Transcript Chapter 1
Distribution Management Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Hugo van Zyl • • • • Representative – SA Druggist, Knoll, Roche Product and Brand Manager - Roche Senior Marketing and Sales Manager – AstraZeneca General Manager – Bausch & Lomb • Director – Knowledge Warehouse • Managing Director – Hugo van Zyl & Associates Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Housekeeping • Cell phones switched off. • Being on time is a matter of choice • Lecture structure – 10min – Quiz on previous week’s lecture (Points to count for semester mark) – 50min lecture – 10min break – 50min lecture • Text book – Distribution management – Strydom, Grove et al. Second edition • Van Schaik!! Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Lecture program Week Chapter - topic 16th July Chapter 1 – The Supply chain, Value chain and Distribution 23rd July Chapter 2 – South African Channel participants 30th July Chapter 3 – Behavioral process in Distribution channels 6th Aug Chapter 4 – Channel design & selection of Channel members 13th Aug Revision 20th Aug Test week 27th Aug Chapter 5 – Logistics Management 3rd Sept Chapter 5 – Logistics Management 10th Sept Chapter 6 – Electronic Marketing channels 17th Sept Chapter 6 – electronic Marketing channels 24th Sept Chapter 7 – Managing the distribution channel 1st Oct Chapter 7 – Managing the distribution channel 8th Oct Revision 15th Oct Revision Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Distribution Management Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Distribution Management Getting the right product to the right place in the right quantity with the right quality at the best possible price in order to present it to customers where they want when they want it. Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Chapter 1 – Supply chain, Value chain and Distribution 1.Supply Chain 2.Value Chain analysis 3.Typical Distribution channel Distribution 4.Intermediaries Hugo van Zyl 083 629-2069 [email protected] 5.Trends / Issues Marketing 2B Distribution Management 6.Distribution Structure decisions Chapter 1 – Supply chain • What is a Supply chain? • What is Supply chain Management? Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Chapter 1 – Supply chain Primary decisions Development Transport logistics Hugo van Zyl 083 629-2069 [email protected] Planning Inventory Marketing 2B Distribution Management Sourcing Production Principles of SCM 1. Communication • Raw material to End-product flow is critical in SCM – The info flow that support this is the basis of success – Sharing of “demand data” between suppliers and producers Dell Direct model •Most efficient path to customer •Single point of accountability •Build to order •Low cost leader •Standards based technology Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Principles of SCM 2. Flexibility, Inventory and Customer service. • Customer satisfaction – Typically measured in “fill rate”, “ on time delivery” and “not delivered on time” • Inventory – Inventory is dead money. • Flexibility – Ability to respond to changes in the environment – Flexibility buffer = Safety Stock So…… it’s a trade off between keeping customers happy and the cost involved Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Principles of SCM 3. Decision making Decision are made on 3 levels: • Strategic – Long term decisions – Location, production, transportation and inventory • Tactical – Medium term decisions. – Demand forecasts, Distribution planning, production planning and materials requirement • Operational level – Day to day decisions – Changes in internal environment – e.g. staff shortages Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Telecoms giant BT has joined the growing band of Western firms to transfer call centre operations to India, at a cost of 2,000 UK jobs. The firm has said it is to open two Indian call centers - in Bangalore and Delhi - employing 2,200 people by 2004. The shake-up is part of plans which will see BT's UK-based centers drop from about 100 to 31, with the number of workers falling from 16,000 to 14,000. BT said no permanent UK employees would be made redundant as a result of the move, and there would be no compulsory lay-offs among agency staff. Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Principles of SCM 4. Metrics and Data collection “Modern supply chains are to complex to make decisions without Data” • • • • • • • • Back order reports Cycle times DPMO Fill rate Inventory accuracy Inventory ABC Inventory turns On time delivery % www.supplychainmetrics.com Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Principles of SCM 4. Metrics and Data collection Performance dimension 1 – Quality – – – – – – – Functionality Conformance Reliability Durability Safety Serviceability Aesthetics • Measure aspects that coincide with customer expectations or requirements • Measured by tools such as DPMO Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Principles of SCM 4. Metrics and Data collection Performance dimension 2 - Delivery • Speed – Time, from order receipt to delivery • Reliability – Deliver products in agreed time frame • Measured with: – Fill rate reports – Back order reports Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Principles of SCM 4. Metrics and Data collection Performance dimension 3 – Flexibility • • • • Mix flexibility Change over flexibility Design flexibility Volume flexibility • Measured with – Inventory accuracy reports – Cycle time reports Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Principles of SCM 4. Metrics and Data collection Performance dimension 4 – Cost • • Supply chain or Distribution cost is part of P&L Measures the effectiveness of the spend on the distribution function • Measure with: – Inventory turn reports Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Principles of SCM 4. Metrics and Data collection Performance dimension 5 – After sales support • • Especially important in high price goods, goods where ASS is sales tool and “upgradeable” products. Effectiveness can be measured as part of Supply chain Management metrics Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Supply chain management • Pitfalls in Inventory management • Globalization and the supply chain • Improving SCM Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Value - Chain analysis • The Supply chain is a value adding process. 10c / Kg R2.50 / Kg R35.00 / Kg Hugo van Zyl 083 629-2069 [email protected] R12.50 / Kg R18.00 / Kg Marketing 2B Distribution Management Value-chain analysis 9 Value creating stages - Porter • Primary activities – – – – – Inbound logistics Operations goods Outbound logistics Marketing / Sales Service • Support activities – – – – Procurement function Tech Development Human resources Infrastructure Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management The Typical distribution channel Selecting a distribution channel. • • • • • • • Customer satisfaction – Product availability, convenience, price Marketing objectives of the company Cost of the channel Nature of the product – Perishables, electronics… Intermediaries Competitors Legal / regulatory environment Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management The Typical distribution channel Importer Producer Manufacturer Wholesaler Retailer Consumer Supplier Importer Producer Retailer Manufacturer Consumer Supplier Global company Local Manufacturer Local Wholesaler Local Retailer Local Consumer Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Distribution channels for Services 4 Characteristics of Services • Intangibility • Inseparability of Production and Consumption – Same time – Customer participation • Perishable nature. • Heterogeneity • Little need for logistical functions – Inventory, Transportation • Little need for Intermediaries – direct from supplier to consumer Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Functions and activities of Intermediaries • Intermediaries = Wholesalers and Retailers • Resolve Discrepancies – – – – – Geographically dispersed Supply sources Manufacturer volumes Production timing Quantity and assortment Transferring ownership Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Functions and activities of Intermediaries • Close Gaps – – – – – Quantity Assortment Spatial Knowledge Ownership • Provide Utility – – – – Form Time Place Possession Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Functions and activities of Intermediaries • Distribution – Transactional – Buying, selling (Risk taking) – Operational - Warehousing, transporting, order processing – Financing, grading. • Specialization – Functional – Transport, warehousing, Order fulfillment. – Support – Financial, Information, Insurance. • Efficiencies of exchange – More efficient to have intermediaries involved in distribution than going directly to end consumer. – Or is it? Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Trends and issues. • Social trends – A change in social trends impact the preference for products and the channels through which they are distributed. Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Trends and issues. • Economic environment – A change in the economic environment creates different demands on a existing distribution network. Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Trends and issues. • Competition in Distribution channels – Porter’s five forces: Substitute products Supplier power Competitive rivalry Threat of Potential competitors Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Buyer power Trends and issues. • Supply chain issues in SAF – High cost of Transport in SAF, due to being road based not rail based. – Mining generates more demand than other sectors due to weight – Geographical position of Steel industry related to harbors add cost – Geographic distribution of Agricultural sector adds complexity Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Distribution and Structure decisions • Intensive distribution – – – – • Selective distribution – – – – • Convenience products Large number of locations Many intermediaries Strategy = low cost and high convenience Specialized products Less locations Few intermediaries Differentiation strategy with medium to high cost. Exclusive distribution – – – – Specialized / exclusive products Few locations Strategy is focused on exclusivity Sales support is important Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Distribution and Structure decisions • Cost leadership Strategy – Producing and distributing at very low per unit cost. – Focused on price sensitive consumers – Convenience products • Differentiation Strategy – Uniqueness – Non price sensitive consumers • Focus strategy – Focused on a particular segment of the market Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Distribution and Structure decisions • Innovative structures – Due to changes in demand in the traditional marketplace Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management Distribution and Structure decisions • Vertical marketing system arrangements – – – – Corporate VMS – Motor dealerships Contractual VMS – Franchises Alliance VMS – SPAR Administered VMS – SAB-Miller and Liquor retailers Hugo van Zyl 083 629-2069 [email protected] Marketing 2B Distribution Management