronic Data Interchange

Information technology
that replaces paper
documents that accompany
business transactions.

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Inventory Control System

A method of developing and

maintaining an adequate
assortment of materials or
products to meet a
manufacturers or a
customers demand.

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Warehouse and
Materials-Handling

Receive goods into

warehouse

Functions
of
Materials
Handling

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Identify, sort and

label goods
Dispatch the goods to
temporary storage
Recall, select, or pick the
goods for shipment
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Transportation
Cost
Cost
Transit
Transit Time
Time
Reliability
Reliability

Criteria
Criteria
for
for
Transportation
Transportation
Mode
Mode
Choice
Choice
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Capability
Capability
Accessibility
Accessibility
Traceability
Traceability
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Criteria for Ranking

Modes of Transportation

7
Lowest

Highest
Relative
Cost

Air

Truck

Rail

Pipe

Water

Transit
Time

Water

Rail

Pipe

Truck

Air

Reliability

Pipe

Truck

Rail

Air

Water

Capability

Water

Rail

Truck

Air

Pipe

Accessibility

Truck

Rail

Air

Water

Pipe

Traceability

Air

Truck

Rail

Water

Pipe

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Learning Objective

Discuss the concept of

balancing logistics service and cost.

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Logistics Service

Interrelated activities
performed by a member
of the supply chain to ensure
that the right product is in the
right
place at the right time.

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Logistical Competencies
Devise logistics service strategies as a means
of competitive differentiation
Integrate members of supply chain to achieve
operating excellence
Respond quickly to changing logistical
requirements
Constantly monitor all aspects of the
supply chain
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Learning Objective

Discuss new technology

and emerging trends in
supply chain management.

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Trends in
Supply Chain Management
Trends
Trends
Affecting
Affecting the
the
Logistics
Logistics
Industry
Industry

Advanced
Advanced
Computer
Computer Technology
Technology
Outsourcing
Outsourcing of
of
Logistics
Logistics Functions
Functions
Electronic
Electronic
Distribution
Distribution

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Learning Objective

10

Discuss channels and distribution

decisions in global markets.

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Channels and Distribution

Decisions for Global Markets

10

Channel structure differs

Global
Global Channel
Channel
Development
Development

Channel types differ

Gray marketing channels
Awareness of trade legalities

Global
Global Supply
Supply
Chain
Chain Management
Management
Transportation Infrastructure

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Learning Objective

11

Identify the special problems and

opportunities associated with
distribution in service organizations.

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Channels and Distribution

Decisions for Services

11

Minimizing
Minimizing wait
wait times
times

Managing
Managing service
service capacity
capacity
Areas
Areas of
of Focus
Focus
for
for
Service
Service Distribution
Distribution
Chapter 12 Version

Improving
Improving delivery
delivery
through
through new
new channels
channels

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