[MKTG 2101] Chapter 11

Physical Distribution (dist.)

Activities that move finished goods from manufacturers (manufs.) to final customers

What does physical dist. include?

Order processing, warehousing, materials handling, transportation, and inventory (invt.) control

How do dist. channel functions create efficiencies?

By reducing the number of transactions through 3 methods

What are the three methods of dist. channel functions?

1. Breaking bulk

2. Creating assortments

3. Transportation/storage

In terms of dist. channel functions, what does breaking bulk entail?

Dividing larger quantities of goods into smaller lots to meet the needs of buyers

In terms of dist. channel functions, what does creating assortments entail?

Providing a variety of products for sale in one location (loc.)

In terms of dist. channel functions, what does transportation/storage entail?

When channel members move goods from the production point to other locs. where they can hold them until consumers want them

Disintermediation

If intermediaries fail to provide unique value to the channel, they're at risk of this

What is the purpose of disintermediation?

To eliminate some layers of the channel of dist. to cut costs and improve its efficiency

What are the two types of intermediaries?

1. Independent Intermediaries

2. Manufacturer-Owned Intermediaries

What are two kinds of independent intermediaries?

1. Merchant wholesalers

2. Merchandise agents/brokers

What are two kinds of merchant wholesalers?

1. Full-service

2. Limited-service

What are some kinds of limited-service merchant wholesalers?

Rack jobers, cash-and-carry, truck jobbers, drop shippers, and mail-order

Agents and brokers provide services in exchange for commissions, but never do what?

They never take title to the product

What are some kinds of merchandise agents/brokers?

Manuf.'s agents, selling agents, commission agents, and merch brokers

Beyond the number of channel levels, dist. strategies also involve two additional decisions. What are they?

1. A conventional, vertical, or horizontal marketing system

2. Intensive, exclusive, or selective dist.

Vertical Marketing System (VMS)

A channel in which there is formal cooperation among members at 2 or more levels

What are the three types of VMSs?

1. Administered VMS

2. Corporate VMS

3. Contractual VMS

Administered VMS

Independent channel members work together due to power of a dominant channel member

Corporate VMS

A single firm owns manufacturing, wholesaling, and retailing ops.

Contractual VMS

Channel member cooperation enforced by contracts that spell out rights and responsibilities of each member

What are the three types of contractual VMSs?

1. Intensive (longer channels best for standard consumer goods)

2. Selective

3. Exclusive (shorter channels best for products w/ support)

What are two aspects of strategy (strat.) implementation?

1. Selecting channel partners

2. Managing the channel

When selecting channel partners, what factors do firms take into consideration?

Economic, competitive, relationship, and sustainability

Order Processing

Activities that occur between the time an order comes in and the time the product goes out

Many firms automate order processing using what?

Enterprise Resource Planning (ERP) software

Warehousing

The storage of goods in anticipation of sale or transfer of goods to another member of dist. channel

Logistics planning determines...

- How many warehouses will be needed

- Where warehouses will be located

- What type of warehouses

Distribution Center

Stores goods for a short period of time and provides other functions

Inventory (invt.)

The store of goods

Firms create an invt. for many reasons, one being to...

Balance the extra costs of holding excess invt. w/ the risk of stock-outs

Inventory Control

Activities to ensure goods are available to meet customers' demands

Just-in-time (JIT) Delivery Systems

Ensure deliveries arrive when and only when they are actually needed

New techs like RFID also reduce what?

Costs