Supply Chain and Channel Management Basics

The Supply Chain

Consists of upstream and downstream partners.
Upstream partners supply raw materials, components, parts, information, finances, and expertise to create a product or service.
Downstream partners are traditionally customer-focused and include marketing channel partners such as wholesalers and retailers.
Value Delivery Network is a collaborative partnership between the company, suppliers, distributors, and customers to improve overall system performance in delivering customer value.
Distribution Channel (Marketing Channel): A set of interconnected organizations that help make a product or service accessible for consumers or business users.
Channel Level: Each layer of marketing intermediaries that contributes to bringing the product closer to the final buyer. Both the producer and the final consumer are part of every channel, as they perform crucial tasks.

Channel Behavior and Organization

Channel Behavior: A marketing channel involves partnered firms working together for their mutual benefit.
Channel Conflict: disagreements among marketing channel members regarding goals, roles, and rewards.
- Horizontal conflicts: occur among firms at the same level of the channel.
- Vertical conflicts: occur between different levels within the same channel, often more common.
Types of Channel Organization:
- Vertical Marketing System (VMS): Consists of producers, wholesalers, and retailers acting as a unified system.
- Conventional Marketing Channel: Involves a producer directly supplying wholesalers, retailers, and ultimately consumers.
- Major Types of Vertical Marketing Systems:
  - Corporate VMS: integrates successive production and distribution stages under a single ownership structure.
  - Contractual VMS: Involves independent firms at different stages collaborating through contracts to achieve economies of scale or increased sales impact.
    - Franchise Organization: The most common type of contractual relationship.
      - Manufacturer-Sponsored Retailer Franchise System
      - Manufacturer-Sponsored Wholesaler Franchise System
      - Service-Firm-Sponsored Retailer Franchise System
  - Administered VMS: Leadership is established not through shared ownership or contracts but through the influence of one or a few dominant channel members.
- Horizontal Marketing Systems: Multiple companies at a similar level join forces to pursue a new marketing opportunity. This can involve competitors or non-competitors, and partnerships can be temporary or permanent.
- Multi-Channel Distribution Systems: When a single firm uses two or more marketing channels to reach different customer segments. This approach offers advantages for companies operating in complex, diverse markets.
- Changing Channel Organizations: Technology advancements, the rise of direct and online marketing have significantly impacted the design of marketing channels.
  - Disintermediation:Occurs when product or service producers bypass intermediaries and directly reach final buyers, or when new types of channel intermediaries replace traditional ones.

Channel Design Decisions

Setting Channel Objectives: Factors that influence a company's channel objectives:
- Nature of the Company
- Products
- Marketing Intermediaries
- Competitors
- Environment
Number of Marketing Intermediaries:
- Intensive Distribution: Stocking the product in as many outlets as possible.
- Exclusive Distribution: Providing a limited number of dealers with exclusive distribution rights within specific territories.
- Selective Distribution: Utilizing more than one, but fewer than all, intermediaries willing to carry the company's products.
Evaluating Major Alternatives:
- Economic Criteria: Cost efficiency, profitability, return on investment.
- Control Criteria: Ability to manage and influence channel members.
- Adaptability Criteria: Flexibility to adjust the channel to changing market conditions.

Channel Management Decisions

Selecting Channel Members: careful selection based on criteria like :
- Target market coverage
- Expertise
- Resources
- Reputation
Training Channel Members: Providing training on:
- Product knowledge
- Sales techniques
- Customer service
- Company policies
Motivating Channel Members:
- Financial incentives: Discounts, bonuses, profit-sharing.
- Non-financial incentives: Recognition, awards, training opportunities.
Evaluating Channel Members:
- Sales performance
- Customer satisfaction
- Compliance with company policies
Channel Modifications: Adapting the channel to changes in:
- Market conditions
- Technology
- Competition

Marketing Logistics and Supply Chain Management

Marketing Logistics (Physical Distribution): Planning, implementing, and controlling the physical flow of goods, services, and related information from origin to consumption to satisfy customer needs profitably.
Nature and Importance of Marketing Logistics:
- Involves outbound distribution: moving products from the factory to resellers and ultimately customers.
- Involves inbound distribution: moving materials and products from suppliers to the factory.
- Involves reverse distribution: handling broken, unwanted, or excess products returned by consumers or resellers.
Customer-Centered Logistics:
- Focusing on customer needs and expectations.
- Providing timely and accurate deliveries.
- Minimizing transportation costs and damage.
- Implementing efficient inventory management.