Transcript Supply chain management

MMIT SESSION 6
Distribution Channels
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4.
What are supply networks and channels of
distribution?
How should marketers design supply
networks and channels of distribution?
How can marketers select channel
members?
What are the challenges of managing
distribution channels?
Who are the top supply chain
companies worldwide?
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Nokia
Apple
Procter & Gamble
IBM
Toyota Motor
Wal-Mart
Anheuser-Busch
Tesco
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Best Buy
Samsung
Electronics
Cisco Systems
Motorola
The Coca-Cola
Company
Johnson & Johnson
What is a supply chain?
A supply chain is a set of three or more
entities (organisations or individuals) directly
involved in the upstream or downstream flows
of product, service, finances and/or
information from a source to a customer.
What are distribution channels?
Distribution channels are sets of
intermediaries that are usually independent
organisations involved in the process of
making a product or service available for
use or consumption.
Intermediaries in
distribution channels
Title Holders
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Wholesalers
Retailers
Distributors
Transport companies
Non-Title Holders
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Brokers
Manufacturers’ reps
Agents
Export management
What is supply chain
management?
Supply chain management (SCM)
encompasses the planning and
management of all activities in buying,
making, providing and distributing. It also
includes coordination and collaboration
with channel partners.
20th century demand-driven supply
networks
Figure 17.8
Demand-driven supply networks
21st century demand-driven supply
networks
Figure 17.8
Demand-driven supply networks (continued)
Key processes of
supply chain management
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Customer
relationship
management
Customer service
management
Demand
management
Order fulfillment
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Manufacturing or
service process flow
management
Intermediary
relationship
management
Product development/
commercialisation
Returns
Consumer marketing channels
Figure 17.11
Consumer and industrial marketing channels
Industrial marketing channels
Figure 17.11
Consumer and industrial marketing channels (continued)
3 types of distribution strategy
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Intensive – stocked in all outlets
Selective – few intermediaries, specialists
Exclusive – only one brand by reseller
Customer needs
Quantity of purchase
Waiting/delivery time
Convenience
Product variety
Service backup
Identifying channel alternatives
Types of
intermediaries
Number of
intermediaries
Terms and
responsibilities
Figure 17.15
The value adds versus the costs of different channels
Terms and responsibilities
of channel members
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Price policy
Condition of sale
Distributors’ territorial rights
Mutual services and responsibilities
Channel-management decisions
Training channel members
Motivating channel members
Evaluating channel members
Modifying channel members
Zara – mini-case
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Inditex = Zara, Pull & Bear, Massimo Dutti,
Bershka, Stradivarius, Oysho, Zara
Home and Uterqüe
Zara operates in 82 countries with a network of
1.631 stores
Based in La Coruna/Arteixo, Spain
70% of sales are in Europe, 25% in Spain
New rules for marketing
Zara’s challenge to marketing wisdom
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Rule one: country-of-origin carries value
(Zara is from a small town in Spain, pop. 25,000)
Rule two: avoid stock-outs
(shortages contribute to the urge to buy now, new goods arrive
twice a week, Zara makes 20,000 items a year (3x what gap
makes), London shoppers visit Zara 17x annually compared to
4x for average store)
Rule three: advertise
(Gap and H&M spend 3-4% of sales on ads, Zara 0.3%, focus
on location)
Zara (continued)
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Rule four: outsource
(Gap and H&M don’t own any facilities, Zara manufactures
51% of its products in Spain, Portugal, Morocco. Only basic
items are outsourced to Asia (34%) and Turkey (14%). This
reduces errors in prediction so that Zara’s average discount is
15% vs. 40% for other retailers)
Rule five: efficiency through large batches
(Zara uses quick reaction, fixed supply chain schedule: stores
order twice a week, truck and cargo flights on fixed schedule,
good arrive in at stores in Europe in 24 hrs, US 48 hrs, and
Asia 72 hrs)
Zara’s challenges
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Expensive in China
Competitors can copy model
Standardized marketing problems
C&A failure – standardization and centraliztion
 Sizes,
Ads showing body hair, Colors, Dress cuts
EU does better in Operations than People
management
Marketing Mix for International Firms
Marketing Mix
Product
Pricing
Promotion
Place
Key Decision-Making Factors
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Standardization versus customization
Legal forces
Economic factors
Changing exchange rates
Target customers
Cultural influences
Competition
Standardization versus Customization
3 Options:
ETHNOCENTRIC (standardized–home)
 GEOCENTRIC (standardized-global)
 POLYCENTRIC (customized)
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International Marketing Advantages
STANDARDIZED Approach
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Reduces marketing costs
Facilitates centralized control of
marketing
CUSTOMIZED Approach
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Promotes efficiency in R&D
Results in economies of scale in
production
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Reflects the trend toward a single
global marketplace
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Reflects different conditions of
product use
Acknowledges local legal
differences
Accounts for differences in
buyer behavior patterns
Promotes local marketing
initiatives
Accounts for other differences
in individual markets
Figure 17.1 The International Operations
Management Process
Strategic Context
•Differentiation
•Cost leadership
•Focus
Standardized vs. Customized
Production
Acquisition of
Resources
•Supply Chain
•Management
•Vertical Integration
•Make-or-buy decision
Location Decisions
•Country-related issues
•Product-related issues
•Government policies
•Organizational issues
Logistics and
Materials
Management
•Flow of materials
•Transportation options
•Inventory levels
•Packaging
Production Management
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Acquisition of Resources
Location Decisions
Logistics and Materials Management
1. Acquisition of Resources
Managers must decide where and how to obtain the
resources the firm needs to produce its products
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Supply chain management: set of processes and
steps a firm uses to acquire the various resources it
needs to create its products
Vertical integration: extent to which a firm either
provides its own resources or obtains them from
other sources
Figure 17.2 Basic Make-or-Buy Options
Necessary Trade-offs in Make-or-Buy
Decision
Make
Buy
Cost
+ Profit potential
- Expensive initial
+ no start up costs
- more exp. unit costs
Control
+ quality, delivery
schedule, design
changes, cost
- contract enforcement
Risk
+ control
+ reduces financial,
operating, and political
Investment
(in facilities,
+ become assets,
competitive or
strategic advantage
+ lowers investment,
frees up capital,
reduces training costs
and expertise needs
- Difficult to change
direction
+ can change suppliers,
products, easily
tech, people)
Flexibility
2. Location Decisions
Managers must decide where to build administrative
facilities, sales offices, etc.
Factors to consider:
 Country-Related Issues
 Product-Related Issues
 Government Policies
 Organizational Issues
Country-Related Issues
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Resource availability
Cost
Infrastructure
Country-of-origin effects
Product-Related Issues
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Value-to-weight ratio
Technology
Importance of customer feedback
Government Policies
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Stability of political process
National trade policies
Economic development incentives
Existence of foreign trade zones (FTZ)
Organizational Issues
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Business strategy
 Cost
leadership
 Differentiation
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Organizational structure
Inventory management policies
 Just-in-time
(JIT) inventory management system
3. Logistics and Materials Management
Managers must decide on modes of
transportation and methods of inventory
control
Three key flows:
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flow of materials, parts, supplies, and other resource from
suppliers to the firm
flow of materials, parts, supplies, and other resources
within and between units of the firm itself
flow of finished products, services, goods from the firm to
customers
Differences in Domestic and International Materials
Management
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Distance involved in shipping
Number of transport modes
Complexity of regulatory context
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Key Factors
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 Time
 Predictability
 Cost
Advantages and Disadvantages of Different Modes of
Transportation for Exports
Mode
Advantages
Disadvantages
Sample Products
Train
Safe, reliable,
inexpensive
Limited to rail
routes, slow
Automobiles, grains
Airplane
Safe, reliable,
fast
Expensive,
limited access
Jewelry, medicine
Truck
Versatile,
inexpensive
Small size
Consumer goods
Ship
Inexpensive,
good for larger
products
Slow, indirect
Automobiles,
furniture
Electronic
Media
Fast
Unusable for
many products
Information