Chapter 9 Principles of Marketing

Distribution Channels (marketing channels)
Intermediaries–wholesalers, distributors, and retailers–through which the flow of products travels.
Inventory Carrying Costs
The costs required to make or buy a product, including risk of obsolescence, taxes, insurance, and warehousing space used to store the goods.
Just-in-time (JIT)
A manufacturing process that seeks to make products based on customer orders rather than in anticipation of orders and to receive components from supplier only when they are needed for production.
Logistics
That part of supply chain management that plans, implements, and controls the flow of goods, services and information between the point of origin and the final customer.
Obsolete Inventory
Inventory that can no longer be sold because the product has expired, been redesigned, was over-ordered, or is at the end of its product life.
Pull Strategy
A supply chain strategy in which customer orders drive manufacturing and distribution operations.
Push Strategy
A supply chain strategy in which a company builds good based on sales forecast, puts those goods into storage, and waits for a customer to order the product.
Reciprocity
Purchasing goods and services from supplier only if they buy from the purchasing manager’s company.
Stockout
A situation in which a company does not have enough inventory available to fill an order.
Supply Chain Management
The actions the firm takes to coordinate the various flows within a supply chain.
Pull Strategy Advantages and Disadvantages
Advantages:
– Allows firms to achieve economics of scale; because the firms makes larges batches of one good at a time, it can reduce manufacturing, transportation, and other costs.

Disadvantages:
– First, Sales forecasts must be accurate. Second, production facilities set up to manufacture one good over a period of time will respond slowly to changing demand patterns. Third, inventory carrying cost are expensive, typically 25-30 percent of the cost to produce and deliver the goods.

Push Strategy Advantages and Disadvantages
Advantages:
– Reduces inventory carrying costs, allows the firm to customize products specifically to customer requirements, and gives firms the ability to respond rapidly to changing market conditions.

Disadvantages:
– Does not often allow firms to take advantage of economics of scale.

Push-Pull Strategy Advantages and Disadvantages
Advantages:
– Companies can achieve economies of scale in purchasing, while engineering flexibility into manufacturing. Also, takes advantage of the fact that sales forecasts tend to be more accurate at an aggregate level than at a specific product level.

Disadvantages:
– The firm will still incur costs to store components in inventory.

7 Steps of Push Strategy
Step 1: Forecast Sales
Step 2: Plan Production
Step 3: Order Materials
Step 4: Make Product
Step 5: Put in Storage
Step 6: Customer Orders
Step 7: Ship Product
5 Steps of Pull Strategy
Step 1: Customer Orders
Step 2: Plan Production
Step 3: Order Materials
Step 4: Make Product
Step 5: Ship Product
6 Steps of Push-Pull Strategy
Step 1: Forecast Sales
Step 2: Plan Production
Step 3: Order Materials
Step 4: Customer Orders
Step 5: Make Product
Step 6: Ship Product