Chapter 16
Supply Chain and Channel Management
Tools For Instructors
· Brief Chapter Outline
· Learning Objectives
· Chapter Overview (“Summing Up”)
· Extended Chapter Outline with Teaching Tips
· PowerPoint Slides with Teaching Notes
· Answers to End of Chapter Learning Aids
· Chapter Case Study
· Additional Teaching Tips
Brief Chapter Outline
The Importance of Marketing Channel/Supply Chain Management
Designing Marketing Channels
Managing the Marketing Channel and Supply Chain
Making Information Flow through Marketing Channels
Making Merchandise Flow through Marketing Channels
Summing Up
End of Chapter Learning Aids
Chapter Case Study: Zara Delivers Fast Fashion
Learning Objectives
LO1 Understand the importance of marketing channels and supply chain management.
LO2 Understand the difference between direct and indirect marketing channels.
LO3 Describe how marketing channels are managed.
LO4 Describe the flow of information and merchandise in the marketing channel.
Chapter Overview (“Summing Up”)
LO1 Understand the importance of marketing channels and supply chain management.
Marketing channels allow companies to get their products in the appropriate outlets in sufficient
quantities to meet consumer demand. To anticipate this demand, advertising and promotions must be
coordinated with the departments that control inventory and transportation. Otherwise, customers
would come in seeking a promotion and not find the product.
Without a the members in a marketing channel, consumers would be forced to find raw materials,
manufacture products, and somehow get them to where they could be used, all on their own. Thus, each
marketing channel member adds value to the product by performing one or more of these functions.
Marketing channel management also creates value for each firm in the chain and helps bind together
many company functions, including manufacturing, inventory management, transportation, advertising,
and marketing.
LO2 Understand the difference between direct and indirect marketing channels.
There are ways by which businesses get their goods to consumers. Using a direct marketing channel, a
customer can purchase goods from the manufacturer without needing to go through a retailer or
intermediary, generally online (e.g., Ascend speakers) or at company stores (e.g., Apple). More
commonly, manufacturers choose to offer their goods to consumers through an intermediary, such as a
retailer (e.g., Walmart), implementing an indirect marketing channel strategy.
LO3 Describe how marketing channels are ¬managed.
The more closely aligned the marketing channel members are with each other, the less likely there will
be significant conflict. An administered marketing channel occurs when a dominant and powerful
marketing channel member has control over the other members. In a contractual marketing channel
(e.g., franchising), coordination and control are dictated by contractual relationships between members.
Corporate marketing channels can operate relatively smoothly because one firm owns the various
levels of the chains. Marketing channels also can be effectively managed through strong relationships
developed with marketing channel partners. To create such relationships, the partners must trust each
other, communicate openly, have compatible goals, realize there is benefit in being interdependent, and
be willing to invest in each other’s success.
LO4 Describe the flow of information and merchandise in the marketing channel.
Information flow involves: Flow 1 (customer to store), Flow 2 (store to buyer), Flow 3 (buyer to
manufacturer), Flow 4 (store to manufacturer), Flow 5 (store to distribution center), and Flow 6
(manufacturer to distribution center and buyer). Merchandise flow involves: Flow 1 (manufacturer to
retailer distribution centers), Flow 2 (manufacturer directly to stores), Flow 3 (distribution centers to
stores, when shipped first to distribution centers), and Flow 4 ¬(retailer to customer).
Extended Chapter Outline With Teaching Tips
I. The Importance Of Marketing
Channel/Supply Chain Management(PPT slide
16-4, 5)
A. Marketing Channels Add Value (PPT slide 16-7, 8)
B. Marketing Channel Management Affects Other Aspects of
Marketing (PPT slide 16-9)
II. Designing Marketing Channels (PPT slide
16-10)
A. Direct Marketing Channel
B. Indirect Marketing Channel
III. Managing The Marketing Channel And
Supply Chain (PPT slide 16-11)
A. Managing Supply Chains through Vertical Marketing
Systems (PPT slide 16-12)
1. Administered Vertical Marketing System (PPT slide 16-13)
2. Contractual Vertical Marketing System (PPT slide 16-13)
3. Corporate Vertical Marketing System (PPT slide 16-13)
B. Managing Supply Chains through Strategic Relationships
(PPT slide 16-15)
4. Mutual Trust
5. Open Communication
6. Common Goals
7. Interdependence
8. Credible Commitments
Check Yourself: Several questions are offered for students to check their understanding of core
concepts. (PPT slide 16-17)
1. What are the differences between an indirect and a direct marketing channel?
2. What are the differences among the three types of vertical marketing systems?
Answer: In an administered vertical marketing system there is no common ownership or contractual
relationships, but the dominant channel member controls or holds the balance of power. In contractual
3. How do firms develop strong strategic partnerships with their marketing channel partners?
IV. Making Information Flow Through
Marketing Channels (PPT slide 16-18)
A. Electronic Data Interchange (PPT slide 16-19)
B. Vendor–Managed Inventory (PPT slide 16-20)
Check Yourself: Several questions are offered for students to check their understanding of core
concepts. (PPT slide 16-22)
1. What are the marketing channel links associated with each information flow?
Answer: The supply chain links associated with each information flow step are Flow 1 (Customer to
2. How do marketing channel members use data warehouses to make decisions?
Answer: As shown on the horizontal axis, data can be accessed according to the level of merchandise
3. What is EDI and how is it used?
4. Why do some marketing channels use VMI, while others do not?
Answer: Although it is a more advanced level of collaboration than simply using EDI and sharing
V. Making Merchandise Flow Through
Marketing Channels (PPT slide 16-23)
A. Distribution Centers versus Direct Store Delivery (PPT slide
16-26)
B. The Distribution Center (PPT slide 16-27)
1. Management of Inbound Transportation (PPT slide 16-28)
2. Receiving and Checking (PPT slide 16-29)
3. Storing and Cross-Docking (PPT slide 16-30)
4. Getting Merchandise Floor Ready (PPT slide 16-31)
5. Shipping Merchandise to Store (PPT slide 16-32)
C. Inventory Management through Just-in-Time Systems
(PPT slide 16-33, 34)
1. Reduced Lead Time
2. Increased Product Availability and Lower Inventory Investment
3. Costs of a JIT System
Check Yourself: Several questions are offered for students to check their understanding of core
concepts. (PPT slide 16-35)
1. How does merchandise flow through a typical supply chain?
2. Why have just-in-time supply chain systems become so popular?