Chapter 15 – Distributing Products
15-31
products with the least amount of materials, in-
ventory, and time.
6. Such systems are sometimes called VALUE
CHAINS because they are so effective and effi-
cient.
7. Firms often outsource the whole supply-chain
management process because it is so complex.
8. The text uses the example of how Cardinal
Health became more successful after reorganiz-
ing its supply chain.
learning objective 7
Describe logistics and outline how intermediaries manage the transportation and
storage of goods.
VII. LOGISTICS: GETTING GOODS TO CONSUM-
ERS EFFICIENTLY
A. Shipping costs have risen dramatically.
1. Shipping from city to city or state to state must to
be fast but cost-effective.
2. Many companies turn to Web-based trade com-
pliance systems to manage customs problems.
3. Distributing goods globally is more complicated
than distributing domestically.
B. LOGISTICS is the marketing activity that involves
planning, implementing, and controlling the physical
flow of materials, final goods, and related infor-
mation from points of origin to points of consumption
to meet customer requirements at a profit.
1. INBOUND LOGISTICS is the area of logistics
Chapter 15 – Distributing Products
15-32
REACHING BE-
YOND
our
borders
PPT 15-43
Weak Links Can
Break a Chain
WEAK LINKS CAN BREAK a CHAIN
15-43
• When nothing goes wrong, supply chains
can be a smashing success.
• But, natural disasters can wreak havoc
and cause billions of dollars in damage.
• Managing the integrity of products
throughout the whole chain is difficult too
• These weak links could cause a chain to
break.
PPT 15-44
Using Logistics
• Logistics — The planning, implementing and
controlling of the physical flow of material, final goods
and related information from points of origin to points
of consumption.
USING LOGISTICS
15-44
LO 15-7
• Firms outsource to
others specializing in
trade compliance to
determine what is
needed to market
products to global
customers.
Chapter 15 – Distributing Products
15-33
that involves bringing raw materials, packaging,
other goods and services, and information from
suppliers to producers.
2. MATERIALS HANDLING is the movement of
goods within a warehouse, from warehouses to
the factory floor, and from the factory floor to
various workstations.
3. FACTORY PROCESSES change raw materials
and parts into goods.
4. OUTBOUND LOGISTICS is the area of logistics
that involves managing the flow of finished
products and information to business buyers and
ultimate consumers (people like you and me).
5. REVERSE LOGISTICS is the area of logistics
that involves bringing goods back to the manu-
facturer because of defects or for recycling ma-
terials.
C. Logistics is as much about the movement of INFOR-
MATION as it is about the movement of GOODS.
1. THIRD-PARTY LOGISTICS is the use of out-
side firms to help move goods from here to
there.
D. SELLERS HAVE MANY DELIVERY OPTIONS.
1. Sellers can deliver the goods themselves, use a
shipping specialist, or outsource the distribution
function to specialists.
2. Choosing the most efficient method of distribu-
tion system requires evaluating on basic service
criteria.
Chapter 15 – Distributing Products
15-34
PPT 15-45
Logistics Applications
• Inbound Logistics — Brings raw materials,
packaging, other goods and services and information
from suppliers to producers.
LOGISTICS APPLICATIONS
15-45
LO 15-7
• Materials Handling —
Movement of goods
within a warehouse,
from warehouse to the
factory floor and from
the factory floor to
workstations.
PPT 15-46
Logistics Applications
LOGISTICS APPLICATIONS
15-46
LO 15-7
• Outbound Logistics — Manages the flow of
finished products and information to business buyers
and consumers.
• Reverse Logistics — Brings goods back to the
manufacturer because of defects or for recycling.
Chapter 15 – Distributing Products
15-35
E. TRAINS ARE GREAT FOR LARGE SHIPMENTS.
1. The largest percentage of goods (by volume) is
shipped by RAIL.
2. Railroad shipment is best for bulky items, such
as coal or wheat.
3. In PIGGYBACK SHIPPING, a truck trailer is
loaded onto a railroad flatcar, taken to a destina-
tion, offloaded, and driven to customers’ plants.
4. Railroad shipment is a relatively energy-efficient
way to move goods.
5. Smaller manufacturers that don’t ship enough
products to fill a railcar or truck can use a freight
forwarder.
6. A FREIGHT FORWARDER is an organization
that puts many small shipments together to cre-
ate a single large shipment that can be trans-
ported cost-effectively to the final destination.
F. TRUCKS ARE GOOD FOR SMALL SHIPMENTS
TO REMOTE LOCATIONS.
1. The second-largest surface transportation mode
is MOTOR VEHICLES.
2. Trucks reach more locations than trains.
3. A company can own its own trucks or hire a
trucking specialist.
4. PIGGYBACKING methods now involve 20-foot-
high railroad cars, called DOUBLE-STACKS.
5. The cost of trucking rises when fuel prices rise.
Chapter 15 – Distributing Products
15-36
PPT 15-47
Comparing Transportation Modes
TEXT FIGURE 15.8
Comparing Transportation Modes
COMPARING
TRANSPORTATION MODES
Mode Cost Speed Dependability Flexibility Frequency Reach
Rail Med. Slow Medium High Low High
Trucks High Fast High Medium High Highest
Pipeline Low Medium Highest Lowest Highest Lowest
Ships Lowest Slowest Lowest Highest Lowest Low
Air Highest Fastest Low Low Medium Medium
15-47
LO 15-7
lecture enhancer 15–8
THE HIGH-TECH FUTURE OF
FREIGHT
Railroads continue to play a vital role in the shipping industry,
but changes need to be made to enjoy the benefits of our digi-
tal age. (See the complete lecture enhancer on page 15.67 of
this manual.)
PPT 15-48
Logistics Specialists
• Freight Forwarder — Puts many small shipments
together to create a single large shipment that can be
transported cost-effectively by truck or train.
LOGISTICS SPECIALISTS
15-48
LO 15-7
• Intermodal Shipping —
Uses multiple modes of
transportation to complete a
single long-distance
movement of freight.
Chapter 15 – Distributing Products
15-37
6. The newest measure of transportation from farm
to consumer is the CARBON COST, and the
fewer the miles food travels the better for the
environment.
G. WATER TRANSPORTATION IS INEXPENSIVE
BUT SLOW.
1. Water transportation isn’t appropriate for goods
that need to be delivered quickly, but it is often
the least expensive method.
2. River transport, shipping on the Great Lakes,
and shipping along coasts are options.
3. When truck trailers are placed on ships, the pro-
cess is called FISHYBACK.
4. When these trailers are placed in airplanes, the
process is called BIRDYBACK.
H. PIPELINES ARE FAST AND EFFICIENT.
1. Pipelines are used primarily for transporting wa-
ter, petroleum, and petroleum products.
2. Other products, such as coal in water, can be
sent by pipelines.
I. AIR TRANSPORT IS FAST BUT EXPENSIVE.
1. Only a small part of shipping is done by AIR, but
it is a critical factor in many industries.
2. The primary benefit is SPEED (examples: Fed-
Ex and UPS).
3. The air freight industry is starting to focus on
global distribution (example: KLM Royal Dutch
Chapter 15 – Distributing Products
15-38
PPT 15-49
Types of Intermodal Shipping
TYPES of
INTERMODAL SHIPPING
15-49
LO 15-7
• Piggybacking: Truck
trailers placed on
trains
• Fishybacking: Truck
trailers placed on
ships
• Birdybacking: Truck
trailers placed on
planes
PPT 15-50
Get Your Product There
GET YOUR PRODUCT THERE
Most Popular Modes of Freight Transport
Source: U.S. Freight Transportation Forecast. 15-50
Method % of Distributors
Trucks 69%
Trains 15%
Pipelines 10%
Ships 6%
Air Under 1%
LO 15-7
Chapter 15 – Distributing Products
15-39
Airlines).
J. INTERMODAL SHIPPING
1. INTERMODAL SHIPPING is the use of multiple
modes of transportation to complete a single
long-distance movement of freight.
2. Services specializing in intermodal shipping are
called INTERMODAL MARKETING COMPA-
NIES.
3. Railroads are merging with each other and other
transportation companies to offer intermodal dis-
tribution.
K. THE STORAGE FUNCTION
1. Marketers must have goods available in various
parts of the country ready to be shipped locally
when ordered.
2. A significant part of the total cost of logistics is
for storage.
3. There are two major kinds of warehouses:
a. A STORAGE WAREHOUSE holds products
for a relatively long time. (Example: season-
al products.)
b. DISTRIBUTION WAREHOUSES are facili-
ties that gather and redistribute products.
(Examples: FedEx or UPS.)
L. TRACKING GOODS
1. Managing the flow of goods means being able to
keep track of where goods are at any given time.
2. UNIVERSAL PRODUCT CODES (UPCs) keep
Chapter 15 – Distributing Products
15-40
PPT 15-51
Storage Warehouses
• Storage warehouses hold products for a relatively
long period of time.
STORAGE WAREHOUSES
15-51
LO 15-7
• Distribution warehouses are
used to gather and
redistribute products such as:
– Beer and soft drinks
– Package deliveries
Chapter 15 – Distributing Products
15-41
track of inventory.
3. RADIO FREQUENCY IDENTIFICATION (RFID)
TAGS allow merchandise to be tracked through
the distribution channel.
4. For example, UPS uses a mix of Bluetooth’s
short-range radio capabilities and wireless re-
ceivers to track merchandise.
VIII. WHAT ALL THIS MEANS TO YOU
A. The success of a firm depends on its ability to take
orders, process them, and get the goods to custom-
ers.
B. There are many new jobs available in the area of
supply-chain management.
IX. SUMMARY
Chapter 15 – Distributing Products
15-42
test
prep
PPT 15-52
Test Prep
TEST PREP
15-52
• What four systems have evolved to tie together
members of the channel of distribution?
• How does logistics differ from distribution?
• What are inbound logistics, outbound logistics,
and reverse logistics?
Chapter 15 – Distributing Products
15-43
PowerPoint slide notes
PPT 15-1
Chapter Title
Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
Distributing
Products
CHAPTER 15
PPT 15-2
Learning Objectives
LEARNING OBJECTIVES
15-2
1. Explain the concept of marketing channels and their
value.
2. Demonstrate how intermediaries perform the six
marketing utilities.
3. Identify the types of wholesale intermediaries in the
distribution system.
PPT 15-3
Learning Objectives
LEARNING OBJECTIVES
15-3
4. Compare the distribution strategies retailers use.
5. Explain the various kinds of nonstore retailing.
6. Explain the various ways to build cooperation in
channel systems.
7. Describe logistics and outline how intermediaries
manage the transportation and storage of goods.
Chapter 15 – Distributing Products
15-44
PPT 15-4
Reed Hastings
REED HASTINGS
Netflix
15-4
• Almost singlehandedly
ended the era of brick and
mortar video rentals.
• In college, Hastings spent
his summers training with
the Marines and joined the
Peace Corps.
• Was inspired to start Netflix
after racking up a $40 late
fee.
PPT 15-5
Name That Company
NAME that COMPANY
15-5
This U.S. company is known for having low prices
all the time. One way it keeps prices low is by
eliminating as many wholesalers as possible and
doing all the wholesale function itself.
Name that company!
Company: Walmart
PPT 15-6
What Are Marketing Intermediaries?
WHAT are MARKETING
INTERMEDIARIES?
15-6
LO 15-1
• Marketing Intermediaries — Organizations that
assist in moving goods and services from businesses
to businesses (B2B) and from businesses to
consumers (B2C).
• They are called intermediaries because they’re in
the middle of a series of firms that distribute
goods.
1. Ask students: How many of you think marketing in-
termediari es are an unnecessary cost?” ( Often a ma-
jority of students will respond emphatically with a
“yes.”)
2. Use this as a basis to begin this chapter and an oppor-
tunity to explain the benefits these intermediaries
play.
Chapter 15 – Distributing Products
15-45
PPT 15-7
What Are Marketing Intermediaries?
• Channel of Distribution — A group of marketing
intermediaries that joining together to transport and
store goods from producers to consumers.
WHAT are MARKETING
INTERMEDIARIES?
15-7
LO 15-1
PPT 15-8
Answer May Be Blowing in the Wind
ANSWER MAY BE BLOWING
in the WIND
15-8
• IKEA was looking to cut down on shipping costs
and to focus on renewable energy.
• It has plans to construct a wind farm in Illinois with
49 wind turbines to generate electricity for 34,000
homes.
• Started using paper pallets that weigh 90% less
than the wood and can be recycled.
• IKEA officials are not satisfied with the new pallets
already and are looking for a new option.
PPT 15-9
Types of Marketing Intermediaries?
TYPES of MARKETING
INTERMEDIARIES?
15-9
LO 15-1
• Agents and Brokers — Intermediaries who bring
buyers and sellers together and assist in negotiating
an exchange but do not take title to the goods.
• Wholesaler — An intermediary that sells products to
other organizations such as retailers, manufacturers,
and hospitals.
• Retailer — An organization that sells products to
ultimate customers.
There are different types of marketing intermediaries, each
with a different role.