Chapter 13: Supply Chain Management and Marketing Channels (Channel…
Chapter 13: Supply Chain Management and Marketing Channels
Supply Chain Management
: A management system that coordinates and integrates all of the activities performed by supply chain members into a seamless process, from the source to the point of consumption, resulting in enhanced customer and economic value.
Supply chain orientation and Supply chain integration
: The connected chain of all of the business entities, both external and internal to the company, that perform or support the logistic function.
Supply chain integration
Occurs when multiple firms or business functions in a supply chain coordinate their activities and processes so that they are seamlessly linked to one another
In a world-class supply chain, the customer may not know where the business activities of one firm or business unit end and where those of another begin—each actor keeps their own interests in mind, but all appear to be reading from the same script, and from time to time, each makes sacrifices that benefit the performance of the system as a whole.
: The connected chain of all of the business entities, both internal & external to the company, that perform or support the logistics function.
Key Business Process
Business processes are composed of bundles of interconnected activities that stretch across firms in the supply chain.
There are 8 critical business processes on which supply chain managers must focus.
(1) Customer Relationship Management
(2) Customer Service Management
(3) Demand Management
(4) Order Fulfillment
The order fulfillment process is a highly integrated process, often requiring persons from multiple companies and multiple functions to come together and coordinate to create customer satisfaction at a given place and time.
One of the
most fundamental processes
, which involves generating, filling, delivering, and providing on-the-spot service for customer orders.
When the order fulfillment process is managed diligently, the amount of time between order placement and receipt of the customer’s payment following order shipment (known as the order-to-cash cycle) is minimized as much as possible.
Since many firms do not view order fulfillment as a core competency, they often outsource this function to a third party logistics firm that specializes in the order fulfillment process.
(5) Manufacturing flow management
(6) Supplier Relationship Management
The supplier relationship management process supports manufacturing flow by identifying and maintaining relationships with highly valued suppliers
Provides structural support for developing and maintaining relationships with suppliers
A key step toward ensuring that firms’ manufacturing resources are available, and thereby the supplier relationship management process has a direct impact on each supply chain member’s bottom-line financial performance
(7) Product Development and Commercialization
(8) Returns management
The returns management process enables firms to manage volumes of returned product efficiently while minimizing returns-related costs and maximizing the value of the returned assets to the firms in the supply chain.
In addition to the value of managing returns from a pure asset-recovery perspective, many firms are discovering that returns management also creates additional marketing and customer service touch points that can be leveraged for added customer value above and beyond normal sales and promotion-driven encounters.
A set of interdependent organizations that eases the transfer of ownership as products move from producer to business user or consumer.
Sustainable Supply Chain Management
A channel intermediary that sells mainly to customers.
Agents or Brokers
Channel Intermediaries reduce the number of required transactions
Intermediaries in a channel negotiate with one another, facilitate the change of ownership between buyers and sellers, and physically move products from the manufacturer to the final consumer.
Channel Functions Performed by Intermediaries
Contacting and communicating with prospective buyers to explain the features, advantages, and benefits
Transportation and storage of assets and their sorting, accumulation, consolidation, and/or allocation of assets
Research and financing
MK channels for consumer Products
Direct channel is used to sell products directly to consumers. No intermediaries are used. Ex: Telemarketing, catalog shopping, online shopping, and shop-at-home television networks.
At the other end of the spectrum, an agent/broker channel may be used in markets with small manufacturers/retailers who lack the resources to find each other. The agents or brokers bring the manufacturers and wholesalers together for negotiations, but they do not take title to merchandise.
Most consumer products are sold through distribution channels similar to the retailer channel and the wholesaler channel.
Alternative Channel Arrangements
Dual Distribution (multiple distribution)
Use of two or more channel to distribute the same product to target Market
A channel that enables customer to return products or components for reuse or remanufacture
Ex: drop and shop programs
Factor Affecting Channel Choice
Consumer or Industry customer
Size of Market
Products that are more
complex, customized, and expensive (price)
benefit from shorter and more direct marketing channels and through a direct sales force.
products can be sold through longer distribution channels with greater numbers of intermediaries.
Product stage in the
is also an important factor in deciding on the selection of channels
As products become more common, producers turn from a direct channel to more alternative channels.
Number of product lines
Desire for channel control
Producers with larger financial, managerial, and marketing resources are able to use more direct channels.
Producers with several products in a related area choose channels that are more direct, and sales expenses can be spread over more products
A producer’s desire to control pricing, positioning, brand image, and customer support may influence channel selection.
Manufacturers of upscale products may sell only in expensive stores to maintain an image of exclusivity.
Levels of Distribution Intensity
Aims at having a product available in every outlet where target customers might want to buy it
Achieved by screening dealers to eliminate all but a few in any single area
Establishes one or a few dealers within a given area