Transcript Chapter 13: Distribution Channels and Logistics Management

SUPPLY CHAIN AND
MARKETING CHANNELS
Professor Ed Fox
Cox School of Business
Southern Methodist University
What is a Channel of
Distribution?
A set of interdependent organizations
(intermediaries) involved in the process of
making a product or service available for use or
consumption by the consumer or business user
Channel decisions are among the most
important decisions that management faces
and directly affect every other marketing
decision
Distribution Channels
EXAMPLES
Grower
Manufacturer
Broker/
Distributor
Wholesaler
Retailer
Consumer Packaged Goods
Commodity
Supplier
Component
Manufacturer
Automobile
Manufacturer
Automobiles
Dealer
Why Are Intermediaries
Used?
Greater efficiency in making goods available to
target markets
Offer the firm more than it can achieve on it’s
own because of the intermediaries’:
 contacts
 experience
 specialization
 scale of operation
Match supply and demand
Supply Chain
DESIGN ISSUES
Analyze Consumer Needs
Lot Size
Convenience
(Decentralization)
Waiting
Time
Variety
Set Channel Objectives & Constraints
Identify Major Alternatives
Evaluate the Major Alternatives
Supply Chain
DESIGN ISSUES
Analyze Consumer Needs
Set Channel Objectives & Constraints
Identify Major Alternatives
Intensive
Distribution
Selective
Distribution
Exclusive
Distribution
Evaluate the Major Alternatives
Supply Chain Simulation
“BEER GAME”
Supply Chain Management
QUICK RESPONSE &
E.C.R.
Supply Chain Management
WHAT IS QUICK RESPONSE?
Quick Response (QR) was pioneered by apparel
retailers and manufacturers
 Addressed high demand uncertainty and long lead times
 Examples include retailers Dayton Hudson and Sears,
and manufacturers Levi Strauss and Milliken & Co
As discount department stores adopted QR,
non-fashion manufacturers increased focus n
integrated supply chain management
 Emphasis was on cost reduction
 Examples include retailers Wal-Mart, Kmart and Target,
and manufacturer Procter & Gamble
Supply Chain Management
WHAT IS QUICK RESPONSE?
Quick Response (QR) encompasses a number
of related initiatives and techniques to integrate
the supply chain across functions within and
between retailers and manufacturers
QR leverages the application of
technology
The danger is that QR, poorly implemented, can
simply shift costs from retailer to manufacturer
Supply Chain Management
QUICK RESPONSE
Information



Point-of Sale Data
Scanning
or
Forecasting
Consumer
Product



EDI
Electronic Ordering
Electronic Funds
Transfer
Retailer



Cross Docking

Computer Controlled 
Material Handling
Flow Through
Distribution
Manufacturer
Barcoding
Vendor
Managed
Inventory
 Quick Response effectiveness depends on:
 Integration of manufacturer and retailer systems
 Commitment
 Capabilities of technology

Just-in-Time
Manufacturing
Trends in Quick Response
Consolidation in discount and department stores
has left strong, sophisticated national retailers
that demand Quick Response (QR) from suppliers

For example, most Target and Kmart suppliers are
on EDI, 2500+ Wal-Mart Retail Link users (1995)

Facilitated by standardization; e.g., Voluntary
Interindustry Communcations Standards (VICS) and
Uniform Product Codes (UPC)
Many variations on cross-docking

Streamline “picking” and other material handling
Manufacturing flexibility is lagging distribution
initiatives
Supply Chain Management
WHAT IS E.C.R.?
Efficient Consumer Response (ECR) is
essentially Quick Response adapted for the U.S.
packaged goods industry
 Broader scope than QR
Promise of $30 billion savings from:
 Efficient Store Assortment
 Efficient Product Introduction
 Efficient Promotion
 Efficient Replenishment
Supply Chain Management
E.C.R.
Information



Point-of Sale Data
Scanning
or
Forecasting
Consumer




Category Management
EDI
Electronic Ordering
Electronic Funds Transfer  Just-in-Time
Manufacturing
Retailer

Product


Continuous
Replenishment
Program (CRP)
Direct Store
Delivery (DSD)
Supplier Managed
Inventory
Manufacturer





Store Order Pallets
Cross Docking
Computer Controlled
Material Handling
Flow Through Distribution
Barcoading
 ECR involves supply chain initiatives beyond
Quick Response
Trends in E.C.R.
Retailers are hesitant to make investments

EDI is prevalent

Continuous Replenishment Programs (CRP) and
Direct Store Delivery (DSD), initiatives that are
manufacturer funded, are increasingly common

Few retailers are investing in warehouse systems,
which represent large retailer investments
Scanning discipline and continuing mistrust have
limited the exploitation of scanner data for ECR
Efficient assortment and efficient promotions have
seen the most activity