Transcript Distribution - Somerset Independent Schools

Distribution
Chapter 13
What is distribution?
• Determining the best methods
and procedures so that
prospective customers can
locate, obtain, and use a
business’s products and
services
Free Enterprise
• Is based on the
matching of
production and
consumption
decisions.
• Is based on
matching supply
and demand
between consumer
and producer.
Utilities affected by Distribution
• Economic utility – amount of satisfaction a
consumer receives from using a product or
service
– Time utility: makes sure that the
product is available when needed
– Place utility: makes sure that the
product is available at the right place to
be sold to customer
Channel of distribution
• All the
organizations and
individuals who
participate in the
movement of
goods from
producer to
consumer
Distribution adjusts the following
differences
• Differences in quantity
• Differences in assortment (products
from many different manufacturers
• Differences in location (customers
typically do not live next to the
producer)
• Differences in timing of production
and consumption by consumer
How does distribution save time
and $$$$
• Consumers do not have to spend
time locating products
• Cost to have products shipped to
you
• Through marketing distribution
there are experts getting the best
prices to keep costs down
Types of distribution channels
• Direct – the producer sells the
product directly to the customer
Example: Farmer to customer
Used when:
1. Small number of consumers
2. Consumers in a small geographic
area
3. Product is complex – meet specific
needs
Indirect distribution
• There are other businesses
(intermediaries) between the
producer and the customer
Example: Levis Manufacturing to
Warehouse to Retailer to Customer
Wholesalers
• Are companies who assist with
distribution activities between
businesses.
–Used to help producers with
marketing tasks to keep costs down
–Main activities are:
• Buying
• Selling
• Transporting
• Storing
Rack Jobbers and Drop
Shippers
• Rack jobbers manage inventory and
merchandising for retailers by counting
stock, filling it when needed, and
maintaining store displays
– Example: Pepsi, Frito Lay
• Drop shippers own the goods they sell but
do not physically handle them
– Example: Coal, lumber, chemicals
Retailers
• Sell typically to the consumer
directly for profit
• Buy their goods from
manufacturer or wholesaler
• Display their products so
customers can evaluate them
• Do promotions for their
products/services
Types of retailers
• Brick and Mortar retailers – sell goods to
the customers from their own physical
stores
• Examples:
Types of retailers
• Automatic retailers – Vending machines
• Direct mail and catalog retailers
Retailers (Cont.)
• TV home shopping –
• Online Retailing –
Value of sales (million
dollars)
Total
234,667
6,824
26,047
22,088
5,608
71,329
17,684
3,667
13,158
6,396
7,953
7,030
E-commerce
112,791
5,214
19,507
11,026
3,092
5,994
14,211
2,244
9,894
5,351
5,736
4,820
E-commerce
as percent Percent distribution
of total
sales
Total E-commerce
48.1
100.0
100.0
76.4
2.9
4.6
74.9
11.1
17.3
49.9
9.4
9.8
55.1
2.4
2.7
8.4
30.4
5.3
80.4
7.5
12.6
61.2
1.6
2.0
75.2
5.6
8.8
83.7
2.7
4.7
72.1
3.4
5.1
68.6
3.0
4.3
How is retailing changing?
• More retail stores offering on-line shopping
• Many retail stores have catalogs to order
from
• Speed and convenience in retail stores is
important
• Customer service is very important
Agents
• Do not own the goods they sell
• Act as intermediaries by bringing
buyer and seller together
–Real Estate Agents
–Food Brokers
Factors that affect distribution
decisions.
• Multiple channels – Selling to both
industrial and consumer users
– Selling cookies at Kroger (consumer) and to
airlines (industrial) for customers on plane
– Control vs. cost – Determining the control
they want to keep over the distribution
process and the costs and profitablity
Exclusive Distribution
• Protected territories for distribution of
products in a given geographic location
Automobile dealers
Franchises (McDonalds)
Selective Distribution
• A limited number of outlets in a geographic
area are used to sell the product
– Maintain the image of the product
• Ralph Lauren – Top department stores (Macy’s)
• Liz Claiborne – Top department stores
Intensive Distribution
• The use of all suitable outlets to sell a
product - Wal-Mart, Kroger, drugstores,
etc.
– Hanes socks
– Household products
– Types of foods
Distribution factors (continued)
• E-Commerce – using the Internet to sell
products to customers and industrial
buyers
• Foreign Markets – Look at cultural
distributions in other countries to sell how
are different
– GM sells automobiles through franchised
retail outlets in US
– In Taiwan, they own their own retail outlets.
Physical Distribution
• Includes transporting, storing and stock
handling of products.
– Trucking is the most frequently used
transportation
• Advantages: Convenient, can deliver to door,
reduces packaging cost, rapid delivery of goods
• Disadvantages: Traffic jams, equipment
breakdowns, traffic accidents, size and weight
restrictions
Rail transportation
Move heavy and bulky freight such as coal,
steel, and lumber
Fishyback – shipping loaded truck trailers
on a ship
Piggyback – shipping loaded truck trailers
on railroad flatcars
Railroads
• Advantages – relatively low cost, can ship
large quantities, seldom stopped by bad
weather
• Disadvantages – Lack of flexibility, cannot
reach as many places
Water transportation
• Oldest method of travel
– Advantages: Lowest cost
– Disadvantages: slowest, hard to get to port
location
Pipelines
• Used to transport oil and natural gas
(200,000 miles of pipeline in U.S.)
• Advantages: operation costs are small,
products move slowly and continuously,
not affected by weather
• Disadvantages: High initial expense to
build
Air Transportation
• The fastest mode of transportation
Advantages: Speed of delivery, reduces
inventory and storage costs
Disadvantages: Very expensive, mechanical
breakdowns, delays caused by bad weather
Transportation service
companies
• U.S. Postal Service – run by government,
small packages by parcel post or fourthclass mail
Express Carriers
• Deliver small, lightweight packages up to
150 pounds, offer overnight and regular
delivery. Faster the delivery time = more
expensive
– UPS
– FED Ex
Inventory Storage
• Private warehouses – designed to meet
the specific needs of the customer (TTAI
having a warehouse to store their parts)
• Public Warehouse – offer storage and
handling to individuals and companies
(boat storage, residential, commercial)
Example: A to Z Self Storage
Distribution center
• Speeds delivery of goods and minimizes
storage costs.
• Example: Wal-Mart Distribution Center in
London