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T9.1-4: Distribution decisions and logistics (Ch15) (Digital Revolution (p…
T9.1-4: Distribution decisions and logistics (Ch15)
Distribution
One of the most critical decisions a company can be involved in due to the impact of globalisation.
Control is shifting from the big manufacturers to consumers
This is leading to a shift towards integrated supply-chain and communication channels to allow rapid response
'Value network view'
Decisions
'Logistics' decisions
Aimed at organising and improving the
effectiveness
,
efficiency
, and
speed
of the physical system of supply at
minimum cost
.
'Channel strategy' (p.502)
Selecting channels of distribution that
optimise
consumer
access
to the product/service
Hybrid channels (p.503)
Each channel should be targeting different segments, or different needs states
Must consider how each segment wants to do business and engage with the company
Using multiply distribution channels, i.e. online, direct sales, intermediary sales (HP example p.503)
Also must NOT cause 'channel conflict', raise costs, cause supply delay, or meet with insufficient demand
Push
or
Pull
strategy (p.502)
Push
: Sales and trade promotions to get intermediaries to sell more of their product
Pull
: Marketing towards end-users to get them to induce intermediaries to stock their products
Good marketing will incorporate both, as a good Pull strategy will significantly augment a Push strategy, e.g. Nike, Apple, Coca-Cola
Types of channels
#
Agents
Negotiate and sell products but do not take ownership
E.g. Brokers, reps, sales agents
Facilitators
Store and/or distribute goods but do not take ownership or negotiate/sell products
E.g. Transport companies, warehousing, banks, ad agencies
Merchants
Take ownership and resell products
E.g. wholesalers and retailers
Characteristics and considerations
Channels must add value by MAKING/GROWING the market, not just serving it. Turning potential customers into active customers
Channel decisions must align with the companies overall strategies in segmentation, targeting, and positioning
Channel decisions are long-term commitments, so huge care and due diligence must be engaged
In US channel partners take 30-50% of final sell prices, so a significant consideration to get it right
Define: 'a system of partnerships and alliances that a firm creates to source, augment and deliver its offerings' (Kotler, p.504)
Includes
Immediate customers and end-users
Any steps along the way, transport and logistics
Suppliers and their suppliers
Technology providers that augment the overall system, e.g. Apples app developers
Other interested parties, e.g. uni researchers, govts
Any other value-add provider who accompanies your offering, e.g. service agents
Could also include providers who deal with the by-products or waste from any part in the chain, including end-users
Benefits
Monitor disturbances along the chain that may impact cost or supply suddenly or in the long-term
The collective chain, or parts of it, can go online together to gain advantages in communication, speed, costs, accuracy.
Can monitor if earnings are higher up- or downstream, and expand or integrate in that direction, or adapt economic relationships to suit
IT -
Enterprise Resource Planning
(ERP) systems
Developed for big chains by the likes of SAP or Oracle
Aim to streamline and integrate management of cash flow, manufacturing, HR, purchasing, etc
Trying to break down silos that cause inefficiencies and by default increase costs
Still really in its infancy and most organisations/groups are a wee way from fully functioning ERP systems
Is 'Mainchain Ultra' along these lines?
Digital Revolution (p.505) - key features that modern shoppers are really looking for and value:
Find out in-store whether a product that is unavailable can be purchased and shipped from another location to home
Order a product online and pick it up at a convenient retail location
Check online for product availability at local stores before making a trip
Return a product purchased online to a nearby store of the retailer
Enjoy helpful customer support in a store, online or over the phone
Receive discounts and promotional offers based on total on- and offline purchases
The role of marketing (distribution) channels (p.505)
Functions and flows
Negotiation
Ordering
Promotion
Financing
Information / Research
Risk taking
Transport
Storage
Payment
Ownership
Figures on p.507 show two different channel models, one being 'Hub and Spoke' model
Channel levels (p.507) - 0-, 1-, 2-, 3- Level channels demonstrated in figure 15.2
Services have specific channel options too. Banks, insurance, entertainers, politicians, etc
Channel design decisions p.509-
Establishing the channel objectives and constraints
Infrastructure
Economic factors
Legal regulations and restrictions
Consumer lifestyle and population density
Dependent on product characteristics, i.e. good/service, bulky, specialised, high-/low-end, etc
Identifying the major channel alternatives p. 513
Types of intermediaries (channels)
Agents
Negotiate and sell products but do not take ownership
E.g. Brokers, reps, sales agents
Facilitators
Store and/or distribute goods but do not take ownership or negotiate/sell products
E.g. Transport companies, warehousing, banks, ad agencies
Merchants
Take ownership and resell products
E.g. wholesalers and retailers
Strategic number of intermediaries needed for:
Selective distribution - mid-level
Intensive distribution - masses
Exclusive distribution - high-end
Terms and responsibilities of channel members:
Conditions of sale
Price policies
Territorial rights
Services and responsibilities
Analysing customer needs and wants
Understand and manage the 'Showrooming Phenomena' in the face of e- and m-commerce (p.510)
Five service outputs
Spatial convenience
Product variety
Waiting and delivery time
Service back-up
Lot size
Evaluating each alternative
Economic Criteria
Control and adaptive criteria