Chapter 11 Marketing Channels and Supply Chain Management

Hospitality Sales and Marketing
Module
Prepared by: Kristel Laurenciano
CHAPTER 11
Marketing Channels and Supply Chain
Management
I. Marketing Channel
A. Marketing Channel
- A set of interdependent
organizations that ease the
transfer of ownership as
products move from
producer to business user or
consumer.
B. Supply Chain
- The connected chain of all
the business entities, both
internal and external to the
company, that perform or
support the logistics
function.
C. Marketing Channel Functions
a. Specialization and division of
labor
- Provides efficiency and cost
savings
- Attains economies of scale
- Aids producers who lack
resources to market directly
- Builds good relationship with
customers
b. Overcoming discrepancies
1. Discrepancy of Quantity
- The difference between the
amount of product produced
and the amount an end user
wants to buy.
2. Discrepancy of
Assortment
- The lack of all the items a
customer needs to receive
full satisfaction from a
product or products.
3. Temporal Discrepancy
- A situation that occurs when
a customer is not ready to
buy it.
4. Spatial Discrepancy
- The difference between the
location of a producer and
the location of widely
scattered markets.
c. Contact efficiency
II. Channel Intermediaries and
Their Functions/ Activities
A. Channel Intermediaries
- The external groups,
individuals and businesses
that help a company deliver
its products to customers
B. Types of Channel Intermediaries
a. Retailer
- A channel intermediary that
sells mainly to customers.
b. Merchant Wholesaler
- An institution that buys
goods from manufacturers,
takes title to goods, stores
them, and resells and ships
them.

c. Agents and Brokers
- Wholesaling intermediaries
who facilitate the sale of
product by representing
channel member.
C. Factors Suggesting Type of
Wholesaling Intermediary to Use
- Product characteristics
- Buyer considerations
- Market characteristics
D. Channel Functions Performed by
Intermediaries
a. Transactional Functions
- Contacting/ promotion
- Negotiating
- Risk taking
b. Logistical Functions
- Physically distributing
- Storing
- Sorting
c. Facilitating Functions
- Researching
- Financing
E. Logistics
- The process of strategically
managing the efficient flow
and storage of raw materials,
in-process inventory, and
finished goods from point of
origin to point of
consumption
III. Channel Structures for
Consumer and Business
Products
A. Direct Channel
- A distribution channel in
which producers sell directly
to consumers.
B. Channels for Consumer Products
1. Direct Channel
Producer > Consumer
2. Retail Channel
Producer > Retailers >
Consumer
3. Wholesaler Channel
Wholesaler > Retailers >
Consumer
4. Agent or Broker Channel
Producer > Agents/ Brokers >
Wholesaler > Retailers >
Consumers
C. B2B Exchanges on the Internet
- Linking buyers and sellers
- Dropping the middleman
form the supply chain
- Creating “private exchanges”
to automate the supply chain
D. Alternative Channel
Arrangement
- Multiple channel
- Non-traditional channels
- Strategic channel alliances

IV. Supply Chain Management
A. Supply Chain Management
- A management system that
coordinates and integrates
all the activities performed
by supply chain members
into a seamless process, from
the source to the point of
consumption, resulting in
enhanced customer and
economic value.
B. Role of Supply Chain
Management
a. Communicator of customer
demand from point of sale to
supplier.
b. Physical flow process that
engineers the movement of
goods.
C. Benefits of Supply Chain
Management
- Reduced costs
- Greater supply chain
flexibility
- Improved customer service
- Higher revenues
V. Issues that Influence Channel
Strategy
A. Channel Strategy Decisions
a. Factors Affecting Channel
Choice
1. Market factors
- Consumer profiles
- Consumer/ industrial
customer
- Size of the market
- Geographic location
2. Product factors
- Product complexity
- Product price
- Product standardization
- Product life cycle
- Product delicacy
3. Producer factors
- Product resources
- Number of product lines
- Desire for channel control
b. Level of Distribution Intensity
1. Intensive Distribution
- A form of distribution aimed
at having a product available
in every outlet.
2. Selective Distribution
- A form of distribution
achieved by screening
dealers to eliminate all but a
few in any single area.
3. Exclusive Distribution
- A form of distribution that
established one or a few
dealers within a given area.

c. Distribution Intensity
VI. Channel Leadership, Conflict
and Partnering
A. Social Dimensions of Channels
a. Channel Power
- A channel member’s capacity
to control or influence the
behavior of other channel
members.
b. Channel Control
- A situation that occurs when
a one marketing channel
member intentionally affects
another member’s behavior.
c. Channel Leadership
- A member of a marketing
channel that exercises
authority or power over the
activities of other members.
d. Channel Conflict
- A clash of goals and methods
between distribution channel
members.
e. Channel Partnering
- The joint effort of all channel
members to create a supply
chain that serves customers
and creates a competitive
advantage.
VII. Logistical Components of the
Supply Chain
A. Integrated Logistical
Components of the Supply Chain
B. Role of Purchasing Departments
- Plan purchasing strategies
- Develop specifications
- Select suppliers
- Negotiate price
- Negotiate service levels
C. Production Scheduling
Traditional
Focus
Customer
Focus
Push/ Pull
Strategy
Push
Pull
Start of
Production
Inventory-
based
Customer
order-based
Manufacturing
Mass
Production
Mass
Customization

D. Just-in-Time (JIT) Manufacturing
- A process that redefines and
simplifies manufacturing by
reducing inventory levels and
delivering raw materials just
when they are needed on the
production line.
a. Benefits of JIT
- Reduces raw material
inventories
- Shortens lead times
- Creates better supplier
relationships
- Reduces production and
storeroom costs
- Reduces paperwork
c. JIT Requirements
- Receive high-quality parts
- Meet supplier delivery
commitments
- Have a crisis management
plan
E. Electronic Data Interchange (EDI)
- Information technology that
replaces paper documents
that accompany business
transactions with electronic
transmission of the
information.
F. Inventory Control System
- A method of developing and
maintaining an adequate
assortment of materials or
products to meet a
manufacturers or a
customer’s demand.
G. MRP and DRP
a. Materials Requirement
Planning
- An inventory control system
that manages the
replenishment of raw
materials, supplies, and
components from the
supplier to manufacturer.
b. Distribution Resource
Planning
- An inventory control system
that manages the
replenishment of goods from
the manufacturer to the final
consumer.
H. Materials Handling Functions
- Receive goods into
warehouse
- Identify, sort, and label
goods
- Dispatch the goods to
temporary storage
- Recall, select, or pick the
goods for shipment
I. Transportation Mode Choice
- Cost
- Transit time
- Reliability
- Capability
- Accessibility
- Traceability