ChapterFifteen

Distributing ProductsEfficiently and Competitively:

Supply Chain Management

Channel of Distribution

• Marketing Intermediaries

– Wholesaler

– Retailer

– Brokers

• Role of Intermediaries

– Create Efficiency

– Value vs. Cost

The Supply Chain

(Figure 15.6)

UtilityForm

Time

Place

Possession

Information

Service

OPEN 24 HRS

Wholesale Intermediaries

• Merchant Wholesalers

– Rack Jobbers

– Cash-and-Carry

– Drop Shippers

• Business to Business

(B2B)

Percent of B2B

Commerce from Internet

0.2% 0.4%

1.0%

2.1%

4.0%

6.3%

9.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

1997 1998 1999 2000 2001 2002 2003

*Excludes Service Industries

Source: Forrester Research Inc.

Retail Competition

• Price

• Service

• Location

• Selection

• Entertainment

Is it Becoming a

Wal-Mart World?

0

50

100

150

200

250

300

350

400

450

500

Number of

Wal-Mart

Stores

Mexico Puerto

Rico

Argentina Germany

*There are 2,985 stores in the U.S.

Source: Wal-Mart Annual Report 2000

Retail Store Distribution

• Intensive

Selective

Exclusive

Identify a Retailer

in Your Area

Supermarket

Convenience

Store

Discount Store

Department Store

Category Killer

Specialty Store

Factory Outlet

Superstores

Catalog

Showroom

The Wheel of Retailing

Passage

of

Time

2. Retail Outlet

1. Retail Outlet Starts

3. Retail Outlet

4. New Outlet Enters

Adds Service

Raises Prices

Better Location

Low Price

Limited Service

Out-of-way Location

Higher Prices

Higher Status

Low Price

Limited Service

Non-Store Distribution

• E-tailing

• Telemarketing

• Vending Machines, Kiosks,

Carts

• Internet

• Direct Selling

• Multilevel Marketing

• Direct Marketing

E-Business Expectations

0

5

10

15

20

25

30

35

40

%

Companies

Responding

None 1-5% 6-10% 11-20% 20%+ Don’t

Know

Now In 5 Years

Share of company revenues CEOs say come from e-business Now vs. In 5 years

Source: USA Today

Has The Internet

Changed Your Shopping Habits?

41% 37%

24% 38%

35%25%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

High Use Low Use

Undecided

No

Yes

Survey of Americans who have high* Internet use vs.

those with low use

* high use = 15+ hours per week

Source: USA Today

What Online Shoppers

Bought* Per Month in 2000

$0 $50,00

0

$100,0

00

$150,0

00

$200,0

00

$250,0

00

$300,0

00

Airline Tickets

Computer Hardware

Apparel

Hotel Reserv.

Books

Software

Health & Beauty

Toys/Video Games

*In thousands of dollars

Source: Forrester Research

What does it take to persuade

consumers to buy online?

0

10

20

30

40

50

60

70

Percent

Assurance of

Privacy

Price Discounts Ability to Return

to Brick-and-

Mortar Store

*Survey of 1,944 Web

users that had not made

an online purchase

Source: CIO Web Business, 10/1/1999

Channel Cooperation

• Corporate Distribution

• Contractual Distribution

• Administered Distribution

• Supply Chain

Management

Contractual Distribution

• Franchise Systems

• Wholesaler-Sponsored

Chains

• Retail Cooperatives

Distribution/Storage Mode

• Railroad

• Motor Vehicles

• Water

• Pipeline

• Air

• Intermodal

• Storage

• Materials

Handling