L11 – Supply chains (place) – marketing management

Supply chain:

Includes all the companies involved in the flow of products, services, finances and information from initial suppliers to the consumers. Includes both upstream and downstream processes. Entire process working together to ensure customer gets what they demand efficiently.

Simple words:

A network of companies and people that are involved in the production and delivery of a product or service (basically how products move from raw materials to consumers).

- Upstream: Towards suppliers - raw material to production.

- Downstream: Towards consumers

SCM process

Raw materials > Supplier > Manufacturing > Distribution > Retail location > customer

Supply chain management (SCM):

the coordination of all these activities that turn raw materials into finished goods and put them into customers hands. Furthermore to create a seamless experience and smooth flow, preventing supply breakdowns. Effective SCM ensure that the right products gets to the right customers at the right time.

SCM activities:

- Sourcing

- Design

- Production

- Warehousing

- Shipping

- Distribution

Goal of SCM:

Improve efficiency, quality, productivity and customer satisfaction.

Types of SCM strategy:

- Push strategy

- Pull strategy

Push strategy:

- Producing goods first and then trying to sell them to consumers e.g. mass production. (no input from customers, instead just expect consumer demand to match supply)

o Organization try to stimulate demand by pushing the produced goods through distribution channels and customers purchase what is produced.

o Companies using these try to encourage consumers to buy, which gives guaranteed demand and they know what to produce.

Pull strategy:

- We produce (after) based on what the customer has demanded e.g. allow customization of shoes, customer preferences, vote for best design.

Agile supply chain:

Works with partners to reduce the waiting time for customers e.g. volvo delivering to your car. An organization's ability to quickly adjust its operations, production processes, and inventory management to respond to changes in demand, supply, and the market overall e.g. Zara producing products internally which allows to quickly respond to trends and customer preferences.

Logistics:

Process of planning, implementing and controlling the efficient flow and storage of goods and services and information from point of origin to consumption. Ensures products are delivered to the right place at the right time and right condition.

SCM strategies and practices in logistics:

- Outsourcing (or contract logistics)

- Third-part logistics company (3PL)

- Reshoring

- Nearshoring

Outsourcing (or contract logistics)

- Transfer logistic tasks or services to another organization (a third party e.g. DHL) e.g. instead of managing own transportation and warehousing or customer service another business does it to save time and costs. E.g. outsource to lower wage country to reduce costs however can create expenses in other ways e.g. supply chain distance, carbon emissions and logistical complexity.

Third-part logistics company (3PL)

a firm that provides functional logistics services to others to make SCM more efficient.

Reshoring

moves outsourced activities, jobs back from foreign to its original domestic locations to balance costs, economic benefits and distance business

Nearshoring

the transfer of an offshored activity from a distant to a nearby country to reduce costs, simplify operations.

Benefits of SCM - all these make the organization more profitable and more valuable:

- Lower inventory: Companies won´t keep much in stock which saves stock and money.

- Lower transportation, warehousing and packaging costs: They become cheaper sine everything runs smoothly.

- Greater logistical flexibility: Companies become more adaptable to the changing market conditions or customer demands.

- Improved customer service: Customers gets their orders efficiently. Products reach customers faster and more accurate deliveries - enhance customer satisfaction and loyalty.

- Higher revenues: Lower costs and improved service leads to increased profitability. Happy customers.

Supply chain integration

Different firms or internal departments or parts of supply chain work together as a single, unified system rather than individual parts to achieve synergy (1+1=3) - seamless integration where all performs better than individually.

Integration can be done:

- Internally: Inside organization where different departments e.g. logistics and procurement work together and focus on the same goal so everything runs efficiently through demand-supply integration (DSI). - make sure all parts work together well with same goal to deliver at right time and products.

- Externally: Working with other firms.

A strong supply chain orientation is characterized by several traits that differentiate companies: (companies that stands out focus on these).

1. They are credible. They can deliver on the promises they make.

2. They are benevolent. They are willing to accept short-term risks on behalf of others, are committed to others, and invest in others' success. - support others success and accept risks and making commitments that benefit entire supply chain.

3. They are cooperative, working with rather than against others.

4. They have the support of top managers. - support the supply chain activities.

5. They are effective at conducting and directing supply chain activity.

Why is integration important:

The supply chains involves all these entities e.g. suppliers and manufacturers as well as processes e.g. production and transportation. Which are all necessary to bring the product to consumers. Through integration all these can collaborate and work together and create a seamless flow of goods, info, and services.

Types of integration (meaning ways companies work together) - by making these parts work together we can create a seamless and unified system.

Relationship integration: Encourages collaboration among organizations, fostering trust, open communication, and mutual understanding.

Measurement integration: Uses standardized tools and methods across the supply chain to assess performance and ensure alignment with objectives.

Technology and planning integration: Implements shared information systems and technology, enabling efficient data management, streamlined operations, and better coordination.

Material and service supplier systems: Ensures suppliers of raw materials and services integrate smoothly within the chain to prevent delays and disruptions.

Customer integration: Engages valuable customers by understanding their needs, offering customized solutions, and incorporating their feedback into operations.

8 important business processes (activities that are done across firms)

Customer Relationship Management: Builds strong connections with high-value customers, fostering loyalty and satisfaction.

Customer Service Management: Ensures responsive customer support, addressing complaints and questions while maintaining trust and service quality.

Demand Management: Anticipates customer needs, providing products at the right time to avoid shortages or excess inventory.

Order Fulfilment: Guarantees efficient order processing and delivery, often utilizing automation and technology.

Manufacturing Flow Management: Balances lean (pre-building to reduce waste) and agile (responsive to demand) supply chain strategies for smooth production and resource flow.

Supplier Relationship Management: Strengthens partnerships with suppliers for better pricing, prioritization, and business opportunities.

Product Development & Commercialization: Engages customers in co-creation to design and introduce new products.

Returns Management: Manages returned products, updating inventory and reintegrating them into the process.

Lean vs Agile

Lean supply chain strategy: products are built before demand occurs, but the aim is to reduce waste as much as possible.

Agile supply chain strategy: They focus on customer responsiveness (rather than waste reduction). They wait for the demand to develop and then make the product to fill that demand.

Sustainable SCM

Important challenge that involves integrating and balancing environmental, societal, and economic considerations throughout the supply chain.

Sustainable SCM practices:

- E.g. recycling and reuse (e.g. of pallets)

- Clean disposal

- Addressing societal issues such as child labour, human rights and quality of life

- Greenwashing - to be avoided - pretending to be more environmentally friendly than you are

o E.g. Coca cola faces challenges regarding bottles, recycling, water management, and the ingredients in their products, sugar/obesity issues.

Digitization

one of the most important trends affecting supply chains, changing how organizations do business using digital technologies e.g. AI, blockchains, drones.

Digitization includes:

- Digitized demand sensing and decision-making

- - Digitized supply chain processes

- Digital distribution

- Digitizing supply chain integrity

Digitized demand sensing and decision-making

- Organizations ability to collect vast amount of data to use in their decision-making e.g. with

o Internet of things (IoT) (can connect all forms of transport and assist inventory management by collecting the data).

o With Big data and analytics: To improve Supply chains

o AI: Help solve problems faster than humans by finding optional solutions to SCM problems.

o Machine learning: Gets numbers of solutions and machines develop logic to solve similar future problems.

- Digitized supply chain processes

o Cloud computing: Real time data sharing and collaboration.

o Advanced robotics: Automates tasks to improve speed and accuracy.

o Automated vehicles and drones: Enhances logistics and delivery efficiency.

Digital distribution

3D printing: Allows on-demand production and reduces need for large inventories.

Digitizing supply chain integrity

o Traceability: Can track raw materials and ingredients throughout the supply chain, where they come from and where they go.

o Blockchain: Have a digital record of every transaction, easier to trace items and ensure they are authentic.

Marketing channels are interconnected organizations that collaborate to deliver products or services from production to consumers. They rely on each other and the marketing mix (product, price, place, promotion) to ensure effective distribution.

Upstream: Involves sourcing raw materials and preparing for production.

Downstream: Focuses on moving finished products toward consumers.

Channel members

intermediaries such as resellers, distributors, suppliers, wholesalers, and retailers who help move goods and services efficiently. They simplify access to products, like Elgiganten offering multiple brands in one store instead of consumers visiting each brand separately.

These members form a business structure where organizations depend on one another to make products available to consumers, using the marketing mix (product, price, place, promotion) for effective distribution.

Intermediaries provide various utilities:

- Form utility: Making the product available in a convenient form (e.g., buying farm produce in a grocery store)

- Time and place utility: Making products convenient for consumers to access when and where they want them (e.g., stores with longer hours)

- Exchange utility: Makes it easier for producer and consumers to exchange products by handling tasks like negotiations, transactions and payments.

Functions and activities of channel members:

- They take title (ownership) of the goods: Some take the title of the goods theu sell (e.g. retailers) while others don´t e.g. brokers but do transactions.

Factors influencing intermediaries:

Product characteristics: Complex items may need specialized intermediaries (e.g., agents or brokers), while perishable (fresh produce) goods require fast and efficient delivery.

Buyer characteristics: Customers with specific preferences may rely on retailers, whereas bulk buyers benefit from wholesalers. Individual buyers often use direct channels.

Market considerations: High-demand products need broader distribution, and in competitive markets, intermediaries help differentiate offerings.

- Specific functions of intermediaries:

o Transactional Functions: Activities like negotiating, promoting, and risk-taking.

o Logistical Functions: Tasks such as transportation, storage, and sorting of goods.

o Facilitating Functions: Supportive roles like conducting research and providing financing.

Channel structures

Can be direct (with no intermediaries) or indirect, using one or more intermediaries like retailers, wholesalers, or agents/brokers to reach consumers.

4 different types of marketing channels for consumer products (basically how producer sell and give their products to the customers.):

- Directly where consumers by directly without any intermediaries. (Direct channels).

- Through retailers: Producer sell to retailers who sell to consumers.

- Through wholesalers: The producer sell in bulk to wholesellers, that sell to retailers and to consumers.

- Through agents/broker channels: The producer sell products via agents or brokers who connect them to wholesalers, they distribute to retailers and sell to consumers e.g. fashion items that are distributed internationally.

Broker

Middleman who does transactions between buyers and sellers, do not take title, role is to negotiate and bring parties together e.g. real estate and insurance.

Agent

Can represent either the buyer or seller in a transaction. Do not take title but work on behalf of their client e.g. agents who sell a manufacturer´s products or purchasing agents who buy goods for a company.

Different ways business can distribute their products to reach consumers:

- Dual or Multiple Distribution: Businesses use two or more channels simultaneously to distribute their products. E.g. selling directly online while also using retail stores.

- Showrooming: Consumers search for products online to gather information and then visit physical stores to compare or purchase.

- Non-Traditional Channels: Unconventional methods like videos, infomercials, or other creative platforms to market and sell products.

- Gray Channels: Involve unauthorized or illegal distribution, such as stolen or counterfeit goods being sold outside official channels.

- Reverse Channels: Focus on the flow of goods back from consumers to producers, such as returns, recycling, or repairs.

Digital Channels

- E.g. spotify.

- M-commerce apps e.g. uber

- Social shopping via Instagram or facebook

Several factors affect channel choice:

- Market factors: Who buys the product, why they buy it, and whether to sell directly or via a distributor.

- Product factors: How complicated or unique the product is to sell, how standardized it is, and how much handling it requires.

- Producer factors: The producer's resources (like money to run logistics) and their sales force.

- Timing factors: The time difference when introducing a product to different markets or channels, considering potential cannibalization where sales in one channel take away from another.

The intensity of distribution varies:

- Intensive distribution (maximum coverage with many intermediaries, typical for convenience products like food)

- Selective distribution (using a few dealers for products requiring comparison shopping, like appliances)

- Exclusive distribution (using only one dealer in a territory for specialized products, like cars).

- Emerging distribution channels include temporary pop-up shops and services offering product rental

Multichannels/Omnichannels

integrate multiple sales and service channels to provide customers with a seamless and consistent experience, whether they shop online, in-store, or through other means. However, greater operational complexity increases the potential for challenges.