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b. It is necessary to secure cooperation among channel members.
c. One means is through a channel captain.
• Is a channel member (producer, wholesaler, or retailer) that coordinates,
directs, and supports other channel members.
• Is a channel captain because:
• A firm (producer, wholesaler, or retailer) becomes a channel captain
because it is the channel member that can influence the behavior of other
members.
• Influence can take four forms:
– Legitimate right.
LEARNING REVIEW
12-6. What are the three questions marketing executives consider when choosing a
marketing channel and intermediaries?
12-7. What are the three degrees of distribution density?
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IV. LOGISTICS AND SUPPLY CHAIN MANAGEMENT [LO 12-4]
• Logistics involves those activities that focus on getting the right amount of the right
products to the right place at the right time at the lowest possible cost.
customers.
A. Supply Chains versus Marketing Channels
• A supply chain consists of the various of firms that perform activities required to
create and deliver a product or service to ultimate consumers or industrial users.
• Supply chain management.
a. Is the integration and organization of information and logistic activities across
c. [Figure 12-7] shows the relationships among marketing channels, logistics
management, and supply chain management.
B. Sourcing, Assembling, and Delivering a New Car: The Automotive Supply
Chain
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• A supply chain:
• [Figure 12-8] A carmaker’s supplier network includes thousands of firms that
provide 2,000 functional components, 30,000 parts, and 10 million lines of
software code in a typical car.
• A central link is the carmaker supply chain manager, who:
a. Is responsible for translating customer requirements into actual orders.
• Logistical aspects of a marketing channel are an integral part of the supply chain.
• Major logistic responsibilities include:
a. The selection and oversight of external transportation carriers.
• Supply chain managers also play an important role in the marketing channel.
a. They ensure that the right products are delivered to different locations.
C. Supply Chain Management and Marketing Strategy
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1. Aligning a Supply Chain with Marketing Strategy
The choice of a supply chain is based on a clearly defined marketing strategy and
involves three steps:
a. Understand the customer.
• Must identify the needs of the customer segment.
c. Harmonize the supply chain with the marketing strategy.
• A firm needs to ensure that what the supply chain is capable of doing well
[Video 12-2: IBM Video]
MARKETING MATTERS
Customer Value: IBM’s Watson Supply Chain – Delivering a Total Solution Integrated
for Its Customers
IBM is one of the world’s great business success stories because of its ability to
reinvent itself to satisfy shifting customer needs in a dynamic global marketplace. IBM has
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2. Dell: A Responsive Supply Chain
a. Dell’s marketing strategy targets customers who:
• Wait to have their customized computer system delivered in a few days,
b. Dell has opted for a responsive supply chain. Dell:
• Relies on more expensive express transportation to both receive
3. Walmart: An Efficient Supply Chain
a. An efficient supply chain:
• Uses inexpensive, but slower, modes of transportation.
b. Walmart’s marketing strategy is to be a reliable, lower-price retailer for a
wide variety of mass consumption consumer goods.
c. Walmart has opted for an efficient supply chain.
• Walmart uses cross-docking to keep inventory levels low, which involves:
– Unloading products from suppliers.
• Walmart runs its own fleet of trucks to service its stores.
• Walmart has invested in information technology to operate its supply
chain.
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d. Dell and Walmart provide three lessons that can be learned:
• There is no one best supply chain for every company.
V. TWO CONCEPTS OF LOGISTICS MANAGEMENT
IN A SUPPLY CHAIN
[Figure 12-9] The objective of logistics management in a supply chain is to balance five
total logistics cost factors against four customer service factors.
A. Total Logistics Cost Concept
• Total logistics cost includes expenses associated with transportation, materials
• It is important to study the impact of all logistics decisions when considering a
change since these costs are interrelated.
B. Customer Service Concept
• If a supply chain is a flow, the end of it—output—is the service delivered to
customers, which can be expensive.
• [Figure 12-9] A supply chain manager’s key task is to balance these four
customer service factors against five total logistics cost factors.
1. Time.
a. Time refers to order cycle or replenishment time for an item.
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– Order recognition. – Documentation.
2. Dependability.
a. Is the consistency of replenishment.
b. Can be broken into three elements:
3. Communication.
4. Convenience.
a. Means that there should be a minimum of effort on the part of the buyer in
doing business with the seller, who must remove unnecessary barriers.
b. Vendor-managed inventory (VMI) is an inventory-management system
whereby the supplier:
VI. CLOSING THE LOOP: REVERSE LOGISTICS
• The flow of goods in a supply chain does not end with the ultimate consumer or
industrial user. It can work in reverse.
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• Reverse logistics is a process of reclaiming recyclable and reusable materials,
returns, and reworks from the point of consumption or use for repair,
remanufacturing, redistribution, or disposal.
• Reverse logistics has:
MAKING RESPONSIBLE DECISIONS
Sustainability: Reverse Logistics and Green Marketing Go Together
at Hewlett-Packard—Recycling e-Waste
About 50 million tons of electronic waste finds their way to landfills around the world
annually. Americans alone discarded 400 million analog TV sets and computer monitors.
[Video 12-3: UPS Video]
• Some firms have:
a. Implemented reverse logistics programs themselves.
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LEARNING REVIEW
12-8. What is the principal difference between a marketing channel and a supply chain?
Answer: A marketing channel consists of individuals and firms involved in the process
of making a product or service available for use or consumption by ultimate consumers
12-9. The choice of a supply chain involves what three steps?
12-10. A manager’s key task is to balance which four customer service factors against
which six logistics cost factors?
Answer: The four supply chain customer service factors designed to satisfy users are:
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APPLYING MARKETING KNOWLEDGE
1. A distributor for Celanese Chemical Company stores large quantities of chemicals,
blends these chemicals to satisfy requests of customers, and delivers the blends to a
customer’s warehouse within 24 hours of receiving an order. What utilities does this
distributor provide?
2. Suppose the president of a carpet manufacturing firm has asked you to look into the
possibility of bypassing the firm’s wholesalers (who sell to carpet, department, and
furniture stores) and selling directly to these stores. What caution would you voice on
this matter, and what type of information would you gather before making this
decision?
3. What type of channel conflict is likely to be caused by dual distribution, and what
type of conflict can be reduced by direct distribution? Why?
4. How does the channel captain idea differ among corporate, administered, and
contractual vertical marketing systems with particular reference to the use of the
different forms of influence available to firms?
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5. List the customer service factors that would be vital to buyers in the following types of
companies: (a) manufacturing, (b) retailing, (c) hospitals, and (d) construction.
Answers:
a. Manufacturing. Probably lead time and dependability (for production scheduling)
plus two-way communications (e.g., status reports).
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BUILDING YOUR MARKETING PLAN
Does your marketing plan involve selecting channels and intermediaries? If the
answer is “no,” read no further and do not include this element in your plan. If the answer
is “yes,”
1. Identify which channel and intermediaries will provide the best coverage of the target
market for your product or service.
2. Specify which channel and intermediaries will best satisfy the important buying
requirements of the target market.
4. Select your channel(s) and intermediary(ies).
Suggestion: If a student’s marketing plan involves a manufacturing operation, choosing
5. If inventory is involved, (a) identify the three or four major kinds of inventory
6. (a) Rank the four customer service factors (time, dependability, communication, and