Sales and Distribution Management Full Notes - Presentation Transcript

Sales and Distribution Management Full Notes Presentation Transcript
1. DISTRIBUTION MGT (D.M.)

D.M. HAS 2 PARTS :
DISTRIBUTION CHANNEL (DC) & PHYSICAL DISTRIBUTION/ MARKETING LOGISTICS (ML)

DISTRIBUTON CHANNEL (MARKETING CHANNEL/TRADE CHANNEL
IS A SET OF INTERDEPENDENT ORGANISATIONS INVOLVED IN THE PROCESS OF MAKING
A PRODUCT/SERVICE AVAILABLE FOR USE/ CONSUMPTION.

KKH/DM/BU-1 www.a2zmba.com
2.
ML CONSISTS OF DELIVERING
COMPLETED PRODUCTS TO CHANNEL INTERMEDIARIES & END USERS / CONSUMERS.
FUNCTIONS & FLOWS IN MARKETING CHANNELS
(A) MARKETING CHANNEL MEMBERS
(E.G. MANUFACTURERS, WHOLESALERS, RETAILERS, BANKS/FIN.INSTITUTIONS,
TRANSPORT CARRIERS, ETC) DO ONE OR MORE OF THE FOLLOWING FUNCTONS / TASKS
/ WORK.
3.
(i) PROMOTION: TO COMMUNICATE ABOUT PRODUCTS, TO GENERATE
DEMAND/ATTRACT CUSTOMERS. IT INCLUDES ADS,S.P., PERSONAL SELLING, D.M.,
PUBLICITY.
(ii) NEGOTIATION: AGREEMENT BETWEEN A BUYER & A SELLER, SO AS TO TRANSFER
OWNERSHIP/POSSESSION.
(iii) PHYSICAL DISTRIBUION: PHYSICAL FLOW/MOVEMENT OF GOODS FROM
MANUFACTURER TO FINAL CUSTOMER.
IT INCLUDES MANY ACTIVITIES : TRANSPORTATION, INVENTORY MGT., WAREHOUSING,
ORDER PROCESSING / CUSTOMER SERVICE, ETC.
4.
(iv) INFORMATION : COLLECTING & SPREADING MARKET INFO.I.E. CUSTOMERS,
COMPETITORS, ENVIRONMENT.
(v) FINANCING / CREDIT / PAYMENT: EXTENDING CREDIT TO CUSTOMERS, WHO PAY
THEIR BILLS THRU BANK / FIN.INSITUTIONS OR DIRECTLY TO SUPPLIERS
(vi) AFTER SALES SERVICE: DEPENDING UPON SERVICE/PRODUCT,CUSTOMERS NEED
PREVENTIVE MAINTENANCE/REPAIRS DURING/OUTSIDE WARRANTY PERIOD.
(EG: 2 WHEELERS, GEN. SETS)
5.
DEPENDING ON WHO CAN DO ABOVE FUNCTIONS EFFICIENTLY, THE MANUFACTURER
SHIFTS/SHARES SOME FUNCTIONS WITH INTERMEDIARIES (EG
STORAGE/INVEN.CARRING, FINANACING, PROMOTION)
(B) FLOWS IN MARKETING CHANNEL.
A FLOW IS THE MOVEMENT OF FUNCTIONS/TASKS PERFORMED BY CHANNEL
MEMBERS, AS SHOWN.
6. KKH/DM/BU-6 www.a2zmba.com
8.
FLOWS / MOVEMENTS IN CHANNEL ARE GROUPED AS
(A) FORWARD FLOWS ARE PROMOTION, PHY.DISTRIN, & OWNERSHIP/TITLE.
(B) BACKWARD FLOWS ARE ORDERING & PAYMENT.
(C) BOTH DIRECTION FLOWS / MOVEMENTS ARE INFORMATION, NEGOTIATION &
FINANCING.

9.
ANALYSING MARKETING CHANNEL STRUCTURES
MARKETING CHANNEL STRUCTURES VARY BY
(1) CHANNEL LEVELS/CHANNEL LENGTH WHICH IS BASED ON NUMBER OF
INTERMEDIARIES &
(2) DEGREE OF SPECIALISATION IN FUNCTIONS / FLOWS, AS SHOWN HEREAFTER.
10. BASED ON CHANNEL LENGTH/LEVELS DIFFERENT TYPES OF CHANNEL STRUCTURES KKH/DM/BU-
10 www.a2zmba.com
11. MULTI CHANNEL MATRIX STRUCTURES (BASED ON SPECILISATION OF FUNCTIONS)
NOTE : INDIRECT CHANNELS ARE TYPICALLY USED FOR CONSUMER MARKETING (EXCEPT
B2C) & DIRECT / MATRIX CHANNEL STRUCTURES ARE USED MORE IN INDUSTRIAL MKG.
12.
CRITERIA FOR HARMONIOUS RELATIONSHIP
HARMONIOUS RELATIONSHIP EXISTS IF GOALS ARE CONVERGENT (SIMILAR), & THE PROCESS OF
DELIVERING SERVICE TO CONSUMERS IS EFFICIENT & EFFECTIVE. KKH/DM/BU-12 www.a2zmba.com
13. TYPES OF RELATIONSHIPS IN MARKETING CHANNEL KKH/DM/BU-13 www.a2zmba.com
14.
WHAT IS RETAILING ?
IT IS SELLING GOODS / SERVICES TO FINAL CONSUMERS FOR PERSONAL / FAMILY USE,
NOT FOR BUSINESS USE . GOODS / SEVICES MAY BE SOLD IN STORES / SHOPS, STREET,
OR CONSUMERS HOME, BY PERSON, MAIL, PHONE, INTERNET OR VENDING M/C.
15.
2. IMPORTANCE / ROLE OF RETAILER
* RETAILER IS THE FINAL BUSINESS IN A CHANNEL, THAT LINKS A MANUFACTURER TO
CONSUMERS.
* RETAILERS PERFORM IMPORTAN ACTIVITIES THAT INCREASE PRODUCT / SERVICE
VALUE BY 20-50% OF FINAL COST OF MERCHANDISE.
RETAILERS ACTIVITIES:
(i) PROVIDING ASSORTMENT,
(ii) BREAKING BULK,
(iii) HOLDING INVENTORY,
(iv) PROVIDING SERVICES.
16.
3. RETAIL ENVIRONMENT
IT IS CHANGING IN INDIA. EG:
SHIFT IN CONSUMPTION HABIT OF OVER 1 BILLION PEOPLE (DUE TO TV, LIBERALISED
ECONOMY & DEMANDING CONSUMERS)
USD 2.5 BILLION INVESTMENTS (70,000 # EMPLOYMENT) (IN 10 YRS)
>1000 LARGE / SMALL WORLD CLASS RETAIL STORES IN INDIA BY 2005.
MULTI-CULTURAL, SOCIO-ECONOMIC DIFFERENCES (HENCE, PRODUCT-MIX MAY VARY)
COOKING OIL & VANASPATHI CONSUMPTION IS 1/3 OF RURAL EXPENDITURE ON FMCG
PRODUCTS.
URBAN POPULATION IS 30% OF TOTAL POPULATION.
50% OF POPULATION < 20 YEARS AGE.
20% RETAILERS OFFER CREDIT TO CUSTOMERS.
50% TEA CONSUMED IN RURAL INDIA.
17.
MAJOR FACTORS AFFECTING RETAILING IN INDIA
HIGH REAL-ESTATE COSTS.
ABSURD RENT CONTROL LAWS (EG - MAHDA 1976 ACT).
HIGH INTEREST COSTS.
UNPLANNED CITIES.
CORRUPTION.
HIGH ELECTRICITY COSTS.
WEAK CONSUMER LAWS.
18.
RETAIL (ORGN.) STRUCTURES
ORGANISATION STRUCTURES DIFFER BASED ON TYPE / SIZE OF THE RETAILER.
(i) ORG. STRUCTURE OF A SMALL RETAILER
19. (ii) ORIGINAL STRUCTURE OF A DEPARTMENT STORE CHAIN KKH/DM/BU-19 www.a2zmba.com
20. 5) RETAIL BASED CHANNEL FORMATS OR TYPES OF RETAILERS
(i) CONVENIENCE STORE : CONVENIENTLY LOCATED , SMALL GROCERY STORE HIGH
MARGIN, LIMITED DEPTH, BROAD VARIETY, LOW WAITING TIME.
(ii) SPECIALITY STORE : LIMITED NUMBER OF PRODUCT LINE WITH GREAT DEPTH OF
SELECTION . PRICES SAME AS DEPARTMENT STORES LOW WAITING TIME.
(iii) DEPARTMENT STORE : ORGANISED INTO SEPARATE DEPARTMENTS. FOR DIFFERENT
PRODUCTS MERCHANTISE. EG: CLOTHING, FOOD ITEMS, APPLIANCES. WIDE VARIETY OF
PRODUCTS WITH MODERATE DEPTH. SPATIAL (SPACE) CONVENIENCE, LOW WAITING
TIME.
21.
(iv) DISCOUNT STORE :
WIDE VARIETY, LESS DEPTH MERCHANTISE, LOW COST LOCATIONS, LESS SERVICE,
LOWER (DISCOUNTED) PRICES. TARGET CONSUMERS ARE LOW/MIDDLE INCOME
GROUPS.
OTHER TYPES OF RETAILERS ARE SUPER STORES (20,000-50,000 SQ.FT), SHOPPING
MALLS, SUPER MARKETS (20,000 SQ.FT) SELF-SERVICE FOOD STORES

6. SHOPPING BEHAVIOUR
(i) SHOPPING NEEDS : MANY PRODUCTS SATISFY
(a) FUNCTIONAL / RATIONAL NEEDS, AND/OR
(b) PSYCHOLOGICAL / EMOTIONAL NEEDS.
22.
(ii) TYPES OF BUYING DECISION MAKING :
(a) EXTENDED PROBLEM SOLVING (HIGH RISK & UNCERTAINITY)
(b) LIMITED PROBLEM SOLVING IMPULSE PURCHASE (MODERATE RISK &
UNCERTAINITY)
(c) HABITUAL DECISION MAKING (LOW RISK & UNCERTAINITY)- BRAND LOYALITY,
STORE LOYALITY ARE EXAMPLES.
23.
STEPS / STAGES IN STORE SELECTION & BUYING PROCESS
24.
RETAIL PLANNING & STRATEGIES
CONSIST OF FOLLOWING STEPS
(i) DEFINE BUSINESS MISSION.
(ii) CONDUCT SITUATIONAL AUDIT (SWOT).
(iii) DECIDE OBJECTIVES & GOALS.
(iv) EVOLVE RETAIL STRATEGY.
(v) DEVELOP FINANCIAL STRATEGY.
(vi) PREPARE ACTION PLAN (PERT-CPM)
(vii) IMPLEMENTATION & CONTROL.
25.
RETAIL STRATEGY CONSISTS OF
(a) TARGET MARKET SEGMENTS.
(b) RETAIL FORMAT/RETAIL MARKETING MIX. IT INCLUDES :
(i) GOODS/SERVICES OFFERED,
(ii) PRICING,
(iii) PROMOTION,
(iv) STORE LOCATION, DESIGN & VISUAL MERCHANTISE,
(v) CUSTOMER SERVICE
26.
(c) SUSTAINABLE COMPETITIVE ADVANTAGE .
CAN BE BUILT BY FOLLOWING AREAS:
(i) CUSTOMER LOYALTY,
(ii) LOCATION,
(iii) VENDOR RELATIONS,
(iv) MANAGEMENT INFORMATION & DISTRIBUTION SYSTEMS,
(v) LOW-COST OPERATIONS.
27. MERCHANDISE PLAN
RETAILER PLANS
(a) WHAT TYPE OF MERCHANDISE (GOODS) TO BUY .
THIS DEPENDS ON RETAIL STRATEGY 3. FACTORS ARE RELEVANT :
(i) VARIETY(BREADTH),
(ii) ASSORTMENT(DEPTH)
(iii) SERVICE LEVEL
28.
(c) HOW MUCH TO BUY .
DEPENDS ON : (i) SALES FORECAST - TOP DOWN, BOTTOM-UP APPROACH &
FORECASTING METHODS.
INVENTORY NET SALES
TURNOVER AVERAGE INVENTORY AT RETAIL
THIS CAN BE CALCULATED ON MONTHLY / QUARTERLY / YEARLY BASIS. RAPID
INVENTORY TURNOVER SHOWS FINANCIAL SUCCESS.
(ii) KKH/DM/BU-28 www.a2zmba.com
29.
PROCUREMENT & DESTRIBUTION
AFTER MERCHANTISE PLAN IS MADE, PROCUREMENT
FOCUSES ON BUYING MERCHANDISE. IT INCLUDES:
(i) SELECTING VENDORS/SUPPLIERS,
(ii) MEETING,NEGOTIATING,
(iii) DEVELOPING RELATIONSHIP.

RETAIL DISTRIBUTION / LOGISTICS
IT IS PHYSICAL FLOW OF MERCHANDISE FROM THE
SOURCE OF SUPPLY TO CUSTOMER.
30.
SOME RETAILERS HAVE DISTRIBUTION CENTER TO STORE BUFFER STOCKS, AS COST OF
SPACE IS LESS.
IF RETAILER HAS FEW STORES, DIRECT DISTRIBUTION TO STORES IS BETTER.
DISTRIBUTION CENTER ACTIVITIES : TRANSPORTATION, RECEIVING, CHECKING,
STORING, MARKING, FILLING ORDERS.
31.
RETAIL (STORE) MANAGEMENT
INCLUDES THE FOLLOWING:
(i) MANAGING STORE EMPLOYEES : RECRUITING, SELECTING, TRAINING, MOTIVATING,
MEASURING & EVALUATING PERFORMANCE,
(ii) MANAGING MERCHANDISE,
(iii) CUSTOMER SERVICE,
(iv) INVENTORY CONTROL,
(v) STORE PERFORMANCE EVALUATION.
32.
PERFORMANCE EVALUATION SYSTEM IS DESIGNED BY H.R. DEPARTMENT, BUT
EVALUATION IS DONE BY IMMEDIATE SUPERVISOR.
SUBJECTIVE & OBJECTIVE CRITERIA SHOULD BE USED.
BOTH YEARLY/HALF YEARLY REVIEW + FREQUENT APPRAISALS ARE DONE.
33.
WHOLESAILING (B2B)
IT INCLUDES SELLING PRODUCTS TO BUSINESSES LIKE RETAILERS, INDUSTRIAL &
INSTITUTIONAL USERS, CONTRACTORS & MERCHANTS, BUT NOT TO HOUSEHOLD
CONSUMERS.
WHOLESALER/DISTRIBUTOR SMALL DIFFERENCE IS IGNORED.
TERMINOLOGIES/TERMS VARY IN INDUSTRY.

34.
IMPORTANCE OF WHOLESAILING
LARGEST SALES IN WHOLESALE TRADE.
SALES GROWTH > ECONOMIC GROWTH.
STEADY GROSS MARGINS.
PERFORM IMPORTANT TASKS/ FUNCTIONS.
35.
FUNCTIONS/TASKS PERFORMED BY WHOLESALERS/ DISTRIBUTORS.
SELLING & PROMOTING.
BUYING & ASSORTMENT BUILDING.
BULK BREAKING.
WAREHOUSING/STORAGE-INVENTORY HOLDING.
TRANSPORTATION
FINANCING
RISK BEARING.
MARKET INFORMATION.
36.
STRUCTURE OF WHOLESAILING
37.
DIFFERENT FORMATS / TYPES OF WHOLESALERS
(A) MERCHANT WHOLESALERS , INDEPENDENT BUSINESSES, BY MERCHANDISE, THEY
ARE CALLED JOBBERS,DISTRIBUTORS OR MILL SUPPLY HOUSES. TWO CATEGORIES :
(i) FULL-SERVICE WHOLESALERS : THEY CARRY STOCK, HAVE A SALES FORCE, OFFER
CREDIT, ARRANGE DELIVERIES.
38.
TWO TYPES OF FULL SERVICE WHOLESALERS
(a) WHOLESALE MERCHANTS SELL TO RETAILERS &GIVE FULL RANGE OF SERVICES.
(b) INDUSTRIAL DISTRIBUTORS : SELL TO MANUFACTURERS, GIVE SERVICES LIKE
STORAGE, CREDIT, DELIVARY.
40.
(ii) LIMITED SERVICE WHOLESALERS OFFER FEW SERVICES TO SUPPLIERS &
CUSTOMERS. FOLLOWING TYPES:
(a) CASH & CARRY WHOLESALERS HAVE LIMITED FMCG PRODUCTS, SELL TO SMALL
RETAILERS FOR CASH.
(b) TRUCK WHOLESALERS SELL & DELIVER LIMITED SEMI-PERISHABLE MERCHANDISE TO
RETAIL STORES, HOSPITALS, RESTAURANTS
(c) DROP SHIPPERS OPERATE IN BULK INDUSTRIES LIKE HEAVY EQUIPMENT TO SHIP
FROM MANUFACTURER TO CUSTOMER.
41.
(b) RACK JOBBERS SELL TO GROCERY & DRUG RETAILERS , DELIVER, DISPLAY, BILL FOR
GOODS SOLD TO CONSUMERS, KEEP STOCK RECORDS.
(e) MAIL-ORDER WHOLESALERS .
(f) PRODUCERS CO-OPERATIVES : COLLECT & SELL FARM PRODUCTS.
(B) BROKERS : BRING BUYERS & SELLERS TOGETHER, NEGOTIATION HELP, COMMISSION
PAID BY PARTY WHO HIRED THEM. EX: REAL ESTATE.
42.
(C) AGENTS : REPRESENT EITHER BUYERS/SELLERS.
(i) MANUFACTURERS REPRESENTATIVES / AGENTS,
(ii) SELLING AGENTS
(iii) PURCHASING AGENTS
(iv) COMMISSION MERCHANTS.
(D) MANUFACTURERS & RETAILERS BRANCH OFFICES
(E) MISCELLANEOUS WHOLESALERS
(i) AGRICULTURAL ASSEMBLERS,
(ii) PETROLEUM BULK PLANTS / TERMINALS,
(iii) AUCTION COMPANIES.
43.
SELECTION & USING WHOLESALERS
WHOLESALERS ARE USED WHEN THEY ARE MORE EFFECTIVE & EFFICIENT IN
PERFORMING IMPORTANT FUNCTIONS/TASKS.
WHOLESALER INDUSTRY IS VULNERABLE.
SELECTION OF WHOLESALERS DEPEND UPON :
(i) GIVING VALUE-ADDED SERVICES AS PER NEEDS OF MANUFACTURERS & RETAILERS.
(ii) REDUCING COSTS WITH MODERN MATERIAL HANDLING & I.T.
(iii) FULFILLING COMMITMENTS (AS PER AGREEMENTS) LIKE SALES VOLUME, TIMELY
PAYMENTS & MARKET INFORMATION.
44.
WHOLESALE STATEGIES
(a) INCREASE PRODUCTIVITY BY BETTER MANAGEMENT OF INVENTORIES &
RECEIVABLES.
(b) IMPROVE DECISIONS ON
(i) TARGET MARKET & RELATIONSHIP BUILDING.
(ii) SELECT PROFITABLE PRODUCTS & SERVICES.
(iii) NEW PRICING STRATEGIES. (iv) DEVELOP OVERALL PROMOTION STRTEGY.
(v) DEVELOP AUTOMATED WAREHOUSES & SUPERIOR MIS & ORDER PROCESSING.
45. CHANNEL PLANNING
DESIGNING CHANNEL SYSTEM
STEPS ARE :
A. UNDERSTAND SERVICE OUTPUTS NEEDED BY TARGET CUSTOMERS.
B. DECIDE CHANNEL OBJECTIVES & CONSTRAINTS.
C. IDENTIFY MAJOR CHANNEL ALTERNATIVES.
D . EVALUATE CHANNEL ALTERNATIVES & CHOSE A CHANNEL SYSTEM.
46.
(A) UNDERSTAND SERVICE OUTPUTS NEEDED BY TARGET CUSTOMERS
SOME OF THE SERVICE OUTPUTS ARE :
(i) LOT SIZE,
(ii) WAITING TIME,
(iii) SPATIAL (SPACE) CONVENIENCE.
(iv) PRODUCT VARIETY/ASSORTMENT.
(v) SERVICE BACK-UP.
IF A CHANNEL GIVES MORE SERVICE OUTPUTS, COST & PRICES GO UP. OPPOSITE IS
TRUE.
EX : DISCOUNT STORES.
47.
(B) DECIDE CHANNEL OBJECTIVES & CONSTRAINTS.
(i) CHANNEL OBJECTIVES VARY WITH DIFFERENT MARKET SEGMENTS. CHANNEL
OBJECTIVES ARE TARGETED SERVICE OUTPUT LEVELS .
(ii) CHANNEL OBJECTIVES VARY WITH PRODUCT CHARACTERISTICS.
(iii) STRENGTHS & WEAKNESSES (CONSTRAINTS) OF DIFFERENT INTERMEDIARIES MUST
BE CONSIDERED.
(iv) CONSTRAINTS OF ENVIRONMENT MUST BE CONSIDERED.
48.
(C) IDENTIFY MAJOR CHANNEL ALTERNATIVES.
CONSIDER 3 ELEMENTS OF CHANNEL ALTERNATIVES:
(i) TYPES OF INTERMEDIARIES.
(ii) NO. OF INTERMEDIARIES : EXCLUSIVE, SELECTIVE, INTENSIVE DISTRIBUTION.
(iii) TERMS & RESPONSIBILITIES : PRICE POLICY, CONDITIONS OF SALE, TERRITORIES
RIGHTS, SERVICES & RESPONSIBILITIES.
49.
(D) EVALUATE MAJOR CHANNEL ALTERNATIVES & SELECT A CHANNEL SYSTEM.
CRITERIA USED FOR EVALUATION :
(i) ECONOMIC CRITERIA . ESTIMATE COST OF SELLING DIFFERENT SALES VOLUME THRU
EACH CHANNEL.
(ii) CONTROL
(iii) ADAPTIVE CRITERIA. DEGREE OF CONTROL VARIES WITH DIFFERENT CHANNELS. THE
MANUFACTURER NEEDS CHANNELS WHICH ADAPT TO CHANGING NEEDS OF MARKETS.
50. ORGANISATIONAL PATTERNS IN MARKETING CHANNELS.
TO DELIVER SERVICE OUTPUTS DESIRED BY END-USERS, DIFFERENT CHANNEL SYSTEMS
ARE DEVELOPED THESE ARE:
(1) CONVENTIONAL (FREE FORM) MARKETING CHANNEL CONSISTS OF INDEPENDENT
FIRMS REPRESENTING MANUFACTURER, WHOLESALERS, RETAILERS. EACH SEEKS TO
MAXIMISE OWN PROFITS. NO MEMBER HAS CONTROL OVER OTHER CHANNEL
MEMBERS. CHANNEL MEMBERS BARGAINED OVER EACH TRANSACTION. THEY WERE
UNSTABLE & COULD NOT ACHIEVE ECONOMIES AND SUPERIOR SERVICE.
51.
(2)VERTICAL INTEGRATION / VERTICAL MARKETING SYSTEM (VMS)
TO IMPROVE EFFECTIVENESS & EFFICIENCY OF FREE FORM/CONVENTIONAL MKT.
CHANNEL, VERTICAL MARKETING SYSTEM (VMS) HAS EMERGED. IT IS A UNIFIED SYSTEM
IN WHICH ONE MEMBER, THE CHANNEL LEADER, OWNS OTHERS OR HAS SO MUCH
POWER THAT OTHERS COOPERATE, BEHAVE BETTER, & HAVE LESS CONFLICT. THERE
ARE TWO TYPES OF VERTICAL INTEGRATION :
(A )HARD VERTICAL INTEGRATION
(CORPORATE VMS).
(B)SOFT VERTICAL INTEGRATION, WHICH INCLUDES
52.
(B1) ADMINISTERED VMS, & (B2) CONTRACTUAL VMS.
(A) HARD VERTICAL INTEGRATION INCLUDES OWNERSHIP OF THE CHANNEL BY ONE
FIRM THRU GROWTH/ACQUISITION. THIS STRATEGY IS FOLLOWED BY COMPANIES ( EX
BATA & CG-TRANF& HTSG) WHEN PRODUCTION AND DISTRIBUTION ARE COMBINED
UNDER SINGLE OWNERSHIP.
54.
DEGREES OF VERTICAL INTEGRATION & OUTSOURCING.
IN MARKETING CHANNELS, DECISIONS ON MAKE-OR-BUY ARE SAME AS VERTICAL
(FORWARD) INTEGRATION OR OUTSOURCE.
55.
OUTSOURCING IS BUYING GOODS / SERVICES FROM OUTSIDE VENDORS.
REASONS :
(I) LESS COST
(II) LESS CAPITAL INVESTMENT,
(III) BETTER QUALITY.
IN DISTRIBUTION MGT., OUTSOURCING ACTIVITIES INCLUDE INVOICING, SHIPPING,
FINANCING, SELLING, WAREHOUSING, ETC.
CAUTION : IF A VENDOR GETS KEY INFORMATION, IT CAN BECOME A COMPETITOR.
56.
ELECTRONIC CHANNELS
IT MEANS REACHING & SELLING GOODS/SERVICES TO END-USERS ELECTRONICALLY-BY
USING THE INTERNET. IT IS SIMILAR TO E-COMMERCE.
ON LINE SHOPPING IS THIRD MOST POPULAR ACTIVITY ON THE INTERNET, AFTER E-
MAIL & RESEARCHING/ GETTING INFORMATION.
MARKET POTENTIAL OF E-CHANNELS IS HIGH, ALTHOUGH PRESENTLY SMALL.
57.
SOME OF THE PROBLEMS OF E-CHANNEL ARE :
(i) HOW VAT (VALUE ADDED TAXES) WILL BE COLLECTED FOR ON LINE SALES?
(ii) ON-LINE-PAYMENTS PROBLEMS.
(iii) DIAL-UP SYSTEM IS SLOW FOR ACCESSING WEB-SITES. OTHER SYSTEMS LIKE ISDN,
DSL, CABLE MODEM ARE COSTLY.
58. MAJOR REASONS FOR ON-LINE SHOPPING.
CAN SHOP ANY TIME.
LESS TIME THAN SHOPPING AT STORES.
ENJOY ON-LINE SHOPPING & EASY TO SHOP.
LOWER PRICES, DONT LIKE CROWD AT RETAIL STORES, PRODUCTS / BRANDS NOT
AVAILABLE WHERE THE BUYER LIVE.
59. MAJOR REASONS FOR NOT MAKING ON-LINE PURCHASE
PRODUCT RETURNS DIFFICULT.
DESIRED PRODUCT NOT AVAILABLE.
NOT SURE ABOUT TIMELY DELIVERY.
DONT WANT TO PAY SHIPPING COSTS.
ENJOY SHOPPING AT RETAIL STORES.
TOTAL COST OF BUYING MORE.
60. CONFLICTS DUE TO ON-LINE SALES
MANUFACTURER SELLING DIRECTLY THRU OWN WEB SITES, OR OTHER ON-LINE
RESELLER CAN FACE GOAL & DOMAIN RELATED CONFLICTS.

MANAGING CONFLICTS
(i) SELLING AT LIST PRICE. (WITHOUT DISCOUNTS) (EX. NIKE)
(ii) SELLING DIFFERENT PRODUCTS (EX. P&G).
(iii) GIVE CREDIT TO OFF-LINE RETAILERS.
(iv) PROMOTE, DONT SALE.
61.
CHANNEL MANAGEMENT
1. CHANNEL CONFLICTS.
2. CHANNEL POLICIES.
INTRA CHANNEL CONFLICT MEANS CONFLICTS WITHIN A CHANNEL .
MULTIPLE CHANNELS HAVE CONFLICTS BETWEEN 2 OR MORE CHANNELS .
62.
SOURCES/CAUSES OF CONFLICTS.
GOAL DIFFERENCES
DIFFERING PERCEPTIONS.
DOMAIN DIFFERENCES.
GRAY/BLACK MARKETS.
MANAGING CHANNEL CONFLICTS
SOME CONFLICTS CAN BE CONSTRUCTIVE.
ASSESS CONFLICT BY INTENSITY, FREQUENCY & IMPORTANCE OF THE ISSUE.
63.
METHODS FOR MANAGING CONFLICTS
EXCHANGE OF PERSONS.
COOPTATION
ACHIEVING COMMON GOALS.
DIPLOMACY.
MEDIATION.
ARBITRATION.
64.
2.0. CHANNEL POLICIES
POLICIES ARE MADE TO MANAGE THE CHANNEL & EFFORTS OF MEMBERS.
POLICIES DISCUSSED ARE:
MARKET & CUSTOMER COVERAGE, PRICING & PRODUCT LINE.

2.1. MARKET COVERAGE POLICIES
INTENSIVE DISTRIBUTION MAY INCREASE INTRABRAND COMPETITION.
SELECTIVE & EXCLUSIVE DISTRIBUTION TO MINIMISE INTRABRAND & IMPROVE
INTERBRAND COMPETITION & SERVICE OUTPUTS.
LEGALITY VARIES IN COUNTRIES.
65.
2.2. CUSTOMER COVERAGE POLICIES
WHOM INTERMEDIARIES RESELL
PREVENT GRAY MARKETS
PREVENT INTRABRAND COMPETITION
2.3. PRICING POLICIES
MANUFACTURER HAS PRICE LIST & DISCOUNT POLICIES. FOR INTERMEDIARIES
COST OF SERVICE OUTPUTS, PROFITS, AND MARKET (COMPETITORS) NORMS ARE
CONSIDERED.
MAXIMUM RETAIL PRICE MAINTAINENCE (RPM) IS ADOPTED.

66.
PRICE DISCRIMINATION LEGALLY ALLOWS DIFFERENT PRICES TO DIFFERENT
BUYERS, AS FOLLOWS:
(i) VOLUME DISCOUNT;
(ii) CUSTOMER SEGMENT PRICING;
(iii) IMAGE PRICING;
(iv) LOCATION PRICING;
(v) TIME PRICING;
PREDATORY PRICING IS ILLEGAL,
67.
2.4. PRODUCT LINE POLICIES
(A) EXCLUSIVE DEALING & TERRITORY ARRANGEMENT ARE LEGAL IF SELLERS MARKET
SHARE IS NOT DOMINANT & COMPETITION IS NOT LESSENED SUBSTANTIALLY.
(B) TYING AND FORCING FULL PRODUCT LINE ARE HELD BY COURTS AS ILLEGAL, IF THE
ARRANGEMENT LESSONS COMPETITION SUBSTANTIALLY.
68.
A PRODUCT MIX CONSISTS OF PRODUCT LINES. EACH PRODUCT LINE MANAGER TO
DECIDE WHICH PRODUCT ITEMS TO BUILD, MAINTAIN, HARVEST, OR DIVEST, BASED ON
SALES, PROFITS, MARKET PROFILE ANALYSIS.
69.
CHANNELS INFORMATION SYSTEMS
1. ELEMENTS OF CHANNEL INF-SYSTEM :
(i) HARDWARE & NETWORKS.
(ii) DATABASES.
(A) DATABASE GENERATION.
(B) DATABASE USE.
2. IMPACT ON SERVICE.
(i) SPATIAL (SPACE RELATED) CONVENIENCE.
(ii) WAITING (DELIVARY) TIME REDUCTION.
(iii) STOCKING NEEDED PRODUCTS & AVOIDING STOCK-OUTS.
70.
CUSTOMERS BY USING CHANNEL INFO.SYSTEM. (BY USING DATABASES), FAST MOVING
ITEMS ARE ORDERED & SLOW MOVING PRODUCTS ARE DELETED.
3. IMPACT OF INF.SYS. ON CHANNEL FLOW PERFORMANCE
INF.TECHNOLOGY HAS IMPROVED PERFORMANCE OF MAJOR CHANNEL FLOWS, AS
SHOWN BELOW. IT HAS INCREASED CONSUMER SATISFACTION & REDUCED COSTS.
72.
ASSESSING MARKETING CHANNEL PERFORMANCE
1. MEASURING & EVALUATING CHANNEL MEMBERS CONTRIBUTION TO CHANNEL
PERFORMANCE. THIS IS SAME AS MARKETING COSTS & PROFITABILITY,DISCUSSED
EARLIER.
THE STEPS ARE :
(i) IDENTIFY CHANNEL ACTIVITIES.
(ii) CONVERT NATURAL EXPENSES TO CHANNEL ACTIVITIES/FUNCTIONS.
(iii) ALLOCATE FUNCTIONAL COSTS TO VARIOUS CHANNELS.
(iv) PREPARE P & L FOR EACH CHANNEL.
73.
2. RESULT OF CHANNEL PERFORMANCE .
CHANNEL PERFORMANCE IS ASSESSED BY AUDITING SERVICE QUALITY.
THIS IS DONE BY A QUESTIONNAIRE TO MEASURE TARGET CUSTOMERS PERCEPTIONS,
FOCUSING ON FOLLOWING 5 FACTORS:
(i) TANGIBLES.
(ii) RELIABILITY.
(iii) REPONSIVENESS.
(iv) ASSURANCE.
(v) EMPATHY.
74.
MARKETING LOGISTICS
IT IS DELIVERING THE FINAL PRODUCT TO CUSTOMERS & INTERMEDIARIES, AT DESIRED
TIME & LOWEST COST. IT IS ALSO CALLED PHYSICAL DISTRIBUTION
75.
IN DEMAND CHAIN MGT: A FIRM FIRST THINKS OF TARGET MARKET & ITS DEMAND, &
THEN DESIGNS SUPPLY CHAIN BY WORKING BACKWARD. REPLACE CHAIN WORD BY
NETWORK IS FURTHER IMPROVEMENT.
76.
MISSION OF LOGISTICS MGT IS TO PLAN & COORDINATE AND INTEGRATE THOSE
ACTIVITIES THAT ARE NECESSARY TO SATISFY CUSTOMER NEEDS OF EXCELLENT SERVICE
AT LOWEST COST, WITHIN THE ORGANISATION.
77. THE SUPPLY CHAIN IS A NETWORK. KKH/DM/BU-77 www.a2zmba.com
78.
SUPPLY CHAIN MGT (SCM)
IT IS A NETWORK OF CONNECTED & INTERDEPENDENT FIRMS COOPERATIVELY
WORKING TO CONTROL, MANAGE & IMPROVE FLOW OF MATERIALS & INFORMATION
FROM SUPPLIERS TO END USERS.
ACTIVITIES OF SCM ARE DESIGN OF PRODUCT, PLANNING & FORECASTING, PURCHASE,
PRODUCTION, ORDER PROCESSING, INVENTORY CONTROL, WAREHOUSING, MATERIAL
HANDLING, CUSTOMER SERVICE.
LOGISTICS SCOPE STARTS FROM MGT.OF RAW MATERIAL THRU OPERATIONS TO
DELIVARY OF FINAL PRODUCT TO CUSTOMERS.
79.
LOGISTICS & COMPETITIVE STRATEGY.
GOALS/COMPETITIVE ADVANTAGE A FIRM WANTS TO ACHIEVE DELIVERING SUPERIOR
CUSTOMER SERVICE AT LOWER COST/SUPERIOR CUSTOMER VALUE.
COMPETITIVE STRATEGIES ARE:
PERFORM VALUE CHAIN ACTIVITIES (PORTERS) MORE EFFICIENTLY & DIFFERENTLY
THAN COMPETITORS..
USE LOGISTICS CONCEPT (& SCM) TO INTEGRATE DISTRIBUTION, OPERATIONS,
PROCUREMENT WITHIN THE FIRM & NETWORK (RELATIONSHIPS) BUILDING WITH
SUPPLIERS & CUSTOMERS.
80.
CUSTOMER SERVICE DIMENSION
IT HAS MANY ELEMENTS WHICH ARE GROUPED IN 3 CATEGORIES:
(i) PRE-TRANSACTION / PRE-SALES SERVICE.
(ii) TRANSACTION / DURING-SALES SERVICE.
(iii) POST-TRANSACTION / POST-SALES SERVICE.
SERVICE MUST BE CUSTOMISED, TO SATISFY DIFFERENT NEEDS OF CUSTOMERS.
PERFECT ORDER ACHIEVEMENT CAN BE USED TO MEASURE SERVICE PERFORMANCE
& TO SET SERVICE STANDARDS.
81.
DEVELOPING LOGISTICS ORGANISATION & MANAGEMENT.
1. HOW TRADITIONAL ORGANISATION PROCESSES A CUSTOMER ORDER. IT IS
SEQUENTIAL & TAKES A LONG TIME.
82.
2. CONVENTIONAL (VERTICAL) ORG. STRUCTURE IS ON FUNCTIONAL BASIS.
THIS ORG. IS INPUT FOCUSED & BUDGET DRIVEN. IT CANNOT INTEGRATE LOGISTICS MGT.TO ACHIEVE
COMPETITIVE ADVANTAGE. KKH/DM/BU-82 www.a2zmba.com
83.
3. HENCE, HORIZONTAL ORG.SHOULD BE DEVEOPED WITH FOLLOWING
CHARACTERISTICS :
(A) ORGANISE AROUND PROCESSES & NOT TASKS.
(B) HAVE A FLAT ORGANISATION.
(C) BUILT ON MULTI FUNCTIONAL TEAMS.
84. (A) MARKET-BASED PERFORMANCE MEASUREMENT.
FIG. HORIZONTAL ORG. FOCUS
85.
SOME OF CORE PROCESSES ARE :
(i) CUNSUMER DEVELOPMENT.
(ii) BRAND MANAGEMENT
(iii) CRM,
(iv) CUSTOMER SERVICE

86.
THESE PROCESSES ARE BEST MANAGED BY CROSS-FUNCTIONAL TEAMS.
LEADERS ARE INTEGRATORS, WHO FOCUS THE TEAM ON MARKET BASED GOALS.
REWARD SYSTEM SHOULD CHANGE.
PRODUCTION SHOULD PRODUCE WHAT IS NEEDED BY MARKET.
FOR MARKET DRIVEN LOGISTICS, CHANGE FROM VERTICAL TO HORIZONTAL IS
IMPORTANT.
87. TRANSPORTATION DECISIONS
1. CAN AFFECT CUSTOMER SATISFACTION.
2. THEREFORE SELECTION OF RIGHT TRANSPORTATION MODE IS IMPORTANT.
3. ALTERNATIVES :
RAIL, AIR, TRUCK, WATERWAYS, PIPELINES, RAIL-TRUCK,TRUCK- WATER,RAIL-WATER,
AIR TRUCK.
88.
4. CRITERIA FOR SELECTION
DEPENDABILITY, AVAILABILITY, SPEED, LOSS / DAMAGE, & COST.
5. MARKETERS CHOOSE FROM :
PRIVATE CARRIERS.
CONTRACT CARRIERS.
COMMON CARRIERS.
89.
WAREHOUSING DECISIONS
EACH FIRM STORES FINISHED PRODUCTS UNTIL THEY ARE SOLD.
PRODUCTION & COMSUMPTION CYCLES DO NOT ALWAYS MATCH.
THEREFORE, FIRMS MUST DECIDE :
(i) HOW MANY WARE HOUSES ARE NEEDED .
(ii)THEIR LOCATION.
90.
4. DECISION DEPENDS ON :
(A) MARKET COVERAGE,
(B) CUSTOMER SERVICE LEVEL,
(C) DISTRIBUTION COSTS.
5. TYPES OF WAREHOUSES AVAILABLE
(i) PRIVATE (COMPANY OWNED)
(ii) PUBLIC (LEASED/RENTED)
(iii) STORAGE (MEDIUM-LONG TERM)
(iv) DISTRIBUTION CENTRES.
(v) AUTOMATED.
91.
INVENTORY MANAGEMENT
INVESTMENT IN INVENTORY IS HIGHEST, OUT OF TOTAL INVESTMENT IN ASSETS.
INVENTORIES ARE HELD AT:
PRODUCTION, DISTRIBUTION, RETAIL LEVELS.
INVENTORY COST RISES AT FASTER RATE AS CUSTOMER SERVICE LEVEL COMES CLOSER
TO 100%.
A FIRMS OBJECTIVE : SUPERIOR CUSTOMER SERVICE AT LOWER COST.
92.
5. INVENTORY DECISIONS ARE :
(A) WHEN TO ORDER?
(B) HOW MUCH TO ORDER?
93.
MARKETING LOGISTICS COST AND PERFORMANCE
MARKETING LOGISTICS/PHYSICAL DISTRIBUTION (PD) COST, P, IS AS FOLLOWS:
P = F+W+I+LS
F = FREIGHT/TRANSPORTATION COST.
W = WAREHOUSE COST.
I = INVENTORY COST.
LS = COST OF LOST SALES, DUE TO DELAY IN DELIVARY.
94.
2. TWO APPROACHES FOR PERFORMANCE MEASUREMENT .
(A) MINIMISE TOTAL COST OF P.D. (P).
(B) RETURN ON INVESTMENTS (ROI).
95.
MATERIAL HANDLING (M.H.)
OBJECTIVES : TO INCREASE USABLE CAPACITY OF THE WAREHOUSE AND TO IMPROVE
OPERATING EFFICIENCY.
GUIDELINES/PRINCIPLES OF MATERIAL HANDLING.
OPTIMISE MATERIALS FLOW.
SIMPLIFY BY REDUCING, ELIMINATING, COMBINING MOVEMENTS.
USE GRAVITY PRINCIPLE.
96.
MAKE OPTIMUM USE OF BUILDING SPACE.
SELECT RIGHT M.H.EQUIPMENT.
STANDARDISE M.H. METHODS & SIZES/TYPES OF EQUIPMENT.
ADOPT SAFETY PRINCIPLE.
97.
BENCHMARKING
MEANING : STUDYING WORLD-CLASS PERFORMERS & ADOPTING BEST PRACTICES,
OR STUDYING BEST PRACTICE COMPANIES TO IMPROVE PERFORMANCE.
INITIALLY BENCH MARKING WAS FOCUSED ON COMPETITORS, BUT NOW IT IS FOCUSED
ON TOP PERFORMING FIRMS, REGARDLESS OF THEIR INDUSTRY.
98.
3. STEPS INVOLVED IN BENCHMARKING
(i) DECIDE WHICH FUNCTIONS TO BENCHMARK.
(ii) IDENTIFY KEY PERFORMANCE VARIABLES.
(iii) IDENTIFY BEST IN CLASS COMPANIES.
(iv) MEASURE PERFORMANCE OF THESE FIRMS.
(v) MEASURE THE COMPANYS PERFORMANCE.
(vi) SPECIFY ACTION PLAN TO CLOSE THE GAP.
(vii) IMPLEMENT ACTION PLAN.
(viii) MONITOR RESULTS.
FOR SR.NO. (iii), ASK CUSTOMERS, SUPPLIERS, DISTRIBUTORS, MGT. CONSULTING
FIRMS.

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1. DISTRIBUTION MGT (D.M.)

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