Marketing Channels & Supply Chain Management

Study Notes

Chapter 12 of the course material covers marketing channels and supply chain management.
Distribution channels are a crucial part of marketing, with various important issues to consider.

Key questions to consider are:
- What is the nature of distribution channels?
- What problems do companies face in designing and managing their channels?
- How do channel firms interact and organize to do the work of the channel?

A set of interdependent organizations (intermediaries) is involved in making a product or service available for use or consumption by the consumer.
A strong distribution system is a competitive advantage.
Channel decisions require long-term commitments to other firms.

A network of companies, suppliers, distributors, and ultimately customers who work together to improve customer value.
Upstream partners provide the supplies needed to create a product or service.
Downstream partners help deliver products to customers.

Intermediaries streamline the process of getting products to customers by requiring fewer contacts.
Intermediaries help match product assortment with demand.
They help bridge gaps in time, place, and possession between manufacturers and customers.

A diagram illustrates how a distributor reduces the number of contacts between a manufacturer and customers.
Without a distributor, there are 9 contacts.
With a distributor, there are 6 contacts.

Channel functions should be assigned to the most efficient member to effectively provide goods and services to target customers.
Functions include risk taking, financing, physical distribution, information, negotiation, matching, promotion, and contact.

Channel conflict occurs when channel members disagree on roles, activities, or rewards.
- Horizontal conflict: occurs among firms at the same channel level.
- Vertical conflict: occurs among firms at different channel levels.
Channel members' roles must be clearly defined and conflict should be managed for the channel to perform well.

A conventional marketing channel is a series of independent producers, wholesalers, and retailers each seeking maximal own profits.
A vertical marketing system (VMS) consists of producers, wholesalers, and retailers acting as a unified system.
- A channel member owns the others, has contracts with them, or has sufficient power they all cooperate.

A corporate VMS combines all stages of production and distribution under one ownership. Leadership is through common ownership.
A contractual VMS consists of independent firms at different levels joining together through contracts.
An administered VMS coordinates successive stages of production and distribution through the size and power of one of the parties.

Horizontal Marketing System: Two or more companies at one level join to follow a new opportunity.
Multichannel Distribution System: Marketers employ more than one distribution approach (e.g., company-owned stores, single-party selling systems).
Disintermediation: Removal of intermediaries in a supply chain.

Step 1: Analyze consumer needs (consider cost, feasibility).
Step 2: Set channel objectives (consider the company's nature, its products, competitors, and economic conditions).
Step 3: Identify major alternatives (explore different intermediaries like company sales force, distributors, wholesalers, and retailers). Consider intensive, selective, and exclusive distribution options and responsibilities of channel members.
Step 4: Evaluate alternatives (use economic criteria to compare sales, costs, and profitability of options; consider control issues and flexibility for adaptation).

Important aspects of channel management include:
- Selecting channel members
- Motivating channel members
- Evaluating channel members
- Obtaining feedback on channel decisions.