Chapter 15 Supply Chain, Marketing Channels, and Logistics are Related

Marketing 370 with Olson at San Diego State University

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Created: 2010-12-01
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Marketing Channel

set of institutions that transfer ownership of and move goods from the point of production to the point of consumption

Marketing Channel Consists of

all the institutions and marketing activities in the marketing process

Marketing Channel sames as

Supply Chain

Logistics Management

the integration of two or more activities for the purpose of planning, implementing, and controlling the efficient flow of raw materials, in-process inventory and finished goods from the the point of origin to the point of consumption

Logistics Management Activities

Customer Service
Demand Forecasting
Distribution communications
inventory control
materials handling
order processing
parts and services
support
plant and warehouse site selection
procurement
packaging
return goods handling
salvage and scrap disposal
traffic and transportation
warehouse storage

Logistics Management is that element of supply chain management that concentrates on

the movement and control of physical products

Supply Chains Add Value

Retailers and wholesalers seem to just cut into the manufacturer's profits
but in reality they add value by making the manufacturer's products readily available to consumers

Supply Chain Management Streamlines Distribution
Before supply chain management

Early 1990's even most innovative firms need 15 to 30 days to fulfill an order
three steps
order creation - mail, fax or telephone
Order Processing - manual system for credit authorization and assignment to warehouse
Physical Delivery

Supply Chain Management Affects Marketing

When products are designed and manufactured, how and when the critical components reach the factory must be coordinated with production

Distribution Center

facility for the receipt, storage, and redistribution of goods to company stores or customers

Distribution centers may be operated by

retailers, manufacturers, pr distribution specialists

marketing and supply chain coordination

advertising and promotion must be coordinated with those department that control inventory and transportation

Five interrelated activities emerge in supply chain management

making information flow
making merchandise flow
managing inventory
designing the supply chain
managing the relationships among supply chain partners

Making Information Flow
Flow 1 Customer to Store

Sales associate scans Universal Product Code on the product the consumer is buying

Flow 2 Store to Buyer

The point of sale terminal records the purchase information and electronically sends it to the buyer at firm's corporate office.

Sales information sent to an inventory management system to monitor and analyze sales

Flow 2 Inventory management system decides to

decide to reorder more products
change price
plan a promotion

Flow 3 Buyer to Manufacturer

The purchase information from each store in the chain of stores is aggregated by the retailer as a whole, which then creates a order for new merchandise to the manufacturer
Buyer also gets information and negotiate prices, shipping dates, promo events

Flow 4 Store to Manufacturer

In some situations
manufacturer decides when to ship more merch to the distribution centers and stores
bypass buyer when merch reordered frequently

Flow 5 Store to Distribution Center

to coordinate deliveries and check inventory status
when store inventory drops to certain level more merchandise shipped to store

Flow 6 Manufacturer to Distribution Center and Buyer

When manufacturer ships the merchandise to the retailer's distribution center, it sends an advanced shipping notice
Then makes appointments for trucks to make the delivery on specific time and date and loading dock

Advanced Shipping Notice (ASN)

an electronic document that the supplier sends the retailer in advance of a shipment to tell the retailer exactly what to expect in the shipment

Data Warehouse

The data base that the purchase data collected at the point of sale goes into

Data Warehouse Horizontal Axis

data can be accessed according to the level of merchandise aggregation - SKU item, vendor, category, or all merch

Data Warehouse Verticle Axis

data accessed by level of the company - store, division or the total company

Data Warehouse Third Dimension

data accessed by point in time - day, season, year

Electronic Data Interchange

Computer to computer exchange of business documents from a retailer toa vendor and back
Information flows 3, 4, and 6

Benefits of EDI

Reduce cycle time
improves the overall quality of communication through better record keeping
data transmitted by EDI are in a computer readable format that can be easily analyzed and used for a variety of tasks

Cycle time

time between the decision to place an order and the receipt of merchandise

Vendor Manged Inventory (VMI)

approach to improving supply chain efficiency. The manufacturer is responsible for maintaining the retailer's inventory levels in each of its stores

reorder point

a level of inventory at which more merch is required

Manufacturer determines reorder point by

receiving data in the retailer's data warehouse by EDI

Consignment

manufacturer owns the merchandise unit it is sold by the retailer, at which time the retailer pays for the merchandise

Consignment selling provides

an incentive for the manufacturer to pick SKUs and inventory levels that will minimize inventory and generate sales

VMI benefits

better matching retail demand to supply
reduce vendor's and the retailer's costs

VMI limitations

manufacturer does not know what other actions the retailer is taking that might affect the sales of its products in the future

Collaborative Planning, Forecasting, and Replenishment (CPFR)

sharing of forecast and related business information and collaborative planning between retailers and vendors to improve supply chain efficiency and product replenishment.

CPFR different than VMI

more advanced form of retailer-manufacturer collaboration that involves sharing proprietary info, such as business strategies, promotional plans, new product developments, etc.

Pull Supply Chains

orders for merch are generated at the store level on the basis of sales data captured by POS terminals.
demand for an item pulls it through the supply chain

Push Supply Chain

merch allocated to stores on the basis of forecasted demand

Pull Supply Chain advantages

less likelihood of being overstocked or out of stock
increases inventory turnover
more responsive to chagnes in customer demand

Pull Supply Chain Disadvantages

requires more costly info systems
for some merch retailers dont have flexibility to adjust inventory levels on basis of demand

Making Merchandise Flow
4 Different Types of Merchandise Flow

Manufacturer to Retail Store's distribution centers
Manufacturer directly to Retail Store
If Merchandise is shipped to distribution center than it is shipped to retail store
Merchandise shipped to the customer

Distribution Center Vs Direct Store Delivery
Advantages of Distribution Centers

More accurate sales forecasts when retailers combine forecasts for many stores
Distribution centers enable the retailer to carry less merchandise in the individual stores
Easier to avoid running out of stock or having too much stock
Retail store space much more expensive than space at dist. center

Distribution Centers are not for all retailers

Retailer has only a few outlets, the expense of a dist. is too much
IF many outlets are concentrated in metropolitin areas delivery of merch by the vendor to all the stores is economical

Advantages of Direct Store Delivery

Merchandise to the store faster

used for perishable goods
items that help create retailer's image of being the fist to sell latest product
fads

Direct Store Delivery provided by manufacturer when

Manufacturer wants to ensue that their products are on store shelves, properly displayed, and fresh

The Distribution Center Activities

Management of Inbound Transportation
Receiving and Checking Using UPC and Radio Frequency Identification (RFID) device
Sotring and Cross Docking
Getting Merch floor ready
Preparing to ship merch to a store
Shipping merch to stores

Management of Inbound Transportation

Buyers and planners are much more involved in coordinating the physical flow of merchandise to stores than in the past

Receiving and Checking Using UPC and RFID Device

Receiving - process of recording the receipt of merch as it arrives at a distribution center
Checking - process of going through the goods upon receipt to make sure they arrive undamaged and that the merchandise ordered was thee merch received

Checking Merchandise

Advanced Shipping notice tells the distribution center what should be in each carton
UPC label or RFID tag on the shipping carton identifies the contents, scanned and automatically counted

Radio Frequency Identification Tags RFID tags

tiny chips that automatically transpmit to a special scanner all the info about a container contents or individual products

Benefits of RFID tags

Stores more info than UPC code
signal presence over a radio frequency when they pass within a few yards of a special scanner

Prospects of RFDI tags

locate mislaid products
deter theft
offer customer personalized sales pitches through displays mounted in dressing rooms
customers able to pay simply by walking through a door with a sensor, that reads products RFID codes and automatically charges credit card

Main Value of RFID

eliminates need to handle items individually by enabling distribution centers ans stores to receive whole truck loads of merch without having to check in each carton

Storing

Storing - cartons are transported on conveyor belt system and forklift trucks to racks that go from distribution center's floor to ceiling
Carton retrieved when a retail store needs it, put back onto conveyor belt and loaded onto a truck

Cross Docking

prepackaged by the vendor for a specific store
UPC labels on the carton indicate the store to which its is to be sent
merch ready for sale transported from loading dock which received merch to loading dock where truck will take to store

Getting Merchandise Ready for the floor

Requires ticketing
Marking
Placing Garments on hangers

Ticketing and marking

affixing price and identification labels to the merch.
more efficient for retailer to do at distribution centers than at stores

Preparing the Ship Merch to a store

At beginning of day the computer system in the distribution center generates a list of items to be shipped to each store on that day
for each item a pick ticket and shipping label is generated

Pick Ticket

is a document or display on a screen in a forklift indicating how much of each item is to get from specific storage areas

Shipping Merch to Stores

To handle complex transportation centers use sophisticated routing and scheduling computer systems than consider store locations, road condition, and transportation operating constraints

Inventory Management through Just In Time Systems (JIT)

also called quick response systems in retailing
designed to deliver less merch on a more frequent basis

Benefits of JIT Systems

Reduced Lead Time
Increased product availability
lower inventory investment

Reduced Lead Time

elimination the need for paper transactions by mail, over night deliveries, or even faxes,

Lead Time

The time between the recognition that an order needs to be placed and the arrival of the needed march

Costs of a JIT system

the logistics function becomes much more complicated with more freqeunt deliveries
with greater order frequency also comes smaller orders whci hare more expensive to transport and more difficult to coordinate

Managing the Supply Chain

In order for a supply chain to run efficiently the participating members must cooperate

Supply Chain or Channel Conflicts

supply chain members have conflicting goals
Tool supplier wants Home Depot to carry only their brand, but Home Depot wants a variety of tools

Managing Supply Chains through Vertical Marketing systems
Independent or Conventional supply chain

several independent members, a manufacturer, wholesaler, and a retailer each attempt to satisfy their own objectives and maximize their own profits often at the expense of the other members

Vertical Marketing System

a supply chain in which members act as a unified system

Administered Vertical Marketing System

There is no common ownership and no contractual relationships, but the dominant channel member controls the channel relationship

Contractual Vertical Marketing System

Independent firms at different levels of the supply chain join together through contracts to obtain economies of scale and coordination and to reduce conflict

Most common type of Vertical Marketing System

Franchising-

Corporate Vertical Marketing System

Corporate owns and controls supply chain

Managing Supply Chains through Strategic Relationships

Strategic Relationship (Partnering Relationship)
supply chain members are committed to maintaining the relationship over the long tern and investing in opportunities that are mutually beneficial.

Strategic Relationship and conventional supply chain
incentives to establishing strategic relationship

size of profits increase
created to uncover and exploit joint opportunities

Mutual Trust

holds strategic relationship together

Open Communication

To share information, develop sales forecasts together, and coordinate deliveries
key to developing successful relationships

Common Goals

Supply chain members must have common goals for a successful relationship to develop

Credible Commitments

Both companies make tangible investments in the relationships

About this deck

By: nick batcheller
Created: 2010-12-01
Size: 80 flashcards
Views: 42

About StudyBlue

“I have used this website for three exams, and I see a huge difference in my test results.”
Naj