Chapter 13: Supply Chain Management and Marketing Channels
16
systems, communication modes, legal systems, and tariffs.
Students readily grasp that international marketing would have been an inevitable result of this
alternative history. It becomes obvious that each area would take advantage of its natural
resources, climate, the special talents, competence and skills of its people, and all of the other
factors that make international trade so important to the rest of the world. This map also
illustrates why the United States of America was relatively slow to enter the world trade arena.
Ethics Exercise
Wholesome Snacks, Inc., the maker of a variety of cookies and crackers, has just created a new
vitamin-packed cookie. The new cookie has the potential to combat many of the health problems
caused by malnutrition in children throughout poverty-stricken areas of the world. To date,
however, many of the larger developing markets have resisted opening distribution channels to
Wholesome’s products. Wholesome realizes that its new cookie could also help open the door
for the company to sell its less nutritious products in these markets. Therefore, the company is
offering the new cookie at a low cost to government relief programs in exchange for the long-
sought distribution channels. The company feels the deal is good for business, but the countries
feel it is corporate bullying.
1. What do you think about Wholesome’s idea for opening a new distribution channel?
Students’ answers will vary. There are really two issues relative to the new distribution
channel. First, opening the channel to distribute the vitamin-enriched cookie is ethical and
laudable. As the scenario indicates, the cookie would be beneficial to the overall health of
2. Does the AMA Statement of Ethics address this issue? Go to
www.marketingpower.com and review the statement. Then, write a brief paragraph
on what the AMA Statement of Ethics contains that relates to distribution channels in
developing nations.
Chapter 13: Supply Chain Management and Marketing Channels
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Students’ answers will vary. The AMA statement of Ethics has a specific section that
Video Assignment: Geoffrey B. Small
Geoffrey B. Small, a super-luxury fashion designer, discusses how he sources the materials
needed to develop his clothing lines. He also discusses how he makes distribution decisions
based on his micro production process and global distribution channels.
1. By moving to Italy to work closely with fabric creators, Geoffrey B. Small is working to
achieve_____.
a. planning integration
b. supply chain integration
c. strong product development processes
d. integrated logistics
2. Which type of external integration does Geoffrey B. Small have with Piacenza and Luigi
Parisotto?
a. Relationship integration
b. Measurement integration
c. Technology and planning integration
d. Customer integration
3. Which trend in supply chain management is Geoffrey B. Small most interested in?
a. Outsourcing logistics functions
Chapter 13: Supply Chain Management and Marketing Channels
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b. Supply chain security
c. Electronic distribution
d. Sustainable supply chain management
4. What type of production schedule does Geoffrey B. Small use?
a. Build-to-stock
b. Build-to-order
c. Postponement
d. Leagile production
5. By making products highly exclusive and “less available” Geoffrey B. Small is focusing on
which of the business processes in supply chain management?
a. Customer relationship management
b. Customer service management
c. Demand management
d. Manufacturing flow management
6. When Geoffrey B. Small takes into consideration the customers at stores that sell his
clothing, he is using customer service management.
a. True
b. False
Chapter 13: Supply Chain Management and Marketing Channels
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A second wave of E. coli caused five additional illnesses in December. And then just a
few weeks later, a case of norovirus caused an incident at a Chipotle in Boston that sickened
more than 140 students at Boston College.
Chipotle’s use of fresh meat and produce is one of the company’s greatest competitive
advantages against other fast food chains, but it has also made it more vulnerable. “We may be at
a higher risk for food-borne illness outbreaks than some competitors due to our use of fresh
produce and meats rather than frozen, and our reliance on employees cooking with traditional
methods rather than automation,” the company stated in their most recent annual report.
“With the degree of in-store food preparation of all incoming items, I think it’s potentially
much harder to control the consistency of good food handling and you’d be much more likely to
be handling meat and poultry, as well as fresh produce, all in close proximity,” said Trevor
Suslow, an extension research specialist in UC Davis’s plant sciences division.
With several food contamination issues over the course of just a few months, many
customers have been scared away, despite Chipotle’s efforts to make improvements. Early in
2016, Chipotle closed all restaurants for a full-day, all-staff food safety meeting. Then, in
February, they invited customers to give Chipotle another chance by offering them a free burrito.
This aggressive marketing campaign began a slow sales recovery.
The company also announced the hiring of James Marsden in March 2016. He is an
expert on E. coli and listeria in processed meats, and he was brought on as executive director of
food safety.
Chipotle pledges to become the “safest restaurant to eat at,” said Steve Ells, Chipotle co-
CEO. It will be a long road for Chipotle to win back all of the customers lost due to food safety
issues, an endeavor that will only succeed if Chipotle can maintain a clean health record for an
extended period of time.
Sources: A. Griswold, “Free burritos haven’t solved Chipotle’s problems,” Quartz, March 15,
2016, accessed October 19, 2016, http://qz.com/640188/free-burritos-havent-solved-chipotles-
problems/; S. Masunaga, “What went wrong at Chipotle? Food safety expert Trevor Suslow
breaks it down,” Los Angeles Times, March 17, 2016, accessed October 19, 2016,
http://www.latimes.com/business/la-fi-qa-food-safety-20160317-story.html; V. Wong, “Why is
Chipotle having so many food safety issues?” BuzzFeed News, November 4, 2015, accessed
Chapter 13: Supply Chain Management and Marketing Channels
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October 19, 2016, https://www.buzzfeed.com/venessawong/why-is-chipotle-having-so-many-
food-safety-issues?utm_term=.whRBxRdxW#.ocGW28G23.
TRUE/FALSE
1. The pork shortage was a supply chain management issue for Chipotle.
2. Chipotle has an agile supply chain because they only use fresh produce in their stores.
3. It is important for Chipotle to maintain a good supplier relationship management process
because they use so many local suppliers.
4. Chipotle had to enact their returns management processes after customers stopped coming
because of the food safety issues.
5. Chipotle practices sustainable supply chain management.
© 2018 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
1. Keeping Chipotle customers happy after the recent food safety issues will be covered by the
__________ management process.
a. business
b. customer relationship
c. customer service
d. demand
2. Which of the following sustainable supply chain management practices does Chipotle follow?
a. environmentally friendly materials sourcing
b. the design of products with consideration given to their social and environmental impact
c. end-of-life product management that includes easy recycling and/ or clean disposal
d. Chipotle practices all of these.
3. Which of the following supply chain management logistical options could NOT be used due to
Chipotle’s business philosophy?
a. outsourcing
b. offshoring
c. nearshoring
d. All of these fit with the business philosophy.
e. None of these fit with the business philosophy.
Chapter 13: Supply Chain Management and Marketing Channels
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4. Chipotle could use __________ to trace a food illness outbreak back to its source.
a. marketing channels
b. supply chain analytics
c. cloud computing
d. electronic distribution
5. Which of the following factors affects channel choice?
a. market factors
b. product factors
c. producer factors
d. All of these
Great Ideas for Teaching Chapter 13
Debra Decelles, Anthony Rossi, Susan Sunderline, and John Gardner, State Univ. of New York
College—Brockport
Egg-Spress Distribution: A Simulated Distribution Exercise
Introduction
Active learning by students allows for better understanding and memory. The activity in this
exercise helps students to internalize the difficulty of developing a distribution system for a new
product.
Goal
In the discussion of physical distribution management, the object is to achieve a high level of
customer service while minimizing costs. In order to accomplish this, the anticipation of
obstacles and reaction to those obstacles is critical. In this exercise, the goal is to get the product
Chapter 13: Supply Chain Management and Marketing Channels
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from the point of origin to the point of sale while maintaining a high level of customer service.
However, the task is to accomplish this as efficiently as possible, minimizing costs.
Activity
To teach this concept to a class, the idea of “egg-spress” distribution is introduced. This exercise
involves sending groups formed within a class through an obstacle course (distribution channel),
carrying Eggman (the product). The task set forth is to deliver Eggman to the finish line fully
assembled, undamaged, and as efficiently as possible. After explaining the task, an example of
Eggman and the distribution course are given to the students. The Eggman is a hard-boiled egg
with a drawn-on face and four push pins inserted as arms and legs. The distribution course can
vary—ours is one example. We began with a piece of four-inch diameter PVC tubing that was
held out our second-story classroom window. The Eggman had to be dropped through this
launch to ground level. At ground level, six cones were set up for the Eggman to be carried
through. The third leg of the race involved getting the Eggman over a wooden dowel held five to
six feet high. Next, the Eggman had to travel under a second wooden dowel placed just 10 inches
above ground. The final leg was a simple hopscotch to the finish line. Though the course was
fairly easy, the challenge was in the rules placed upon the students.
Rules
1. The Eggman can never touch the ground.
2. No one is allowed to touch the Eggman with their bare hands, except to release him into
the launch tube.
3. A different form of transportation must be used for each leg of the course.
If either of the first two rules were broken, the students had to return to the bottom of the launch
and begin the course again. Example forms of transportation include a softball mitt, a ladle, a
plastic bowl, a paper baggy, a lacrosse stick, and a small hand towel. By giving more choices of
transportation than there were legs to the course, the students were made to contemplate the
benefits and disadvantages of each. Further, the students had to strategically plan out the best
path through the course given the resources available.
Operations
Once the instructions were understood, the students were given a few minutes to design their
approach. In this time no further rule clarification was given, thus allowing the students to be
innovative and creative around the basic three rules. Each team was then timed as they went
through the course. It is important that later teams be kept from watching and copying strategies.
Chapter 13: Supply Chain Management and Marketing Channels
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Learning Objectives
The student should better understand the following.
• The importance and implications of forming proper distribution channels
• The importance of managing communication relationships throughout the distribution
processes (e.g., team conferences prior to attempting the course)
• Transportation choices (e.g., using the ladle versus the bowl or the high wooden dowel)
• The use of new logistics tactics such as postponed assembly and the coordination of
marketing and logistics through packaging (e.g., inserting the push pins at the end or the
course)
• To continually challenge corporate channel cultures that need reassessment in order to
react to internal and external environmental changes (i.e., creative thinking)
Variations to the original are possible.
• Alternative channel choices (e.g., offering the choice of two courses where the student
must decide which to attempt. One course may have more difficult obstacles but be shorter,
while the other would be longer but uncomplicated)
• Product packaging decision making (e.g., requiring that the product be packaged either
prior to distribution for added strategic planning or after)
• Allowing a trial run to test ideas.
• Including market research (e.g., only allowing one student to see the course and report
back to their team prior to the attempt)
Evaluation
The exercise was tested by a Marketing Management class. Teams were formed and briefed, and
ran the course with varied strategies. The strategies lead to a relevant debriefing using
distribution terms and tactics. The class evaluated the exercise on an eight-item, seven-point
scale evaluation form, giving an overall excellent rating to the presentation. Overall, our class
had a great time with the exercise.
Monica Perry, University of North Carolina at Charlotte
Thomas Stevenson, University of North Carolina at Charlotte
Marketing Channel Functions: A Low-Tech Kinesthetic Simulation
Why?
Undergraduate students often have only a slight appreciation for the functions provided by
intermediaries in marketing channels. Advertising messages that tout “we keep prices low by
Chapter 13: Supply Chain Management and Marketing Channels
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cutting out the middleman” merely exacerbate the problem.
What?
To enhance students’ appreciation of intermediary functions, students participate in a low-tech
simulated channel. The simulation consists of two steps.
How?
1. Prior to conducting the simulation, make signs on different color cardstock for various
positions, lists, and products.
• Four different manufacturers (e.g., Proctor & Gamble, Kraft, etc.)
Pallets of products for each manufacturer (print 100 brand names on each piece
of cardstock and get four pairs of scissors, one for each manufacturer)
Use products that students are reasonably familiar with, such as grocery products.
2. Conduct the simulation in class.
• Obtain 3 student volunteers and assign them manufacturer (two students per) and
consumer (one student per) positions. Give manufacturers signs, product pallets, and
scissors. Give consumers signs and shopping lists.
• Have the consumers stand on one side of the classroom while the manufacturers
stand on the opposite side.
• Part I:
Begin the simulation by having each consumer fill their shopping list by going
to each of the manufacturers. Each manufacturer will have to select and
provide an individual product from their pallets (make sure each manufacturer
has a pair of scissors to “select” an individual product for consumers to buy).
Chapter 13: Supply Chain Management and Marketing Channels
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Track the time that it takes to complete all the transactions (4 manufacturers x
5 consumers = 20 transactions in total). Be prepared because chaos will ensue!
If you have a large class, run multiple channels so that more students are involved.
• Part II:
Obtain four more volunteers to be the retailers and give them the purchase
orders. Place the retailers in the middle of the classroom between the
manufacturers and the consumers.
Start the simulation by first allowing the retailers to obtain the products from
the manufacturers and then let consumers fill their shopping lists from the
retailers. Log the time that it takes to complete all the transactions (nine
transactions in total).
It is virtually impossible for the 20 transactions to take less time than the 9 transactions!
Some students may suggest that the nine transactions take less time because there was a
practice round without the retailer. You can rerun another round with no retailer to show
that it is not the effect of practice.
Katryna Johnson, Concordia University
Logistics and Relay Races
Most students at some point in their lives have completed a relay race. The purpose of this relay
race is to help students understand how different forms of transportation are used for different
materials and how strategic planning is important to working out the logistics.
Materials
1. Items to be transported (CARGO): big wad of chewed gum, cotton balls, sugar, cheerios,
water, eggs (or anything else you want)
2. Transportation Devices (MODES): different size measuring cups, tongs, bowls, toothpicks,
spoons (various kitchen utensils)
Activity
1. Before class, set up a room for the race. At one end of the room you will have all of the
cargo and all of the modes of transportation; at the other end of the room will be the finish
line.
Chapter 13: Supply Chain Management and Marketing Channels
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2. Divide the students into teams (the number of teams will depend on the size of your class).
Assign a few students to observe the teams. Tell the students that you have measured the
cargo in advance to see which items work best in which modes of transportation (for
instance, you know that the sugar best fits into a 1/2-cup measuring cup and the Cheerios
best fit into a 1/3–cup measuring cup). Instruct the class that you will give them a few
minutes to develop a strategy to most efficiently and effectively transport all of the items
from one end of the room to another.
3. Tell students that they can reuse any of the transportation devices. Inform students that
spilling any of the cargo or having any leftover cargo in a transportation device will count
against them. For instance, if someone transports water in a bowl and then uses the same
bowl to transport sugar, there will be sugar left over in the bowl.
4. Notify students that someone from each team needs to write down how all of the items are
being transported. You will use this information and the group times for completing the
relay to determine which group wins.
5. Have the students complete the relay race. The observers should be watching the teams to
make sure they are not spilling anything or cheating, and should be recording information
accurately.
6. Use information from the observers to determine your winner. If the teams finish close in
time, use their recordings to determine who was most effective and efficient. For instance,
the last time I did this, one team used a toothpick to transport the wad of gum, and another
stuck it in a large bowl. While the second team’s method was effective, it was not efficient.
Object Lesson
Students learn about the importance of planning in logistics to increase efficiency and
effectiveness. As an example, if you put sugar in a bowl that had water in it previously, some of
the sugar will stick to the bowl. It does work to use the bowl for transportation, but the end
product is not in the same form (wet sugar) as it was originally and the quantity is less (some
sugar will stick to the bowl). Point out to students how different modes of transportation are
needed for different forms of cargo. For instance, the wad of gum represents a sensitive product
such as flammable material that needs to be handled carefully. Students may ask instructors if
they can throw the items across the room (to represent air transportation). Instructors shouldn’t
allow them to do so in order to avoid possible problems. But it’s up to the instructors what they
want to do!
Douglas K. Ross, Franklin University
Chapter 13: Supply Chain Management and Marketing Channels
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The Chocolate Candy Branding Exercise
This exercise has been used in classes ranging from Principles of Marketing to MBA-level
Marketing Management. This is a fun small-group exercise that fits will when discussing brands
and branding or when discussing the marketing mix variables. It is used after discussing what
constitutes a good brand name and how the target market, packaging, and so forth, must be
considered. It usually takes approximately 40–45 minutes but can be accomplished in as little as
30 minutes.
Break the class into small groups (three or four students per group works best). On an overhead
or PowerPoint, have a small paragraph explaining that each group is a marketing team who
works for a company that has developed a new chocolate. The chocolate is different in that it
contains a large (really extreme) amount of caffeine. The team must do the following.
• Determine the most appropriate target market(s).
• Develop a brand name for the product.
• Develop the packaging, including colors that will be used.
• Determine the price.
• Determine the distribution/outlets.
The groups have 20–30 minutes to accomplish this. Divide the whiteboard (or have them use
computers if available; PowerPoint works fine for this) and have them draw their product
including the brand name on the board. They should also indicate the colors used on the package.
This part of the activity takes approximately 5–10 minutes. A member from each group then
talks about their brand. They should discuss the following items.
• Why they chose the target market(s) that they did.
• How they came up with the brand name.
• Why they used the colors that they did and aspects of the lettering.
• How they determined the price.
• How their distribution fits with their target market.
After the students’ discussion, talk about the similarities and differences in the brands, such as
the various target markets or the various forms they used. Students have used regular bars, bite
size, various shapes (lightning bolts and coffee cups) liquid chocolate, etc. This exercise allows
the students to be creative and reinforces the discussion on brands and branding.
Variations of this exercise can include chocolate that contains all of the daily requirements of
vitamins plus fiber. You can also assign half of the groups the chocolate with caffeine and the
other half the chocolate with vitamins and fiber.