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© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-11McGraw-Hill/Irwin
ChapterChapterFifteenFifteen
Distributing ProductsDistributing ProductsEfficiently and Competitively:Efficiently and Competitively:
Supply Chain ManagementSupply Chain Management
© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-22McGraw-Hill/Irwin
Channel of Channel of DistributionDistribution
Marketing IntermediariesMarketing Intermediaries WholesalerWholesaler RetailerRetailer BrokersBrokers
Role of IntermediariesRole of Intermediaries Create EfficiencyCreate Efficiency Value vs. CostValue vs. Cost
© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-33McGraw-Hill/Irwin
The Supply ChainThe Supply Chain(Figure 15.6)(Figure 15.6)
© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-44McGraw-Hill/Irwin
UtilityUtilityFormForm
TimeTime
PlacePlace
PossessionPossession
InformationInformation
ServiceService
OPEN 24 HRSOPEN 24 HRS
© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-55McGraw-Hill/Irwin
Wholesale Wholesale IntermediariesIntermediaries
Merchant Merchant WholesalersWholesalers Rack JobbersRack Jobbers Cash-and-CarryCash-and-Carry Drop ShippersDrop Shippers
Business to Business to Business (B2B)Business (B2B)
XYZ XYZ WarehouseWarehouse
© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-66McGraw-Hill/Irwin
Percent of B2B Percent of B2B Commerce from Commerce from
InternetInternet
0.2% 0.4%1.0%
2.1%
4.0%
6.3%
9.4%
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%
8.0%9.0%
10.0%
1997 1998 1999 2000 2001 2002 2003
*Excludes Service Industries*Excludes Service Industries
Source:Source: Forrester Research Inc.
© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-77McGraw-Hill/Irwin
Retail Retail CompetitionCompetition
PricePrice ServiceService LocationLocation SelectionSelection EntertainmeEntertainme
ntnt
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15-15-88McGraw-Hill/Irwin
Is it Becoming aIs it Becoming aWal-Mart World?Wal-Mart World?
050
100150200250300350400450500
Number of Wal-Mart
Stores
Mex
ico
Can
ada
Pue
rto
Ric
o
Uni
ted
Kin
gdom
Arg
enti
na
Chi
na
Ger
man
y
*There are 2,985 *There are 2,985 stores in the stores in the
U.S.U.S.
Source: Source: Wal-Mart Annual Report 2000
© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-99McGraw-Hill/Irwin
Retail Store Retail Store DistributionDistribution
IntensiveIntensive
SelectivSelectiveeExclusiveExclusive
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15-15-1010McGraw-Hill/Irwin
Identify a Retailer Identify a Retailer in Your Areain Your Area
SupermarketSupermarket Convenience Convenience
StoreStore Discount StoreDiscount Store Department Department
StoreStore Category KillerCategory Killer
Specialty Specialty StoreStore
Factory Factory OutletOutlet
SuperstoresSuperstores Catalog Catalog
ShowroomShowroom
© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-1111McGraw-Hill/Irwin
The Wheel of The Wheel of RetailingRetailing
PassagPassagee
ofof
TimeTime
2. Retail 2. Retail OutletOutlet2. Retail 2. Retail OutletOutlet
1. Retail 1. Retail Outlet StartsOutlet Starts
1. Retail 1. Retail Outlet StartsOutlet Starts
3. Retail 3. Retail OutletOutlet3. Retail 3. Retail OutletOutlet
4. New Outlet 4. New Outlet EntersEnters
4. New Outlet 4. New Outlet EntersEnters
Adds ServiceAdds Service
Raises PricesRaises Prices
Better Better LocationLocation
Adds ServiceAdds Service
Raises PricesRaises Prices
Better Better LocationLocation
Low PriceLow Price
Limited ServiceLimited Service
Out-of-way Out-of-way LocationLocation
Low PriceLow Price
Limited ServiceLimited Service
Out-of-way Out-of-way LocationLocation
Higher Higher PricesPrices
Higher Higher StatusStatus
Higher Higher PricesPrices
Higher Higher StatusStatus
Low PriceLow Price
Limited Limited ServiceService
Low PriceLow Price
Limited Limited ServiceService
© The McGraw-Hill Companies, Inc., 2002 All Rights Reserved.
15-15-1212McGraw-Hill/Irwin
Non-Store Non-Store DistributionDistribution
E-tailingE-tailing TelemarketingTelemarketing Vending Machines, Vending Machines,
Kiosks, CartsKiosks, Carts InternetInternet Direct SellingDirect Selling Multilevel MarketingMultilevel Marketing Direct MarketingDirect Marketing
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15-15-1313McGraw-Hill/Irwin
E-Business E-Business ExpectationsExpectations
05
10152025303540
% Companies Responding
None 1-5% 6-10% 11-20% 20%+ Don’tKnow
Now In 5 Years
Share of company revenues CEOs say Share of company revenues CEOs say come from e-business Now vs. In 5 come from e-business Now vs. In 5
yearsyears
Source:Source: USA Today
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15-15-1414McGraw-Hill/Irwin
Has The Internet Has The Internet Changed Your Shopping Changed Your Shopping
Habits?Habits?
41% 37%
24% 38%
35%25%
0%10%20%30%40%50%60%70%80%90%
100%
High Use Low Use
Undecided
No
Yes
Survey of Americans who Survey of Americans who have high* Internet use have high* Internet use vs. those with low usevs. those with low use
* high use = 15+ hours * high use = 15+ hours per weekper week
Source: Source: USA Today
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15-15-1515McGraw-Hill/Irwin
What Online Shoppers What Online Shoppers Bought* Per Month in Bought* Per Month in
20002000
$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000
Airline Tickets
Computer Hardware
Apparel
Hotel Reserv.
Books
Software
Health & Beauty
Toys/Video Games
*In thousands of dollars*In thousands of dollars
Source: Source: Forrester Research
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15-15-1616McGraw-Hill/Irwin
What does it take to What does it take to persuade persuade consumers to buy consumers to buy
online?online?
0
10
20
30
40
50
60
70
Percent
Assurance ofPrivacy
PriceDiscounts
Ability toReturn toBrick-and-
Mortar Store
**Survey of 1,944 Web Survey of 1,944 Web users that had users that had notnot made made
an online purchasean online purchase
Source: Source: CIO Web Business, 10/1/1999
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15-15-1717McGraw-Hill/Irwin
Channel Channel CooperationCooperation
Corporate Corporate DistributionDistribution
Contractual Contractual DistributionDistribution
Administered Administered DistributionDistribution
Supply Chain Supply Chain ManagementManagement
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15-15-1818McGraw-Hill/Irwin
Contractual Contractual DistributionDistribution
Franchise SystemsFranchise Systems
Wholesaler-Wholesaler-Sponsored ChainsSponsored Chains
Retail CooperativesRetail Cooperatives