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15-1: Check Yourself 1. There are no intermediaries between the buyer
and seller in a direct marketing channel. In
indirect marketing channels, one or more
intermediaries work with manufacturers to
provide goods and services to customers.
2. 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 vertical marketing systems,
independent firms at different levels of the
marketing channel join together through
contracts to obtain economies of scale and
coordination and to reduce conflict. In a
corporate vertical marketing system, the parent
company has complete control and can dictate
the priorities and objectives of the marketing
channel because it owns multiple segments of
the channel, such as manufacturing plants,
warehouse facilities, and retail outlets.
3. Successful strategic relationships require mutual
trust, open communication, common goals, and
credible commitments.
15-2: Making Information Flow
through Marketing Channels
Each step requires the collection and dissemination
of information.
Group exercise: List the information that each
member of the supply chain hopes to gain from
each flow.
Now list the information each member disseminates
during each flow
15-3: Data Warehouse Electronic Data
Interchange
The growth of EDI systems has allowed for
advanced tracking of information. Each system can
seamlessly integrate with others, which creates
value for both customers and the firm.
Ask students: Exactly how does EDI increase value
for end customers?
Answer: Since EDI facilitates information, it makes
it easier for retailers to plan their deliveries
(advance shipping notice) and plan their inventories
(CPFR). Other information is handled through EDI
as well. The bottom line is the retailer has the
merchandise the customer wants when he/she wants
it, and in the quantities that are demanded.
15-4: Vendor-Managed Inventory Vendor-managed inventory (VMI) is an approach
for improving supply chain efficiency in which the
manufacturer is responsible for maintaining the
retailer’s inventory levels in each of its stores.
15-5: Check Yourself 1. 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), Flow 6 (Manufacturer to
Distribution Center and Buyer)
2. As shown on the horizontal axis, data can be
accessed according to the level of merchandise
aggregation—SKU (item), vendor, category
(e.g., dresses), or all merchandise. Along the
vertical axis, data can be accessed by level of
the company - store, divisions, or the total
company. Finally, along the third dimension,
data can be accessed by point in time - day,
season, or year.
3. Electronic data interchange (EDI) is the
computer-to-computer exchange of business
documents from a retailer to a vendor and back.
4. Although it is a more advanced level of
collaboration than simply using EDI and sharing
information, retailers cannot use VMI blindly.
Whereas the manufacturer coordinates the
supply chain for its specific products, it does not
know what other actions the retailer is taking
that might affect the sales of its products in the
future.
15-6: Making Merchandise Flow
through Marketing Channels
Remind students that supply chains enable the flow
of not just information but also goods.
Keeping goods flowing is not a simple task.
Ask students: Under what circumstances might a
manufacturer deliver directly to stores (flow 2)
rather than to a distribution center (flow 1)?
Answer: 1. Because the retailer demands it. 2.
Because merchandise is bulky (furniture) or needs
to be delivered daily (tortillas)
15-7: Bakery with a Conscience This video shows Dancing Deer’s CSR initiatives
but at the same time offers many views of the
production, packaging, and shipping of their
product.
Note: Please make sure that the video file is located
in the same folder as the PowerPoint slides.
15-8: How Does Dell’s Merchandise Flow Students may know that Dell sells through retailers
but also directly to end consumers.
15-9: Distribution Center vs. Direct Store
Delivery
Distribution centers are not best if the retailer has
few outlets and/or the stores are consolidated.
The following list are some advantages of having a
distribution center:
more accurate sales forecasts due to many stores
lower inventory in each story therefore lower
overall inventory costs
overstock and under-stock is less of a problem
it is less expensive to store in a remote
warehouse then expensive retail location.
15-10: The Distribution Center Group Project: Ask students to draw out the
distribution center for a pair of Nike shoes that are
at a Foot Locker distribution center.
For each stage, ask them to list 3 things that will
happen to the item and 1 thing that might go wrong!
15-11: Inbound Transportation Buyers and planners are much more involved in
coordinating the physical flow of merchandise to
the stores.
15-12: Receiving and Checking After goods arrive at their destination, the recipient
must account for them.
RFID has the potential of tracking merchandise
throughout the supply chain. Items wouldn’t have to
be physically checked.
A distribution center or a store could know exactly
where and how many of an item it has because each
item has an RFID tag.
Some are concerned, however, about consumer
privacy—being able to track a consumer that is
wearing apparel with an RFID tag.
15-13: Storing and Cross-Docking Remind students that one of the most important
functions of the supply chain is to hold merchandise
until the next link in the chain is ready for it.
But many firms strive to hold merchandise a
minimum amount of time because holding
merchandise in a distribution center is expensive
and the merchandise is not available for sale. So
cross-docking distribution centers are part of
just-in-time delivery systems.
Ask students: Which type of distribution center is
best for minimizing inventory in the supply chain?
Answer: cross-docking
15-14: Getting Merchandise Floor-Ready Many firms now require that manufacturers ship
floor-ready merchandise, which shifts the burden of
ticketing and marketing to the manufacturer.
Ask students: What cost implications do these
requirements have for manufacturers and retailers?
15-15: Shipping Merchandise to Stores Technology facilitates shipments to stores by
tracking item sales and thus triggering replacement
orders.
Ask students: How do automatic ordering systems
benefit manufacturers, retailers, and customers?
Answer: Manufacturers can plan their production
schedules. Retailers get forecasts that are more
accurate.
Customers get the merchandise they want, when
they want it.
15-16: Inventory Management through
Just-In-Time Systems
Inventory management systems track goods
throughout stores, warehouses, and DCs.
As its name implies, just-in-time inventory
management ensures goods get delivered only when
they are needed.
15-17: Benefits of JIT Systems Because they use smaller but more frequent
shipments, JIT systems reduce stock-out situations
which in turn increase customer satisfaction.
Ask students: Can you think of any potential
problems with this inventory management
approach?
Answer: The systems can be expensive and the
supply chain partners must be committed to
accurate data or they won’t work. Also, if the
system isn’t working properly, out-of-stocks can
occur.
15-18: Check Yourself 1. Manufacturing – Distribution Center (optional)
– Store – Customer
2. JIT leads to reduced lead time, increased
product availability, and lower inventory
investment.
Additional Teaching Tips
This chapter introduces the student to supply chain management. Instructors should tie in the
role of the supply chain to value creation and its contribution to the marketing effort. Students
can understand how a product gets from point A to the end delivery point but may not understand
the role of the intermediaries in transport and the responsibility to the marketing effort that the
intermediaries contribute to. These factors should be addressed in teaching the chapter.
Students can find this chapter difficult to fully understand. Showing the DVD for this chapter
titled “New Balance: Managing Supply from U.S. and Overseas” may clarify the role of supply
chain management in the marketing effort.
Instructors may want to assign students to roles in the distribution channel (manufacturer,
warehouse distributor, truck driver or transport person, wholesale, retailer) and various
intermediaries with the assignment given to them as follows: How does your role add to the
marketing effort? This exercise gets students to think about the connection to “Place,” one of the
elements of the Marketing Mix to the overall marketing strategy.
Similar to the last chapter, the instructor may want to review the vocabulary of the chapter by
having students complete story problems surrounding the vocabulary words presented in this
chapter.
