Week 9 Distribution Channels and Logistics

These flashcards cover key concepts related to distribution channels, supply chain management, and retailing as discussed in the provided lecture notes.

Distribution Channel

Institutions that transfer the ownership of goods and move goods from production to consumption.

Supply Chain Management

Approaches and techniques employed to efficiently integrate suppliers, manufacturers, warehouses, stores, and transportation intermediaries.into a seamless value chain in which merchandise is produced and distributed in the right: quantities, locations, and time. Firms also minimize system- wide costs while satisfying the service levels their customers require.

Wholesalers

Firms that buy, take title to, store, and handle goods in large quantities, then resell them, usually in smaller amounts.

Retailers

Entities that sell products directly to consumers.

Logistics Management

Integration of activities to control the flow of raw materials and finished goods from origin to consumption.

Direct Distribution

No intermediaries between the buyer and seller, typically the seller is the manufacturer.

Distribution Centre

A facility for receiving, storing, and redistributing goods to stores or customers.

Transactional Functions performed by intermediaries

Buying, Risk Taking, Promotion, Selling

Logistical Functions performed by intermediaries

Physical distribution, Risk taking

Facilitating Functions performed by intermediaries

Gathering information, financing

Channel Conflict

Occurs when channel members disagree about goals, roles, or rewards.

Vertical Marketing Systems

Various approaches to integrate different levels of the supply chain.

How do distribution centres add value?

• Buying

• Selling

• Facilitation of exchange

Administered VMS

is a type of vertical marketing system where one channel member, usually the manufacturer, controls the retail distribution and is responsible for setting prices and policies in the channel because they have size and influence (not contractatual). (least formal)

Contractual VMS

A system where independent firms at different supply chain levels join through contracts.

Corporate VMS

A system where a parent company has complete control over its supply chain.

Canadas largest franchises

1. Tim Hortons 3500 outlets

2. Subway 3032 outlets

3. McDonalds 1400 outlets

Successful Strategic Relationships

Supply chain relationships that are long-term committed with mutual trust, open communication, common goals, and credible commitments.

3 Different Distribution Channels Channel Structures

• Direct distribution (manu→consumer)

• Indirect distribution (manu→whole→retail→consumer)

• Multichannel distribution (sony who sells in best buy and also in sony stores)

Multichannel Distribution

Selling through multiple channels, such as physical stores and online.

Push Marketing Strategy

Designed to increase demand by focusing on wholesalers who push products through distribution channels.

Pull Marketing Strategy

Designed to get consumers to demand products, pulling them through the supply chain.

Intensive Distribution

A strategy to get products into as many outlets as possible.

Exclusive Distribution

Granting exclusive rights to sell a product to one or few retailers.

Selective Distribution

A strategy that uses a few selected customers in a territory.

4 interrelated activities emerge in supply chain management:

1. Making information flow

2. Managing the relationships among supply chain partners 

3. Making merchandise flow

4. Managing inventory

Universal Product Code (UPC)

A black and white bar code found on most merchandise.

Radio Frequency Identification (RFID)

Tiny computer chips that transmit information about a container’s contents or individual products.

Logistics information flow

1. Customer to store

2. Store to buyer

3. Buyer to manufacturer 

4. Store to manufacturer

5. Store to distribution centre

Data Warehouse

A huge database accessible on various dimensions and levels.

Electronic Data Interchange

Computer-to-computer exchange of business documents from retailer to vendor and back

• Advanced shipping notice

• Reduces cycle time

• Communication is improved

• Easy data analysis

Advanced shipping notice

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

Vendor-Managed Inventory

An approach where the manufacturer is responsible for maintaining the retailer's inventory levels.

Advantages to Distribution Centres:

• More accurate forecasts when combining forecasts from many locations / stores

• Enable retailers to carry less merch lower inventory investments

• Easier to avoid running out of stock or having too much

• More expensive for retail space than distribution centre space

mobile task management

Technology that uses a wireless network and a mobile device that receives demand notification and enables a speedy response.

Steps in distribution centres

1. Inbound transportation

2. Receiving and checking

3. Storing and cross-docking

4. Get merchandise floor ready

5. Ship merchandise to stores

   • Just-in-time systems

Just-in-Time Systems

Inventory management systems designed to deliver less merchandise on a more frequent basis.

• Quick response

• DisAdv: Expensive and involves deep communication

• Adv: Reduced lead time, increased product availability and lower inventory investment

Lead Time

The time between recognizing an order needs to be placed and the arrival of the merchandise.

Retailing

Activities that add value to products and services sold for personal use. includes products bought at stores, through catalogues, and over the Internet, as well as services such as fast-food restaurants, airlines, and hotels.

Factors For Establishing a Relationship With Retailers

1. Choose retail partners

2. Identifying types of retilers

3. developing retail strat

4. managing multichannel marketing

Multichannel strategy

Selling in more than one channel (e.g., store, catalogue, kiosk, and Internet).

Choosing Retail Partners

Channel Structure, Customer expectations, Channel member characteristics

Less likely to use supply chain intemmediaries

Large firms, can gain control be more efficient and save money by not

Food Retailers

• Conventional Supermarket

• Big Box Retailer

• Convenience store

Cooperative Advertising

An agreement between a manufacturer and retailer to share advertising costs.

General Merchandise Retailers

• Discount store

• Specialty store

• Category specialists

• Department store

• Drugstore

• Off-price retailers

• Extreme-value retailers

Conventional Supermarkets

Offers groceries with limited sale of non food items such as health and beauty (Sobeys)

Big-box food retailer

Comes in 3 types: supercentres, hypermarkets, and warehouse clubs, (costco) larger than conventional supermarkets, they carry both food and non food

Convenience Store

Provides a limited number of items at convenient locations in small stores with speedy checkout

Discount Store

A broad variety, limited service and low prices

• Walmart, giant tiger

Specialty Store

Concentrate on a limited number of complementary merchandise categories in a relatively small store.

• Payless, Running Club, Lids

Category

Offers a narrow variety but a deep assortment of merchandise.

• Indigo, Home Depot, Best Buy, Rona (done well mostly)

category killer

Offers an extensive assortment in a particular category, so overwhelming the category that other retailers have difficulty competing.

Department Store

Broad variety, deep assortment, some customer service, organized into seperate departments

Hudson's Bay (consumers are confused by department stores, think its a rip off, Hudson's Bay is restructuring)

Drugstores

A specialty store that concentrates on health and personal grooming merchandise, though pharmaceuticals may represent more than 60 percent of its sales.

Off-Price Retailer

A type of retailer that offers an inconsistent assortment of merchandise at relatively low prices.

• Winners, Home Sense, Marshalls (doing well)

Extreme-Value Retailer

A general merchandise discount store found in lower-income urban or rural areas.

• Dollarama

Services Retailer

Firms that primarily sell services rather than merchandise.

• Jiffy Lube, YMCA

Retail Mix

• Product

• Pricing

• Promotion

• Place

• Personnel

• Presentation

Steps in the wheel of retailing

1. Outlet starts with low prices, low margins, low status

2. Outlet now has higher prices, margins, status

3. Outlet now has even higher

4. New firms of outlet enters retailing environment with characteristics of outlet Box 1

Planogram

A diagram that shows how brand products are organized on shelves.

Omnichannel Strategy

A strategy to create a consistent experience for consumers across distribution channels.

live streaming

Pairing an online event with an e-commerce site that allows viewers to simultaneously watch and shop.

Benefits of the Internet Channels – For Retailers

• Potential to offer a greatter selection

• provide customers with more personalized info

• retailers can collect info about consumer behaviour

• retailers can enter new markets economically

Effective omnichannel includes

• Integrated CRM

• Supply Chain

• Brand Image

• Pricing

Integrated CRM

system with a centralized customer data warehouse that houses a complete history of each customers interaction with the retailer