Marketing Mix Issues in Channel Management - PDF

PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 1 MARKETING MIX ISSUES IN CHANNEL MANAGEMENT PRODUCT ISSUES IN CHANNEL MANAGEMENT Product Development and Channel Management All producers and manufacturers confront the problem of developing new items. New technology, shifting client tastes, and competitive dynamics all contribute to the need for new product introductions. A new product's success is determined by a variety of variables. One of these elements is the level of support received by a new product from independent channel members. As a result, the channel manager must consider the potential channel consequences while planning and developing new goods. Five challenges are usually significant for a variety of channels: 1) How can channel members help with new product development? 2) What steps have been taken to ensure that new items are acceptable to channel members? 3) Do the new items complement the existing channel members' offerings? 4) Will any specific education or training be required to equip channel members to effectively market the new products? 5) Will the product generate any unique issues for channel members? 1) Including Channel Members in New Product Planning Involving channel members in the creation of new items is one approach to improve their excitement and adoption of new products. This input might range from soliciting ideas at the idea-generation stage to collecting feedback from selected channel members throughout the test marketing or commercialization stages. Modifications to product size or packaging may be all that is necessary to enhance channel member participation. Obtaining assistance from channel members may need that the manufacturer keep channel members informed of new product plans; nevertheless, many manufacturers are competitively sensitive about new product plans. As a result, channel members are far more likely to eagerly advocate new activities in which they have participated. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 2 2) Promoting New Product Approval Among Channel Members New items must be accepted by end users, whether they be industrial clients or end users, to be successful. The acceptance of the new product by the channel members who distribute it is also important to its success. While end consumers are more concerned with how the product will function in use, channel members are more concerned with how the product will sell, if it will be easy to stock and show, and, most importantly, whether it will be lucrative. When it comes to the salability of a new product, channel members' impressions are crucial. They have to feel they can sell the goods or they would not carry it. As more new items compete for shelf space, stocking and display simplicity is more important than ever in persuading channel members to accept new products. Finally, channel partners cannot overestimate the importance of new product profitability. Retailers, and to a lesser extent wholesalers, are realizing that their only tangible product is shelf space. As a result, they will not permit a variety of unnecessary things to fill this vital area. 3) Include the New Product in the Assortments of Channel Members The assortment of each channel member is the specific combination of products he carries. A channel member's product mix is identical to that of a producer. The acceptance of the new product within current channel members' assortments should be a major marketing concern. The channel manager should inquire whether channel members think they can manage their new products. If channel members are hesitant to add the new product owing to a lack of experience with similar items, steps should be taken to alleviate these worries before the product is released. 4) Introducing New Items to Channel Members It is rare for channel members to require specific education or training offered by the manufacturer in order to commercially sell new items. The type and scope of training will, of course, be determined by the new product being given. 5) Ensuring that New Products Are Trouble Free Nobody wants to work on something fresh that will cause complications. This applies to both product issues that arise while the product is still in the channel member's inventory and issues that arise after the product has been sold to the client. Minor annoyances that make it more difficult for channel members to stock and sell to serious flaws that endanger the brand equity on which channel members rely to attract customers are examples of new item challenges. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 3 THE PRODUCT LIFE CYCLE AND CHANNEL MANAGEMENT A product life cycle (PLC) concept describes the stages of a product's life. We won't go into depth because the PLC has been thoroughly discussed in marketing literature and is virtually always included in basic marketing courses. 1) The Introductory Stage Significant promotional actions are necessary to market a product at the introduction stage. As a result, the channel manager must make certain that channel members offer enough market coverage for the product throughout this time period. 2) The Growth Stage When a good or item approaches the growth stage, its market expands rapidly. To aid in this expansion, the channel manager must address two critical issues: a. To guarantee enough product availability so that growth is not hampered b. to closely monitor channel member activity with competitor products The primary solution to the availability problem is to monitor product flows as they move through the channel. Effective monitoring necessitates formal and systematic reporting methods. Monitoring the actions of channel members toward competing items is equally as important as monitoring one's own products. To keep the firm's product increasing, a manufacturer must compete for the backing of channel members. While forecasting all potential channel competition acts and devising channel tactics for each step of the PLC may be difficult, some effort in this regard is probably doable. A manufacturer with appropriately prepared programs for supporting channel members has an advantage over a rival seeking for the same channel members but lacking previously produced programs. 3) The Maturity Stage The slow expansion or saturation characteristics of the mature stage highlight two strategic objectives for channel management. a. More work should be put into making the product more appealing to channel members. b. Additionally, potential channel structure changes, particularly the selection of different types of intermediaries, should be investigated in order to delay the decline stage and maybe produce a new development period. In the face of sluggish growth or near-saturation, some channel members' product sales and turnover rates will fall. To reduce the strength of this inclination, the channel manager must make the product more appealing to channel members. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 4 There are also options for additional trade-offs, marketing, and advertising allowances, special package deal discounts, and more liberal return policies. Changing the distribution channel structure is a more comprehensive and long-term channel plan for the mature stage. This may lead the product to reach a new growth stage in some situations. While the channel manager should avoid changing channels for a product on a regular basis, considering this possibility may be beneficial. 4) The Decline Stage When a product is in decline, it is nearly always unavoidable for it to completely collapse. The channel management should concentrate on two final channel implications in this situation: a. Is it feasible to swiftly phase out marginal outlets in order to avoid additional profit erosion? b. Would the product's termination harm existing channel members? Even though a product has reached the end of its life cycle, a significant fraction of channel members may still carry it. Many of them will be low-volume buyers who will place a few orders. The product will have previously been dropped by high-volume members. As a result, the channel manager is left with a high-cost, low-volume channel for the product, further eroding an already bleak profit picture. As a consequence, the channel manager must determine whether to phase out the outlets with extremely low volume. This entails examining the revenues generated by each outlet in relation to the expenditures connected with servicing each of them. Regrettably, there is no standardized technique for doing this type of analysis. PRODUCT STRATEGIC MANAGEMENT AND CHANNEL MANAGEMENT Several factors influence successful product strategies, including the quality, innovativeness, or technological sophistication of the products themselves, the capabilities of the managers in charge of overseeing the product line, the firm's financial capacity, and the willingness to provide promotional support, among others. One of these new components is the involvement of channel members in the implementation of the product strategy. Hence, the success of the manufacturer's product strategies is dependent on the channel members' efficacy in carrying out the manufacturer's product strategies to some extent - and often to a very significant level. 1) Product Differentiation Product differentiation is likely the most common product approach. In essence, product differentiation is the manufacturer's endeavor to depict a product or goods as distinct from competitors and hence more attractive to acquire, even if the price is greater. The actual key to developing a differentiated product is convincing the consumer of a meaningful difference. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 5 Channel members may be asked to assist in the development of a unique product. The kind of places where the product is sold, how it is exhibited and marketed, and the services offered may all play a role in developing a unique offering. Two-channel management has consequences for product differentiation strategy. a. To begin, while building a product differentiation strategy, channel managers should attempt to choose and grow channel members who suit the product's image. b. Second, if a product differentiation strategy is impacted by how the product is supplied at retail, the channel manager should give retailers with the support and help they require to effectively sell the product. 2) Product Positioning Product positioning is an attempt by a manufacturer to influence how consumers view their products in comparison to competitors. If this is done, the product is perceived by customers as a viable alternative to other things that they now use. While many elements influence a successful product positioning strategy, the type of outlets that sell the product, as well as how they display and market it, can be essential. In terms of product placement, there are three consequences for channel management. a. Evaluate the numerous interfaces between the product positioning strategy and where the product will be shown and sold to customers while executing the positioning strategy. b. Second, before attempting to adopt the positioning strategy, retailers should assist in the form of effective goods presentation and display. c. Third, a substantial war chest of finances should be available to give appealing incentives to retailers to secure strong retailer approval in favor of the positioning plan. 3) Expansion and contraction of product lines Most firms must either expand or decrease their product portfolios at some point, frequently concurrently. Such product line development and pruning tactics may pose issues when working with channel members since it is difficult to establish the optimal balance of items in the line that would suit all channel members. As a result, product line development and cost-cutting strategies need the manufacturer treading a tight line between channel member happiness and support for revised product lines. Furthermore, as channel members become increasingly focused on category management (the administration of product categories as business units), the desire for producers to have the correct product mix increases. Several aspects must be considered when dealing with the nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 6 interface between product line expansion and contraction and channel strategy in order to always have the proper mix of items to suit ever more demanding channel members. These are: a. Before extending or shrinking product lines, it appears logical to seek channel member viewpoints. b. The manufacturer should make an attempt to communicate to channel members the rationale for product line expansion or deletion activities. c. The manufacturer should make every effort to provide channel members with adequate prior notice of significant product line changes so that they may plan for such changes. Trading Down, Trading Up Trading down: The addition of lower-cost items or a product line to an otherwise unavailable product mix. Trading up: Including goods or a product line that are much more costly than the rest of the line or mix. 1) Product Brand Strategy When it comes to product branding initiatives, most firms have various possibilities. They could market their wares. (1) under a single national brand (2) under numerous national brands (a brand family), (3) under private labels or (4) both under national and private labels. At times, any of these methods may cause channel management issues. However, the fourth alternative, selling under both national and private brands, provides the most challenging channel management issues, since when a manufacturer sells under both national and private brands, direct competition with channel members may arise. Such dual distribution or multi- marketing methods are becoming more widespread as national brand manufacturers look to use excess manufacturing capacity and compete with private brand items manufactured for channel members. If the rivalry gets too direct, this dual-product brand approach might result in serious issues between the manufacturer and its channel partners. Prioritizing such channel issues before launching a dual national/private brand strategy would help the manufacturer see the need of having clear channel management policies to govern dual- brand operations. Examples are: nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 7 a. Offering both national and private brand versions of the same product to the same channel members is not permitted. b. The commodities are marketed in various geographical locations under national and private brand names. c. Make the things visually unique enough to minimize direct competition between national and private brand variants of the same product. 4) Product Service Strategy Several goods need after-sales support. After-sales care should be provided by the manufacturers of these items, either directly at the plant, through their network of service centers, channel members, recognized independent service centers, or any combination of these. A marketing channel that delivers effective and efficient product distribution is neither complete or efficient unless it also provides product service. To deliver a successful product service through the channel, the manufacturer must approach the product issue as a core strategic issue in product management and channel management. Furthermore, a positive service image may considerably boost a product's desirability. If the manufacturer anticipates significant cooperation from channel members in providing service, the manufacturer must communicate to channel members that service is an important component of the overall product strategy and provide incentives for channel members to participate in the service program. PRICING ISSUES IN CHANNEL MANAGEMENT Channel Pricing Strategy Stakeholders at various levels of the channel each desire a share of the overall price (the cost paid by the end buyer) that will cover their expenses and earn a reasonable return. The golden rule of channel pricing is that it is inadequate to base price decisions just on the market, internal cost concerns, and competitive factors when developing a price plan. For organizations that use independent channel members, explicit concerns about how price decisions affect channel member behavior are a critical component of pricing strategy.Price issues can have a significant influence on the performance of channel members. Members of the channel will be more helpful if they believe the manufacturer's pricing plan aligns with their goals. The opposite is also true. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 8 Guidelines for Developing Effective Channel Pricing Strategies Oxenfeldt provides a set of fundamental principles in establishing pricing strategies that consider channel problems into consideration. Though not exhaustive, they give a solid agenda and standard for price verdicts that take channel concerns into account. 1) Unit profit margins must surpass unit operating costs for each effective reseller. 2) The margins of each type of reseller should be roughly equivalent to the cost of the functions provided by the reseller. 3) Prices must be equivalent to those paid for comparable rival brands at all channel levels at all stages throughout the vertical chain. 4) Variations in payment arrangements should correspond to changes in functions performed or diversions from the regular flow of products. 5) Unless a valid justification for deviating from the standards can be proved, all types of resellers' margins must comply to defined percentage guidelines.. 6) Margin variations on various models and styles within a line are common and expected. However, they must vary on the standard trade margin. 7) Products at such price points should be included in a price structure when they exist. 8) A company's pricing structure must reflect changes in the desirability of various product offerings. A) Profit Margins Channel members expect profits that exceed the costs of maintaining a certain product. Items with insufficient margins to cover costs and profit are frequently not carried, much alone enthusiastically pushed, by channel members. Channel members who think the manufacturer is not paying them enough are more inclined to seek out alternative suppliers or develop and sell their own private brands over time. As a result, the channel manager should be involved in a continual examination of channel member margin structures to determine their sufficiency, paying specific attention to changes in the competitive environment that may alter channel member views of the present margin structures. B) Various Types of Resellers Ideally, the channel manager would like to set margins that are proportional to the functions given by different sorts of channel members. Yet, in the wholesale and retail sectors, margins are frequently set by strong industry-wide norms. Regular assessments of the margin structures available to different classes of channel members, on the other hand, should be done in order to make progressive changes as needed. Oxenfeldt advises posing the following questions in this review: a. Do channel members keep inventory? b. Do they buy in bulk or little amounts? nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 9 c. Do they offer any kind of repair service? d. Do they provide credit to their clients? e. Do they follow through? f. Do they assist in the training of the clients' sales force? The main reason for monitoring channel member services with the margins allowed to them regularly is to see whether any big disparities are causing issues in the ranks of specific groups of channel members. C) Rival Brands Channel members carrying competing items should have fair margin differentials. The practical problem for the channel manager wanting to implement this guideline is determining how much margin disparity is acceptable. Sadly, there is no simple solution to this problem. Following that, channel managers should strive to balance any profit differences between their own and competing brands in terms of the type of assistance their companies provide and the amount of support they expect from channel members. If it is determined that this link is considerably different from the competitors, margin differentials should be calculated accordingly. D) Special Arrangements If the manufacturer's and channel members' conventional distribution job allocation changes, so should the margin structure. E) Conventional Norms in Margins According to Oxenfeldt, almost all channel members expect margins to reach commonly acknowledged standards. Because channel members are so committed to what they regard to be customary, fair, or suitable margins, it is extremely difficult for the manufacturer to break from the norm. As a result, the channel manager must explain to channel members any margin changes that differ from the average. While this does not ensure that the members of the channel will support the move, it does explain why they will. F) Price Points Customers have gotten used to certain prices, typically at the retail level. In other words, shoppers have come to expect certain things to be available at regular prices. While the majority of price points rise, some may reduce. G) Product Variations When a producer assigns pricing to different models within the same product line, it must be careful not to correlate price disparities with product attributes. Channel members will have a more difficult time selling to the customer if pricing discrepancies are not tied to obvious or detectable product qualities. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 10 PROMOTION IN MARKETING CHANNELS Push Promotional Tactics in Marketing Channels at a Glance Promotional techniques that emphasize the manufacturer's push approach while requiring participation and follow-through from channel members can take numerous shapes. The great majority of people fall into one of the seven categories listed below: 1) Cooperative Advertising Cooperative advertising is one of the most common types of promotional assistance provided by the manufacturer to channel members. One of the most popular is a 50-50 cost sharing arrangement for up to a certain proportion of the retailer's manufacturer purchases. The amount of assistance provided by channel members is critical to the efficacy of cooperative advertising as a manufacturer promotional method. Channel members, in particular, must: a. Maintain an appropriate supply of the goods on the market. b. Provide sufficient point-of-purchase signage. c. As needed, provide personal selling assistance. The producer must properly manage the partnership program in order to acquire this level of support. 2) Allowance for Promotions The most frequent promotional allowance strategy is to make a direct cash payout or a percentage of purchases on certain goods to the channel member. Allowances are given to merchants to encourage them to purchase more of the manufacturer's products, to give the items more prominent shelf space, to highlight the products in superior ground or end-of-aisle displays, or to participate in other similar promotional activities. Because of the availability of scanner data, manufacturers can now more easily measure the success of promotional campaigns. Such precautions, however, are implemented after the fact. The most beneficial strategy a manufacturer can take to increase channel member help and follow-through is to ensure that promotional allowance packages are appropriate for channel member needs. 3) Slotting Fees Fees for slots, sometimes known as slotting allowances, are payments paid by manufacturers (in cash or in kind) to channel members, notably retailers, to encourage them to carry, display, and support new goods. Slotting fees are payments made by retailers to manufacturers or suppliers in exchange for the right to have their items displayed on shop shelves. Suppliers pay these fees to merchants in nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 11 order to get prominent product placement and ensure their items are supplied and visible to customers. Slotting fees are ubiquitous in the retail business, especially in supermarkets and big chain stores. The use of slotting fees varies by retailer and industry. Suppliers are frequently required to pay these fees by retailers in order to offset the expenses of launching new items, maintaining inventory, and assigning shelf space. Slotting fees can assist businesses in managing the risk of selling items that may not sell well or may necessitate further marketing efforts. Slotting costs can vary greatly based on criteria such as the retailer's size, location, and market dominance, as well as the product category and the retailer's unique requests. Fees can range from a few hundred dollars to thousands of dollars per product, shop, or SKU (Stock Keeping Unit). Slotting fees have been the topic of debate and criticism. Some claim that they create entry hurdles for small or new suppliers since they may lack the financial capacity to pay the fees. This can limit market competitiveness and innovation. Furthermore, slotting fees might raise the cost of items, which may be passed on to customers. 4) Displays and Selling Aids Dealer identity signs, promotional kits, customized in-store displays, and mailing pieces are all popular sorts of displays and selling aids. Displays and selling aids may be quite successful, but producers often struggle to persuade merchants to utilize them. The perceived utility of such commodities typically varies greatly between creators and channel participants. As a result, the channel manager must make an effort to determine whether the company's selling aids and displays are effective or if they are more of a nuisance than a benefit. Displays and selling aids are marketing tools and materials that are used to advertise and exhibit items or services to potential buyers. These methods are intended to draw attention, engage customers, and boost revenue. Displays and selling aids that are effective are meant to provide an immersive and convincing purchasing experience. They aid in product education, brand exposure, and eventually sales through influencing purchase decisions. 5) In-store Promotions The majority of in-store promotions are limited-time events intended to increase consumer interest and passion for the manufacturer's products. Regardless of the style of the in-store promotion, the important concern for the channel manager is whether the merchants gain from improved sales, profitability, or store recognition. Retailers utilize in-store promotions to attract customers and increase sales within their physical establishments. These promos are intended to enhance foot traffic and encourage customers to make purchases. 6) Contests and Incentives nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 12 Manufacturers frequently use contests and prizes to persuade channel members to promote their products. A contest or incentive program's impact can be increased by tying it to a large event on a local, state, national, or even worldwide scale. Push money: Financial incentives given to channel salespeople in exchange for advocating certain items. Contests and incentives are useful tactics used by individuals, organizations, and enterprises to encourage and engage people in various tasks. These projects frequently provide awards or prizes to participants who satisfy specified criteria or reach specific goals. Contests and incentives can be used in a variety of situations, including education, marketing, employee engagement, and community participation. Contests and incentives are intended to tap into people's innate drives and to recognize and reward their accomplishments. These programs can drive people to go the additional mile, engage in desirable behaviors, and accomplish desired goals by delivering appealing prizes or recognition. 7) Promotional Offers and Merchandising Campaigns Special promotional discounts and merchandising campaigns are examples of catch-all categories. It encompasses a wide range of push-type promotional services, such as discounts to channel members to urge them to order more, advantageous incentives to customers to promote greater purchases, percentage or cents-off offers, rebates, coupons, prizes, and premium offers. The fact that special discounts and marketing activities are so common does not suggest that the vast majority of manufacturers are pleased with them. Trade agreements of this type have the potential to: a. Consumers' brand loyalty is dwindling. b. Encourage channel members to buy from one another. c. Failure to pass on cost savings to consumers d. Encourage extra shops and wholesalers to diversify their product lines. When manufacturers push retailers and wholesalers to acquire considerably more than they can sell in a reasonable length of time, this is referred to as trade loading, advance buying, or channel stuffing. Unfortunately, there is no straightforward answer to the issues raised by such promotional bundles. Most manufacturers' sole defense is to develop well-designed channel promotion plans based on understanding of channel member desires and to adopt a long-term perspective of marketing channel promotion. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 13 Push Promotion Techniques in Marketing Channels that are Kinder and Gentler Some promotional tactics involve channel members being persuaded to push a single manufacturer's items through increased elegance, delicacy, and a more indirect way. They are referred to as softer push marketing. 1. PROGRAM for TRAINING - One of the most successful strategies to promote channel member promotional cooperation is to provide training programs aimed at boosting the efficacy of channel members' salespeople. Such programs might demonstrate the manufacturer's commitment to aiding channel members in areas where many of them require assistance. Manufacturer-sponsored training programs for channel member salespeople must be organized and implemented in a way that is acceptable to the channel members in order to be effective. A) Training Programs at the Wholesale Level Wholesale training programs should be developed to help wholesaler salespeople in three areas: 1. Their comprehension of the manufacturer's product 2. Their marketing techniques 3. Their capacity to provide advice to clients they contact B) Programs for Store Level Training Retail salesperson training programs are useful for goods that still require significant human sales support. The following topics should be covered in retail sales training: 1. Product comprehension 2. Strategy for selling 2. QUOTA SPECIFICATION Sales quotas are the sales quantities that manufacturers need channel members to meet within a certain time frame. Manufacturers set quotas with the intention of motivating channel members to work more in exchange for rewards for reaching or exceeding the targets. Sales quotas, when used effectively, may be a successful promotional approach for gaining channel member promotional support. The context in which channel members are given quotas is crucial to their proper utilization. If presented forcefully, they will engender ill will and strife. Furthermore, if the manufacturer's product line is not a significant component of the channel member's product mix, the limit may be disregarded. Quotas, on the other hand, may have a beneficial impact on raising channel member support if they are designed in collaboration with the channel members and presented in the context of providing information on the channel members' territories' sales potentials. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 14 3. MISSIONARY SELLING Missionary selling: This word refers to the efforts of a manufacturer's salesperson who was specially assigned to urge distributors to handle the manufacturer's new items. Currently, the word refers to any of the manufacturer's salespeople who have been specifically allocated to support the selling operations of channel members. A consumer goods missionary salesman can do the following: a. Inventory levels at wholesale and retail b. requesting that shops notify them of new items c. Assisting in the setup of the window and in-store displays d. Addressing wholesaler and retailer queries, as well as offering guidance and training e. Attempting to spread goodwill f. Accepting merchandise orders LOGISTICS AND CHANNEL MANAGEMENT ◦ Logistics, often known as physical distribution (PD), is the act of planning, implementing, and managing the physical movements of resources and completed commodities from their points of origin to their points of use to successfully meet customer demands. ◦ Supply chain management focuses on strong collaboration and extensive inter-organizational management to integrate the channel's numerous enterprises' logistical operations. ◦ Regardless of whether the term physical distribution, logistics, or supply chain management is used, the key concept emphasized throughout this article is the establishment of strong collaboration among channel members through effective inter-organizational management. The Role of Logistics In the marketing channel, logistics revolves around delivering the appropriate number of the right items to the right place at the right time. Third-party logistics providers specialize in doing the majority or all of the logistical duties that would otherwise be undertaken by manufacturers or other channel members. Third-party logistics companies are rapidly expanding. LOGISTICS SYSTEM COSTS AND COMPONENTS Systems relating to the many components of the logistical process and their interrelation. Such factors include transportation, materials handling, inventory control, warehousing, and product packaging. In essence, logistics managers seek the optimal combination of important logistical components (such as transportation) to meet customer service criteria. Overall cost approach: Handles all logistical expenses at once in order to reduce overall costs. A company must think about the expense of each component as well as how it affects the others. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 15 1) Transportation Transportation is the most fundamental and necessary component of every logistics system. Transportation is also the component with the highest share of total logistics expenditures. The most significant worry for the organization is determining the best means of transportation to satisfy customer service needs. Transportation is critical in channel management because it allows products and services to travel from manufacturers to end users or intermediaries. Effective transportation management ensures that items are delivered at the correct location, at the correct time, and in the proper condition, which is critical for sustaining customer happiness and enhancing overall channel performance. Transportation is an important component of channel management, influencing customer happiness, prices, and overall supply chain effectiveness. Channel managers may improve transportation operations and increase their market competitiveness by carefully examining mode selection, logistics partner collaboration, route planning, inventory positioning, visibility, and reverse logistics. 2) Materials Handling This category includes the actions and equipment used in the installation and transfer of items in storage spaces. When building materials handling systems, consider how to limit the distances things are transported, what sort of mechanical equipment to utilize to save costs, and how to use manpower effectively. Cross docking is the process of swiftly transporting products across the receiving dock to other trucks for timely delivery to retailers. It is also known as flow-through distribution. Finally, commodities are carried straight from shipment to reception. Materials handling is the transfer, management, and storage of materials in a variety of businesses and contexts. It entails the transportation, protection, and administration of commodities and products throughout their lives, from raw material extraction to manufacture, distribution, and disposal. Efficient materials handling is critical for organizations because it has a direct impact on productivity, cost-effectiveness, and customer satisfaction. Companies may simplify their processes, decrease waste, improve safety, and increase overall efficiency by optimizing how materials are handled. The following are some of the advantages of effective material handling: Productivity and throughput have increased. Lower labor expenses and less physical strain on workers Material damage, losses, and waste were reduced. Increased workplace safety Order processing and shipping times are now faster. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 16 improved inventory management and precision Supply chain activities have been streamlined. Cost reductions from better resource use Overall, materials handling is an important part of many businesses, including manufacturing, shipping, retail, and construction. Businesses may gain a competitive advantage and provide superior products and services to their consumers by developing efficient materials handling techniques and leveraging relevant technology. 3) Order Processing Order processing is often a vital component of logistics, and creating an efficient order- processing system is not always easy. In logistics, the relationship between order cycle time and order processing is critical. The order cycle time is the time it takes between placing an order and receiving it from the client. Order processing is a critical component of channel management, which refers to the administration of a company's different distribution channels via which it distributes its products or services. Effective order processing ensures that client orders are fulfilled properly and effectively, resulting in customer satisfaction and on-time delivery. 4) Inventory Control Inventory control refers to a company's attempt to keep as little inventory as feasible while yet meeting consumer demand. Inventory carrying expenses, which include financing, insurance, storage, and things that are lost, damaged, or stolen, can amount to roughly 25% of the inventories worth every year. Inventory control's two goals - keeping inventory levels as low as feasible while distributing items in as many quantities as possible - may clash. The average inventory carrying costs grow in direct proportion to inventory volume. And ordering expenses often decrease in proportion to order size. To determine the right quantities for each, a trade-off must be established between these two expenses. Economic order quantity (EOQ) happens when overall expenses (inventory costs + ordering expenditures) are at their lowest. Inventory control is the practice of maintaining and regulating a company's or organization's inventory levels. It entails monitoring the flow of commodities, raw materials, and completed products to ensure that the appropriate quantity is accessible at the appropriate time and location. For organizations to maintain ideal stock levels while limiting expenses associated with overstocking or stockouts, effective inventory control is critical. It assists firms in streamlining processes, improving customer service, lowering carrying costs, and increasing profitability. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 17 5) Warehousing The warehousing component of a logistics system is responsible for holding items until they are ready to be sold. Warehousing is one of the most complex components of a logistics system since it involves a number of critical considerations such as where to locate warehouses, how many to construct, their size, architecture, and ownership. Warehousing may be an essential component of a logistics system since it is so closely tied to a company's capacity to deliver excellent customer service. Warehousing is the process of keeping commodities, products, or inventories at a specific area known as a warehouse. Warehouses are big structures or facilities that are particularly built to store and arrange numerous sorts of commodities. The fundamental goal of warehousing is to offer a consolidated place for goods storage prior to distribution to consumers or merchants. Warehouses play an important role in company supply chain management by acting as a center for receiving, storing, and dispatching items. Warehousing is critical to ensure the seamless flow of commodities across the supply chain. Warehouses help to improve inventory management, order fulfillment, and customer happiness by offering storage, organizing, and value-added services. 6) Packaging Packaging and the associated expenses (consumer packaging and case design) may have an impact on the system's other components and vice versa. The mode of transportation utilized may have an impact on packaging and packing expenses. While a well-designed package can serve to improve efficiency in these components, packaging can have an impact on materials handling, order processing procedures, and prices. Furthermore, creative packaging can assist cut inventory-carrying costs by limiting product damage. Packaging is a vital logistical factor that may make or break the efficacy and efficiency of a logistics system. The process of designing, manufacturing, and enclosing items in containers or materials to protect them throughout storage, transit, distribution, and sale is referred to as packaging. It entails erecting a protective barrier around the product to avoid damage, contamination, or deterioration, as well as giving consumers with information and marketing the goods. Packaging is a broad area that includes a wide range of materials, processes, and design concerns. Product designers, packaging engineers, marketing teams, and regulatory specialists work together to produce packaging solutions that fulfill the demands of both the product and the customer. Packaging is a vital logistical factor that may make or break the efficacy and efficiency of a logistics system. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 18 THE OUTPUT OF THE LOGISTICS SYSTEM: CUSTOMER SERVICE The attempt to define and enumerate services, as well as to assess performance against these criteria. Heskett, Galskowsky, and Ivie, for example, emphasized the nine kinds of logistical service criteria listed below: 1. The time it takes between receiving an order and sending it 2. Order size and assortment restrictions 3. The percentage of goods that are currently out of stock 4. Percentage of orders correctly filled 5. The proportion of orders that are filled within a specified number of days of receipt. 6. Rate of order fulfillment 7. The percentage of client orders that arrive in pristine condition. 8. Order processing time (the time it takes to process an order from the moment it is placed to the time it is delivered) 9. The ordering process is simple and customizable. 10. Packaging and the associated expenses (consumer packaging and case design) may have an impact on the system's other components and vice versa. The mode of transportation utilized may have an impact on packaging and packing expenses. While a well-designed package can serve to improve efficiency in these components, packaging can have an impact on materials handling, order processing procedures, and prices. FOUR KEY INTERFACE AREAS BETWEEN LOGISTICS AND CHANNEL MANAGEMENT Channel management and logistics management must operate in concert to achieve lucrative and effective distribution. Close coordination is required for the integration of channel management and logistics management. This is particularly true at four important points of interaction between channel and logistics management. 1. Setting Up Logistics Service Standards In general, the more expensive the item, the more stringent the manufacturer's servicing requirements. It is seldom feasible to avoid the trade-off of greater expenses for better service quality entirely. As a result, establishing precisely the types and degrees of logistical service required by channel members is the key issue for the channel manager in setting logistics service standards. When developing a logistical program, the channel manager must first solicit feedback from channel members on the sorts of service standards that they want. Despite this, only around nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 19 20% of manufacturers make a concerted effort to learn about their customers' service requirements. Bienstock, Mentzer, and Bird observed that three major factors-delivery timeliness, product availability, and product condition-all had a substantial impact on buying managers' judgments of logistical service quality, with timeliness being the most important of the three. This was referred to as physical distribution service quality (PDSQ) by the authors. The development of logistics service standards should not be based solely on what the manufacturer wishes; the opinions of channel members should also be addressed. This enhances the possibility that the collection of logistical requirements reflects what channel members desire. 2. Logistics Program Evaluation A logistics program can be provided to channel members as a stand-alone service or as part of a manufacturer's overall strategy for achieving channel member expectations. A logistics program might be a key component of a channel partnership or strategic alliance. The channel manager should play a role in ensuring that the program satisfies the channel members' service expectations. The channel manager must understand the logistics program's objectives. To summarize, the channel manager is in charge of ensuring that the program meets the demands of the channel members. 3. Members of the Logistics Marketing Channel Stewart proposes a number of arguments to assist channel members in promoting the logistics program. Manufacturers should stress the following benefits of a new logistics program: The following benefits of a new logistics program should be highlighted by manufacturers: A) Fewer out-of-stock situations. Reduced Out-of-Stock Occurrences Through a tighter logistics program, channel members' sales will be reduced by limiting out-of-stock occurrences. Because some systems fail to deliver on their promises, channel members should not be oversold on the benefits of the new system. Electronic data interchange (EDI) and computer-to-computer ordering appear to be operating systems. B) Lower inventories of channel members Faster order cycles for channel partners can result from a well-planned and responsive logistics operation, allowing them to carry less inventory. The Kanban system, also known as Just in Time Inventory (JIT), is based on the idea of keeping only enough inventory on hand to meet immediate production demands, with no reserve stock. JIT relies on flawless coordination between the manufacturer and its suppliers, as well as a logistical system that is flawlessly designed and implemented. C) Enhanced manufacturer assistance for channel partners. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 20 A well-planned logistics program geared at enhancing service to channel members may be one of the most visible indicators of the manufacturer's concern for and dedication to the success of channel members. When presenting a suggested logistics program to channel members, the manufacturer should underline that the program was designed to assist them in succeeding. A better logistics management system has a lot of promise as a strategic marketing tool because it allows manufacturers to help channel members develop their logistics and marketing skills by leveraging their increased logistics capabilities. 4) Analyzing the Logistics Infrastructure Logistics structures must be audited on a regular basis, both in terms of how well they serve the manufacturer and, as importantly, channel members. The channel manager should monitor how channel members react to the logistics program. Polling a representative sample of channel members is the most effective way. The survey should be included in the overall marketing channel evaluation. If the research or audit finds areas for improvement or flaws, the manufacturer must implement the necessary adjustments or resolve the issues. When the channel members who highlighted the difficulties do not see future modifications or improvements, their satisfaction with the manufacturer's logistics program dwindles. If a company regards logistics as an essential component of its entire marketing strategy, it is more likely to implement these improvements. EVALUATING CHANNEL MEMBER PERFORMANCE Within the company, the importance of channel member performance is comparable to that of employee evaluations. Scope & Frequency of Evaluations: 1. The extent to which the company has influence over channel members 2. Members' relative importance in the channel 3. The product's nature 4. Number of channel participants nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 21 PERFORMANCE AUDIT Three Phases Creating performance metrics for channel members Assessing channel members' performance against the criterion on a regular basis Advice on corrective activities to decrease the occurrence of poor performance. SALES PERFORMANCE Channel members' sales performance Channel member inventory management Channel members' selling ability Channel members' attitudes Channel members face competition nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 22 · Channel members' overall growth potential Channel managers should utilize the following criteria to analyze sales data: 1) Comparisons of channel members' present and past sales 2) Sales comparisons between one member and others 3) Channel members' sales are compared to specified quotas. Inventory Maintenance Key Criteria for evaluating member inventory performance: 1. Total inventory level of channel members 2. Inventory is kept on a shelf or the floor. 3. In comparison to rivals' merchandise, shelf or floor space is supplied. 4. Breakdown by specific product in units and dollars 5. Figures are compared to channel members' expected purchases of related and competing products. 6. Inventory form and inventory amenities 7. The quantity of outdated stock on hand and the efforts made to re allocate it 8. The effectiveness of the channel member inventory control and record-keeping system CAPABILITIES of SELLING When a manufacturer obtains sales records for channel members' salespeople, the following considerations must be made: 1. The number of salespeople assigned to the manufacturer's product line by the channel member. 2. Salespeople from channel members' technical expertise and skill 3. Salesperson enthusiasm for the manufacturer's items ATTITUDES OF CHANNEL MEMBERS When a manufacturer acquires sales records for channel members' salespeople, the following things should be considered: 1. The number of salespeople assigned to the manufacturer's product line by the channel member. 2. Salespeople from channel members' technical expertise and skill 3. Salesperson enthusiasm for the manufacturer's items COMPETITION Channel managers should think about two kinds of competition: 1. Other intermediaries' competition 2. Other product lines sold by the manufacturer's channel members compete nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 23 APPLYING PERFORMANCE CRITERIA 1. Separate performance assessments based on one or more factors 2. Many variables are officially incorporated to evaluate overall performance qualitatively. 3. A quantitative assessment of overall performance is produced by explicitly integrating many criteria. SEPARATE PERFORMANCE EVALUATIONS When the number of channel members is vast and the criteria are confined to sales success, inventory upkeep, and potential selling capabilities, this technique is often applied. INFORMALLY COMBINED MULTIPLE CRITERIA Acquired operational performance metrics Managerial discretion is used to mix performance metrics. A qualitative evaluation of overall channel member performance 1. Criteria and operational measures are selected. 2. Weightings assigned to each criterion 3. Each evaluated member receives a grade for each of the criteria. 4. Each criterion's score multiplied by its weight 5. Weighted criterion ratings are averaged together to generate an overall performance grade for each member. RECOMMENDING CORRECTIVE ACTIONS Channel managers should investigate why members did badly. 1. Create real and practical strategies for aggressively seeking information on member wants and challenges. 2. Member support programs must be aligned with member needs and challenges. 3. The constraints imposed by the marketing channel's inter-organizational configuration must be understood. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 24 ADDITIONAL PERSPECTIVES ‘ ON MARKETING CHANNEL ELECTRONIC MARKETING CHANNELS Electronic marketing channels are the use of the internet to make things and services available so that the target market with access to computers or other enabling devices may shop and complete the transaction for purchase using interactive electronic ways. Channel Structure of Electronic Marketing ◦ Disintermediation versus Reintermediation ◦ Information flow versus Product flow ◦ Virtual channel structure versus Physical channel structure DISINTERMEDIATION VERSUS REINTERMEDIATION ◦ Disintermediation decrease in the use of middlemen between manufacturers and consumers ◦ Reintermediation reinstatement of a middleman between a manufacturer of commodities and customers CONVENTIONAL AND INTERNET AUTO CHANNEL nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 25 CONVENTIONAL VERSUS INTERNET-BASED CHANNELS FOR GROCERIES INFORMATION FLOW VERSUS PRODUCT FLOW ◦ Information Flow Information flow specifies the persons who take part in the information flow either up or down the channel ◦ Product Flow Product flow refers to the flow of a physical product from the maker to all parties who take physical custody of it until it reaches the final customer. VIRTUAL CHANNEL STRUCTURE VERSUS CONVENTIONAL CHANNEL STRUCTURE ◦ Virtual Channel Structure a communications path between two nodes that provides the bandwidth required for a virtual network connection nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 26 ◦ Conventional Channel Structure - a manufacturer, distributors, and retailers all act independently in conventional distribution. TRENDS AND DEVELOPMENTS IN ELECTRONIC MARKETING CHANNELS nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 27 Developments and Trends in Electronic Marketing Channels MOBILE ELECTRONIC CHANNELS Mobile commerce, also known as m-commerce, has been mentioned multiple times in this text. It refers to electronic marketing channels that allow consumers to purchase online from nearly any place or while on the go. Electronic Channels on Social Network Sites What are the Key Advantages of EMC? Global reach and scope Transaction processing convenience/speed Flexibility and efficiency in information processing Management and connection capabilities based on data Reduced sales and distribution expenses EMC implications for various areas of channel decision-making nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 28 1. Objectives and Strategies of the Firm and Electronic Marketing Channels ◦ The channel manager must examine if internet-based channels have a significant impact on the firm's choice to prioritize distribution strategy. If a company feels it can be successful as a pure- play online seller, utilizing the Internet as its sole medium of communication with clients, it must prioritize distribution strategy above all else. ◦ 2 - Role of Electronic Marketing Channels in the Marketing Mix The function of electronic marketing channels allows information to be quickly exchanged, which promotes the company; product prices can be decreased if there is less need for middlemen. The main concern is the product's distribution. ◦ 3 - Channel Design and Electronic Marketing Channels The function of electronic marketing channels allows information to be quickly communicated, giving the company advertising; product prices can be decreased if there is less need for middlemen. The main difficulty is product distribution. ◦ 4 - Channel Member Selection and Electronic Marketing Channels ◦ The need to select prospective channel members carefully will remain an important part of channel design-making. As electronic marketing channels result in reintermediation rather than disintermediation ◦ 5 - Channel Management and Electronic Marketing Channels Channel management is going to become increasingly difficult and sophisticated as technology advances. The fundamental issues of motivating channel members, building cooperation, managing conflict, and coordinating elements of the marketing mix to meet the firm's distribution objectives still require the channel manager's full attention, and if these issues are not addressed in person, they may take longer to resolve or may not be resolved adequately. FRANCHISE MARKETING CHANNELS Franchise marketing refers to the marketing strategies and tactics franchisors and franchisees use to attract new clients or customers to increase awareness and drive revenue to their franchise organization. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 29 FRANCHISE CHANNELS CONCEPTS AND TERMINOLOGY Franchise is a legal arrangement between two independent parties in which one of the parties provides the other party a license to sell a branded goods or service. The franchisor is the person that owns the trademarked product or service, whereas the franchisee is the party that has been granted the right to sell the product or service. Product Distribution Franchise This type of franchise is similar to the original franchise notion described above. In other words, the franchisor licenses its branded product or services to franchisees, who subsequently market the products or services of the franchisor. In this type of franchise, the franchisor provides very little management and marketing assistance to the franchisees. Business Format Franchise The franchisor not only licenses the franchisee to sell the franchisor's branded product or service, but also provides the whole system or format for running the firm under this type of franchise. Training, marketing strategy, logos, promotion management systems, financial control procedures, quality control standards, and everything else needed to start up and run a franchisee's business are typical examples. Single-Unit-Franchise The franchisor provides the franchisee the ability to own and operate one unit under this structure. This is the most typical and basic franchise channel arrangement. If a franchisee is successful with a single unit and then wishes to purchase one or more additional units, the channel structure remains a single-unit channel structure with extra units added. Multi-Unit-Franchise Under this structure, the franchisor grants the franchisee the ability to own and operate more than one unit from the outset of the partnership. This multi-unit franchise structure can be created using an area development franchise or a master franchise agreement. Franchising Although it is frequently referred to as an industry or kind of business, franchising is a technique of distribution that uses franchise marketing channels to make items and, in particular, services available to customers. Franchise Fee A franchise payment is often a one-time flat charge paid to the franchisor when the franchise contract is signed. Royalty Fee Most franchisees are expected to pay a monthly and ongoing royalty fee to the franchisor for the duration of their ownership of the franchise. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 30 RATIONALE FOR FRANCHISE MARKETING CHANNELS Distributing via Franchise Channels: 1. Capital Advantages, The most essential rationale for choosing franchised distribution is frequently highlighted as capital benefits. The acquisition of cash via franchising does not erode ownership in the firm to the same extent as equity financing via the public sale of securities. Furthermore, it avoids the debts associated with borrowing, which may be too costly for the business to bear. 2. Potential to Reduce Distribution Costs, The ability of franchising to lower distribution costs is especially essential for a corporation whose primary channel alternative is to develop a network of company-owned stores. 3. Franchising may foster a high level of managerial motivation. Typical Initial and Continuing Assistance Offered by Franchisors to Franchisees DOWNSIDES OF FRANCHISE CHANNELS The following are three disadvantages for franchisees: LIMITED INDEPENDENCE, the franchisee's limited independence is mostly owing to the franchise company format's pre-packaged and programmed nature. ROYALTY FEES, this is a recurring duty that lasts for the duration of the franchise agreement, regardless of whether the franchisee earns a profit or not. NEGATIVE HALO EFFECT: If one or more franchisees in a system produce negative publicity, all franchisees in the system may suffer. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 31 CHANNEL MANAGEMENT IMPLICATIONS OF FRANCHISE CHANNELS Channel control is a significant advantage of franchise channels. The channel manager who pursues a channel design approach that attempts to build a high level of control into the channel while yet relying on independent highly motivated channel members must almost always consider the franchise channel option. Managing the marketing mix in franchise channels provides a quandary for channel managers. On the one hand, he or she wants to swiftly modify product, pricing, promotion, and logistical strategies to benefit franchisees. However, the channel manager is confined in terms of the activities that may be made by the franchise business format's rather defined strategic framework. Is a franchise fee the same thing as a royalty fee? A franchise fee is often a one-time flat cost paid by the franchisee to the franchisor when the franchise contract is signed. Royalty fees, on the other hand, constitute ongoing and consistent payments to the franchisor for the duration of the franchise. The franchisor often sets royalty payments based on a proportion of the franchisee's total sales. Services Marketing Channels Service features that set them apart from products include: -The intangibility of services -Service and service provider dependency -The difficulty of standardizing services -A high level of consumer involvement in service delivery -The perishability of the services Marketing channels are the most effective and direct means to increase the visibility of a service. Why? -The client is instantly exposed to and experienced the channel's service. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 32 Because services are inseparable from the provider, the service provider lacks the safety net offered to product producers, who may compensate for poor distribution. Why? -As a result, all marketing channel components with which the consumer interacts reflect the service's excellence. In the case of franchising, it is difficult for the channel manager to push franchisees to deliver a consistent quality of service. Why? -The number of human interactions— is typically involved in service offering. Client engagement should be encouraged in a channel that includes services such as barbers, health clubs, and tax preparation. Why? -For such services to be successful, they often require client feedback. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 33 The channel must be created to connect people who supply the service with those who wish to obtain it as efficiently as possible. Why? -Because unsold services are very perishable, the design should maximize service sales within the target market's limited exposure. ADDITIONAL PERSPECTIVES Shorter Channels The immediate formation of a short channel reduces the difficulty of building a channel structure in terms of: -the length, intensity, and kind of intermediary at each level -the selection of intermediaries -the need to incentivize middlemen to effectively sell the commodities. Franchised Channels Using business-style franchising can provide the service provider with the following benefits: -the economic magnitude of a huge organization -the entrepreneurial spirit and determination associated with privately held firms -the level of control required to promote homogeneity in the services provided by individual franchised entities Service Customization -Many providers offer a high level of personalization. -Small-scale channels composed of local independent service providers are expected to remain crucial for services that need a high degree of personalization. Channel Flows -Flows of information, negotiation, and marketing transport the service via the channel. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 34 -Many can be managed electronically, with technology's role becoming it will become much more significant in the future than it is now. INTERNATIONAL CHANNEL PERSPECTIVES What motivates the need to concentrate on overseas markets? -Home markets are tiny, oversaturated, highly competitive, and expand slowly. Going global means more money, a larger market, a higher ROI, and long-term success. What makes the international market complex? 1. Behavioral processes in international channels 2. Designing international channels 3. Motivating channel members 4. Environment of international channel management What are the key environmental factors of the international market? 1. Economic environment- All economic circumstances that exist in the native environment can also exist in foreign settings. Indeed, the transformations can be considerably more drastic. 2. The competitive environment will need the channel structure to adjust to differences in competitive structures among many different countries. 3. Sociocultural environment- Differences in sociocultural elements between countries are a reality in worldwide marketing. Cultural values, behavioral norms, attitudes, and perceptions differ greatly throughout the world. 4. Technological environment- Another aspect that might influence channel strategy is the degree of technology and the rate of technological change in foreign contexts. 5. Tariffs, import restrictions, quotas, and other government laws impacting the distribution of foreign items within the nations in issue may be merely the tip of the iceberg. Highly precise, opaque, and even bizarre restrictions and bans can make establishing overseas distribution extremely difficult. Behavioral Processes in International Channels The channel manager must grasp the behavioral features of the channel to minimize bad conflict, efficiently wield authority, and develop excellent communication channel systems. Because cultural patterns in many nations generally place greater importance on person- to-person interactions than is normal in the United States, the behavioral side can be even more essential in international channels than in domestic channels. Designing International Channels Phase 1: Recognize channel design decision must be made nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 35 Phase 2: Reflect on whether the firm's distribution objectives entail entering an overseas market Phase 3: Examine tasks necessary for the successful distribution of objective outcomes Phase 4: Develop channel structure alternatives for the international environment Phase 5: Choosing the best channel design What are some alternative methods to enter international markets? 1. Foreign production sources 2. Production in the home market (indirect exports vs. direct exports) Indirect Exporting Definition: a corporation selling items in overseas markets without having a separate division inside its structure. 1. Casual exportation (occasional) 2. Foreign trading firms (powerful organizations) 3. Intermediaries in trade (domestic representatives) 4. Collaboration (piggybacking) (carrier and rider) Direct Exporting Direct engagement of the manufacturer in exporting goods by fulfilling all activities associated with the process, such as creating market contacts, doing market research, managing physical distribution, and so on. 1. Distributors from other countries (independently owned businesses take the title of handled products) 2. Foreign agents (a separate company that does not assume title/physical ownership) 3. Marketing subsidiaries in other countries (sales branch established by manufacturer) Motivating International Channel Members 1. Identifying channel members' wants and issues 2. Giving channel members help that is congruent with their needs/problems 3. Making efficient use of power to provide leadership nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 36 THE BUSINESS OF SUPPLY CHAIN A Supply Chain is the network of individuals, businesses, coffers, conditioning, and technology that are utilized to manufacture and sell a product or service. The distribution of raw materials from a supplier to a manufacturer begins a supply chain and finishes with the delivery of the finished product or service to the end consumer. Supply Chain Management is the operation of the flow of goods and services, which covers all operations that transform raw materials into finished commodities. It entails actively simplifying a company's force-side conditioning in order to optimize customer value and obtain a competitive edge. Mapping out a supply chain is one of the most significant tasks in a strategic planning process's external analysis. One reason why it is vital to precisely delineate the supply chain is a company's capacity to define its market and choose where it wants to go in the future. When formulating corporate-level strategy, a corporation usually must determine whether to operate a single line of business or to enter additional related or unrelated businesses. Raw material extraction and manufacture, for example, are key components of each stage of a supply chain. A corporation may learn about the individuals engaged in each level of the supply chain and receive insight into the attractiveness or competitiveness of sectors it might wish to enter in the future by doing research. Examples: A. Generic Supply Chain The beginning of the generic supply chain is the procurement and extraction of raw materials. The raw ingredients are subsequently transported by a logistics provider to a supplier, who serves as the wholesaler. Materials are transferred to a manufacturing, or more than one manufacturer, where they are refined and processed into a final product. After that, it is transported to a retailer by a distributor who sells the final product wholesale. In a store, the merchant sells the product to customers. The consumer's purchase completes the cycle, but demand continues to fuel the manufacture of new raw materials, so perpetuating the cycle. Supply Chain for an e-Commerce Company nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 37 Technology like a checkout cart, an order system, or a third-party product like Shopify is responsible for processing a customer's product order. Following that, payment processors manage the order's payment transactions, establishing a new supply chain. Although payment processors utilize their own systems, third-party services such as PayPal and Stripe, which include banks and other providers, are commonly used. The warehouse receives a product order and verifies that it is ready for shipment. The warehousing company might be either inside or external to the enterprise. The order is subsequently transferred from the warehouse to the shipping firm. Once again, shipping can be done internally or through a third party. Once the box has been dispatched, it is delivered to the customer's door. Two main business processes: Inventory control (inbound logistics) Material management is concerned with the procurement and storage of supplies, components, and raw materials. To explain, material management enables the whole material flow cycle, including the acquisition and internal control of production materials, the planning and control of work-in-progress, and the storage, shipping, and distribution of finished items. Outbound logistics (physical distribution) Physical distribution encompasses all outward logistical processes associated with delivering customer service. Some of these operations include order receiving and processing, inventory deployment, storage and handling, outbound transportation, consolidation, pricing, promotion support, handling of returned items, and life-cycle support. DEMAND CHAIN, VALUE CHAIN, AND SUPPLY CHAIN CONCEPTUAL FOUNDATIONS The Demand Chain includes any efforts to focus on the customer and take a pull approach throughout all business processes. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 38 Value Chain is a set of interconnected business processes that create and add value for customers. Its goal is to separate value-adding activities from non-value-adding activities by breaking down all of a company's business processes into separate activities and assessing how much each activity contributes to the company's value. Reduced Uncertainty, which results in a reduction in asset intensity through the elimination of inventory. Increased Speed, which reduces the likelihood of becoming obsolete. Increased Revenue as a result of customer loyalty and the maximization of customization Increased Productivity through the use of multiple assets The Comparison of Demand Chain, Value Chain, and Supply Chain Even though similar concepts such as integrated logistics management, value chain, and demand chain have existed in the past, the supply chain concept has emerged as the foundation of the competitive business strategy of the twenty-first century. How effectively and efficiently multiple business functions and firms across traditional organizational boundaries break down their barriers to create synergies is a key to supply chain success. Three Dimensions Of Supply Chain Management Intrafunctional coordination, which manages a company's specific function's activities and procedures. Example: Logistics International coordination among the company's functional areas of logistics and marketing, logistics and production, and logistics and purchasing. Interorganizational coordination occurs between companies that are legally distinct from one another, like manufacturers and their suppliers. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 39 SUPPLY CHAIN STRATEGY The impact of supply chain management is significantly broader and lasts for a longer period due to its cross-functional and organizational nature. As a result, strategic decision-making is intrinsically linked to supply chain management. Simply put, a strategy's function is to plan how resources will be used to achieve goals. To put it another way, a strategy is a set of plans that combine an organization's long-term goals for supporting markets. A corporate philosophy, on the other hand, is concerned with a way of doing business. The decisions that the company as a whole makes regarding the market segments (such as transportation, cosmetics, automobile manufacturing, construction, and public utility) in which it wishes to compete are the focus of Corporate Strategy. The decisions regarding the target markets (such as seniors, teenagers, and women) in which the company competes or wishes to compete in the future are the focus of this part of the business unit strategy. The coordination and integration of new product/service development, branding, customer relationship management, quality assurance, and delivery schedules are all aspects of these decisions. Cost, differentiation, and focus are subcategories of this strategy. To keep the company ahead of the competition, a cost strategy focuses on low costs. To acquire new customers, a differentiation strategy emphasizes product or service innovations. A Focus Strategy focuses on the company's current strength by creating a distinct market segment. The management and control of the variety of tasks that support each specific business function, such as marketing, operations, purchasing, logistics, and finance, is the primary focus of the Functional Strategy. In addition, it establishes the foundations upon which the function will support the desired advantage in competition. Comparison of the Red Ocean and Blue Ocean Strategies nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 40 Types of Supply Chain Strategies 7 Pillars of Supply Chain Customer Service Demand Planning and Forecasting Inventory Control and Planning Warehousing Transportation Planning Sourcing Portfolio Management THE ULTIMATE GOAL OF SUPPLY CHAIN MANAGEMENT IS CUSTOMER SERVICE. A service is not something that is built in a factory, shipped to a store, put on a shelf, and then taken home by a consumer. In short, a service is not a thing. —G. Lynn Shostack, Designing Services That Deliver, Harvard Business Review Businesses cease to exist if they do not have customers. As a result, a company's success often depends on its ability to acquire new customers and keep existing ones. More specifically, the company's market share, revenue, profitability, and competitiveness are all directly influenced by customer service. Because it determines the level of inventory that the company ought to maintain to make a product available to customers whenever they wish to purchase it, customer service has also affected the cost of carrying inventory. Since customer service has a significant impact on a business's bottom line, it is important to work together across the supply chain to increase customer satisfaction. Understanding the requirements, preferences, and expectations of customers is the first step toward increasing customer satisfaction. However, due to the elusive and shifting nature of the customer mindset that shapes customer service, such nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 41 comprehension is extremely difficult to attain. This means that different customers may have different perceptions of customer service at different times. Regardless, there are some ways in which all customers conceptualize customer service that is shared by all of them. Categories Of Customer Service Pre-sales and post-sales distribution services Technical service Product maintenance and repair services Service support for distributors and dealers Management aids to industrial/business customers Elements of Customer Service nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 42 Potential Costs and Benefits of The Customer Relationship DEMAND PLANNING AND FORECASTING If a man gives no thought about what is distant, he will find sorrow near at hand. —Confucius What and how much customers want is reflected in demand. As a result, the company's financial, logistics, and marketing plans are influenced by demand, which in turn drives supply and, consequently, production plans. The primary cause of business failure is inaccurate demand information because it results in either excessive supply, which wastes valuable resources, or insufficient supply, which causes customers to be dissatisfied. 1. Planning demand—Involves more than just forecasting 2. Communicating demand—includes communicating the demand plan to supply 3. chain partners across the entire supply chain 4. Influencing demand—Includes marketing and promotion plans, product positioning, and pricing 5. Prioritizing demand—Includes customer order management and customer profiling nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 43 Demand Influencing Process nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 44 Demand Forecasting Processes nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 45 S&OP Processes nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 46 Four Stages of the S&OP Maturity Model INVENTORY CONTROL AND PLANNING There are two ways to extend a business. Take inventory of what you are good at and extend your skills. Or determine what your customers need and work backward, even if it requires learning new skills. — Jeff Bezos, CEO of Amazon In various forms, inventory is an asset that is not being used right now or in the future (for sale or distribution). Inventory can end up being a financial burden for the business because it represents an underutilized resource represented by an idle asset. Many businesses want to keep inventory to meet anticipated customer demand and avoid losing sales opportunities, despite the risks associated with it. When you don't have an inventory, it's hard to get products to customers when they need them. Inventory is thought to be an option for future production and purchase. nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 47 Key components of the inventory management principle Functions of Inventory Buffer Stock- This is an additional cushion that is kept for a long time to prepare for an unexpected surge in demand and prevent stockouts. This kind of inventory is frequently required to cut down on the possibility of disrupting distribution and shutting down the production line. Safety stock is another name for buffer or safety stock. Lot-size Inventory- This is inventory that has been built up as a result of buying too much and making too much to take advantage of economies of scale. To elaborate, a lot of businesses buy a lot of certain products to take advantage of quantity (volume) discounts or freight discount opportunities. Additionally, by mass-producing goods simultaneously, a business can reduce setup costs per unit. Cycle stock is another name for this type of inventory. Anticipation inventory- This is inventory that has been built up in anticipation of anticipated future demand, price increases, marketing campaigns, seasonal changes, strikes by employees, or plant closures. This kind of inventory helps keep production or distribution at a consistent level, preventing future overtime or idle time. An excellent illustration of anticipation inventory is the seasonal inventory that is kept in preparation for the upcoming Thanksgiving holiday or Christmas season. Speculative inventory, which is kept to safeguard the business from future price increases or product shortages, is another example. Pipeline (or transit) inventory—This is inventory that exists because of the delay in transportation. To put it another way, items that have been pre-ordered but have not yet arrived at warehouses, distribution centers, or retail stores are still unavailable to customers, so items that are in transit can be considered inventory. Using a faster mode of transportation can help reduce this kind of inventory. Decoupling inventory- This is inventory that separates each stage of the supply chain from any unanticipated disruptions to the chain. For example, if a machine breaks down during the manufacturing stage, the process will stop. This could result in a lack of work-in-process inventory at the next manufacturing stage or a lack of products at the next distribution stage. As a result, nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 48 allowing for uninterrupted production and distribution at a steady pace will be made possible by decoupling inventory held at various stages of the supply chain. Types of Inventories Raw Materials- The term raw materials refer to unaltered physical resources that are either obtained from natural sources like mines or purchased from outside organizations to be utilized in the production of products or components. Parts/Components- A finished product's major components—parts and components—are what enable it to function properly. Work in process- Items that are still in the manufacturing process and are awaiting processing within the supply chain are referred to as work in process (WIP). Finished goods-Items that are finished and ready for distribution or sale are referred to as finished goods. To put it another way, finished goods are those that no longer require the transformation procedure. Supplies are things, including finished goods, that are required to participate in the manufacturing process but do not make up the finished product. Key components of annual inventory carrying cost nrfa//MKM106//FINALS 2025 PAMANTASAN NG CABUYAO |DISTRIBUTION MANAGEMENT 49 Typical cycle counting procedures WAREH

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