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12
SUPPLY CHAINS AND THE VALUE DELIVERY NETWORK
The supply chain consists of upstream and downstream partners. Upstream
from the company is the set of firms that supply the raw materials, components,
parts, information, finances, and expertise needed to create a product or service.
Downstream side of the supply chain are those who look toward the customer,
such as wholesalers and retailers.
Value delivery network is made up of the company, suppliers, distributors,
and, ultimately, customers who partner with each other to improve the
performance of the entire system.
THE NATURE AND THE IMPORTANCE OF MARKETING CHANNELS
Most of the producers try to forge a marketing channel or distribution
channel, which is a set of parties that help make a product or a service available for
use or consumption by consumer or business user.
A companys channel decision directly affects every other marketing decision.
How channel members add value
Producers use intermediaries because they create greater efficiency in making
good available goods to target markets and usually offer the firm more than it can
achieve on its own.
Producers make narrow ranges of products in large quantities, but customers
want broad ranges of products in small quantities. The role of intermediaries is to
transform the variety of products made by producers into the specific products
wanted by consumers. Thus, intermediaries play an important role matching the
supply and demand.
Key functions of marketing channel members:
Corporate VMS
Contractual VMS
Administered VMS
Types of intermediaries
Direct sells/resselers...
Number of intermediaries
o Selective distributionthe use of more than one but fewer than all the
intermediaries who are willing to carry a companys products. By using
selective distribution, they can develop good working relationships with
selected channel members and expect a better-than-average selling effort.
Selective distribution gives producers good market coverage with more
control and less cost than does intensive distribution
Evaluating the major alternatives
o Economic criteria a company compares the likely sales, costs and profits of
different channel alternatives;
o Control issue - using intermediaries involves loosing a part of control over the
marketing process.
o Adaptability criteria channels often involves long-term commitments, yet
the company wants the channels to be flexible.
MARKETING LOGISTICS AND SUPPLY CHAIN MANAGEMENT
Companies must decide on the best way to store, handle, and move their
products and services so that they are available to customers in the right
assortments, at the right time, and in the right place. Logistics effectiveness has a
major impact on both customer satisfaction and company costs.
Nature and importance of marketing logistics
Marketing logistics also called physical distribution involves planning,
implementing, and controlling the physical flow of goods, services, and related
information from points of origin to points of consumption to meet customer
requirements at a profit. In short, it involves getting the right product to the right
customer in the right place at the right time.
It involves entire supply chain managementmanaging upstream and
downstream value-added flows of materials, final goods, and related information
among suppliers, the company, resellers, and final consumers. Improved logistics can
save costs to both a company and its customers.
Warehousing
Stock management
Managers must maintain the delicate balance between carrying too little
inventory and carrying too much. With too little stock, the firm risks not having
products when customers want to buy. Carrying too much inventory results in
higher-than-necessary inventory-carrying costs and stock obsolescence.
Transportation
Amount of service
o Self-services serve customers who are willing to perform their own
locate-compare-select process to save tome or money and
increasingly also operate self-service chekouts (supermarkets).
Product line
Relative prices
Organizational approach
Price decision
Most retailers seek either high markups on lower volume (speciality stores)
or low markups on higher volume (mass merchandisers and discount stores).
Retailers must also decide on the extent to which they will use sales and other price
promotions.
No price promotion high quality positioning/constant low
prices/high-low pricing.
Promotion decision
Retailers use any or all of the five promotion tools advertising, personal
selling, sales promotion, public relations and direct marketing.
Place decision
It is very important retailers select locations that are accessible to the target
market in areas that are consistent with the retailers positioning.
WHOLESALING
Wholesaling includes all the activities involved in selling goods and services
to those buying for resale or business use.
Wholesalers add value forming one or more of the following channel functions:
Types of wholesalers
Wholesalers fall into three major groups: merchant wholesaler; agents and
brokers and manufacturers sales branches and offices.
Like retailers, wholesalers must segment and define their target markets and
differentiate and position themselves effectively.
They can choose a target group by size of customer, type of customer, the
need for service or other factors.
Marketing mix decisions
L
ike retailers, wholesalers must decide on product and service assortment,
prices, promotion and place.
Nowadays, wholesalers are cutting down on the number of lines they
carry, choosing carry only more-profitable ones.
Regarding to price, they usually practice the standard markup
strategy.
Most of wholesalers are not promotion minded.
They must to find strategically good locations.