ch 16 olson

Marketing channel management/supply chain management
matching inventory to demand all the way through
• Wholesaler
firms that buy products from manufacturers and resell them to retailers
• Retailers
sell products directly to customers
• Viral marketing program
one that encourages people to pass along a marketing message to other potential consumers
• Distribution center
a facility for the receipt, storage, and redistribution of goods to company stores, may be operated by retailers, manufacturers, or distribution specialists
• Fulfillment centers
used to ship directly to customers
Direct Marketing Channel
• No intermediaries between the buyer and seller
• Seller is a manufacturer
• Customers → manufacturer
Indirect Marketing Channel
• One or more intermediaries work with manufacturers to provide goods and services to customers
• Customer → wholesaler → retailer → manufacturer
• Vertical channel conflict
when supply chain members that buy and sell to one another are not in agreement about their goals, roles, or rewards/discord results
• Horizontal channel conflict
disagreement or discord among members at the same level in the marketing channel (ex two competing retailers or two competing manufacturers)
• Independent or conventional marketing channel
several independent members, manufacturer, wholesaler, retailers, attempt to satisfy their own objectives and max their profits, often at the expense of the other members
• Vertical marketing system
a marketing channel in which the members act as a unified system
o 3 types:
• 1. Administered
• 2. Contractual
• 3. Corporate
o Administered Vertical Marketing System
no common ownership or contractual relationships, but the dominant channel members controls or holds the balance of power
• Coercive power
threatens to punish or punishes the other channel member for not undertaking certain tasks
• Referent power
supplier desperately wants to be associated with larger company because it attracts other retailers business
o Contractual Vertical Marketing System
Independent firms at different levels of the marketing channel join through contracts to obtain economies of scale and coordination and to reduce conflict
• Franchising
contractual agreement between a franchisor and a franchisee to operate a retail outlet using a name and formal developed and supported by the franchisor
o Corporate Vertical Marketing System
The parent company has complete control and can dictate the priorities and objectives of the marketing channel because it owns multiple segments of the channel such as manufacturing plants, warehouse facilities, retail outlets
Strategic relationship/partnering relationship
marketing channel members are committed to maintaining the relationship over the long term and investing in opportunities that are mutually beneficial
o Mutual trust
o Open communication
o Common goals
o Interdependence
o Credible commitments
MAKING INFORMATION FLOW THROUGH MARKETING CHANNELS
• Flow 1: (Customer to Store)
• Flow 2: (Store to Buyer)
• Flow 3 (Buyer to Manufacturer)
• Flow 4 (Store to Manufacturer)
• Flow 5 (Store to Distribution center)
• Flow 6 (Manufacturer to distribution center to buyer)
o Universal product Code (UPC)
tag on HDTV packaging and the customer receives a receipt
o Point of Sale (POS)
terminal records the purchase information and electronically sends it to the buyer at best buy corporate office
o Advanced shipping notice (ASN)
electronic document that the supplier sends the retailer in advance of a shipment to tell the retailer exactly what to expect in the shipment
o Electronic data interchange (EDI)
computer to computer exchange of business documents from a retailer to a vendor and back
o Vendor managed inventory (VMI)
improving marketing channel efficiency in which the manufacturer is responsible for maintaining the retailers inventory levels in each of its stores
MAKING MERCHANDISE FLOW THROUGH MARKETING CHANNELS
o 1. Management of inbound transportation
o 2. Receiving and checking using UPC or RFID
o 3. Store and cross docking
o 4. Getting merchandise floor ready:
o 5. Preparing to ship merchandise to a store
o 6. Shipping merchandise to stores
Radio frequency identification (RFID)
tiny computer chips that automatically transmit to a special scanner all the info about a containers contents or individual products
• Ticketing and marking:
affixing price and identification labels to the merchandise
• Pick ticket
a document or display on a screen in a forklift truck indicating how much is each item goes in the storage area
• Just in time system
: deliver less merchandise on a more frequent basis than traditional inventory systems
• Reduced lead time with JIT system
• Lead time
amount of time between the recognition that an order needs to be placed and the arrival of the needed merchandise at the sellers store and is available for sale
Where does the predominant supply chain issue occur in this scenario?
Information flow

At the moment, merchandise availability is the major problem, but the problem was originally caused by difficulties in information flow. Beth was not informed that her order had been rejected until much too long after it was placed, leading her to believe that the order was on its way.

Zara has developed the practice of delivering less merchandise to its stores on a more frequent basis. This quick response system is called a(n) ________.
Zara uses a just-in-time inventory system which is an inventory management system that delivers less merchandise on a more frequent basis than traditional inventory systems.
As the case indicated, over time some stores had stockouts of popular merchandise while other stores were overstocked with the same item. This could lead to disagreements between the stores and Zara’s corporate headquarters, which is a form of ______.
Vertical conflict occurs between members at different levels of the channel, in this case retailers and corporate headquarters.
Zara owns its factories, distribution centers, and retail stores. This is the ______ form of a ________.
corporate; vertical marketing system

In a corporate vertical marketing system, the parent company, in this case Zara, has complete control and can dictate the priorities and objectives of the marketing channel because it owns multiple segments of the channel, such as manufacturing plants, warehouse facilities, and retail outlet

Zara’s store managers use hand held devices to immediately pass purchase information back to its corporate headquarters in Spain. This is a form of _______.
EDI

Electronic data interchange (EDI) is the computer-to-computer exchange of business documents from a retailer to a vendor and back.

One problem that occurred for Zara was that individual store managers were ordering too much inventory on popular items. One way Zara addressed this was to implement _________, whereby Zara used mathematical processes and assumed responsibility for managing each store’s inventory.
VMI

Vendor-managed inventory (VMI) is an approach for improving marketing channel efficiency in which the manufacturer is responsible for maintaining the retailer’s inventory levels in each of its stores.

One of the ways that Walmart has been able to reduce the prices of its products, and add value to its customers, is by its continuing focus on streamlining all its _____ functions.
supply chain management

Walmart has focused its efforts on streamlining its supply chain management functions. This includes storage, transportation, delivery, and distribution as well as building collaborative relationships with its suppliers.

By combining their resources and developing shared goals, Procter & Gamble and Walmart were able to increase the value to the final consumer. Their relationship is considered _________.
Strategic relationships

occur when supply chain members are committed to maintaining a relationship over the long term and investing in opportunities that are mutually beneficial.

Walmart and Procter & Gamble effectively implemented ________, which allowed for information to flow directly from Walmart’s store to Procter & Gamble’s production facilities. This streamlined production as well as distribution, thus reducing costs and getting products to Walmart’s customers sooner.
electronic data interchange

The CFPR system discussed in the case is an example of electronic data interchange (EDI), which reduces the time between the decision to place an order and the receipt of merchandise. These increased efficiencies can result in lower costs and lower prices.

The strategic relationship between Walmart and Procter & Gamble is based on __________ because both firms realize that investments in supply chain management will create savings for consumers.
Interdependence

between the supply chain members (Walmart and Procter & Gamble) is based on mutual benefits and is key to developing a sustainable strategic relationship.

example of information flows
customer to store: DVD player purchased
store to buyer: POS terminal sends data
buyer to manufacturer: corporate inventory order
store to manufacturer: frequent, direct reorder
store to distribution center: request delivery schedule
manufacturer to distribution center and buyer: advanced shipping notice