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What Is a Supply Chain?Figure 1. Supply Chain of Peanut Butter. We have discussed the channel partners, the roles they fill, and the structures they create. Marketers have long recognized the importance of managing distribution channel partners. As channels have become more complex and the flow of business has become more global, organizations have recognized that they need to manage more than just the channel partners. They need to manage the full chain of organizations and transactions from raw materials through final delivery to the customer—in other words, the supply chain. A supply chain is the system through which an organization acquires raw material, produces products, and delivers the products and services to its customers. Figure 1 illustrates a typical supply chain. Supply chain management helps increase the efficiency of logistics service by minimizing inventory and moving goods efficiently from producers to the ultimate users. On their way from producers to end users and consumers, products pass through a series of marketing entities known as a distribution channel. The Functions of Distribution ChannelsWhy do distribution channels exist? Why can’t every firm sell its products directly to the end user or consumer? Why are go-betweens needed? Channels serve a number of functions. Channels Reduce the Number of TransactionsChannels make distribution simpler by reducing the number of transactions required to get a product from the manufacturer to the consumer. For example, if there are four students in a course and a professor requires five textbooks (each from a different publisher), a total of 20 transactions would be necessary to accomplish the sale of the books. If the bookstore serves as a go-between, the number of transactions is reduced to nine. Each publisher sells to one bookstore rather than to four students. Each student buys from one bookstore instead of from five publishers (see Figure 2). Figure 2. How Distribution Channels Reduce the Number of Transactions (Attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license.) Dealing with channel intermediaries frees producers from many of the details of distribution activity. Producers are traditionally not as efficient or as enthusiastic about selling products directly to end users as are channel members. First, producers may wish to focus on production. They may feel that they cannot both produce and distribute in a competitive way. On the other hand, manufacturers are eager to deal directly with giant retailers, such as Walmart, which offer huge sales opportunities to producers. Channels Ease the Flow of GoodsChannels make distribution easier in several ways. The first is by sorting, which consists of the following:
Without the sorting, accumulating, and allocating processes, our modern consumer society would not exist. Instead, there would be home-based industries providing custom or semicustom products to local markets. In short, society would return to a much lower level of consumption. A second way channels ease the flow of goods is by locating buyers for merchandise. A wholesaler must find the right retailers to sell a profitable volume of merchandise. A sporting-goods wholesaler, for instance, must find the retailers who are most likely to reach sporting-goods consumers. Retailers have to understand the buying habits of consumers and put stores where consumers want and expect to find the merchandise. Every member of a distribution channel must locate buyers for the products it is trying to sell. Channel members also store merchandise so that goods are available when consumers want to buy them. The high cost of retail space often means many goods are stored by the wholesaler or manufacturer. Practice QuestionSupply Chain vs. Marketing ChannelsThe supply chain and marketing channels can be differentiated in the following ways:
Successful organizations develop effective, respectful partnerships between the marketing and supply chain teams. When the supply chain team understands market dynamics and the points of flexibility in product and pricing, they are better able to optimize the distribution process. When marketing has the benefit of effective supply chain management—which is analyzing and optimizing distribution within and beyond the marketing channels—greater value is delivered to customers. Contribute!Did you have an idea for improving this content? We’d love your input. Improve this pageLearn More What are the 4 types of channels of distribution?There are four types of distribution channels that exist: direct selling, selling through intermediaries, dual distribution, and reverse logistics channels.
What is the combination of distribution channels by which a firm gets products to end users quizlet?The distribution mix is the combination of channels that a firm selects to get a product to end users. Most business products are distributed through direct channels. Agents and brokers buy products from manufacturers and then sell them to other businesses.
What refers to an individual or firm that helps to distribute a product?Intermediary - An independent or corporate-owned business that helps move products from the producer to the ultimate consumer. Intermediate market - A set of wholesalers and retailers that buy goods from others and re-sells them. Merchant middleman - An intermediary that takes title to the products it distributes.
What are the types of distribution channels that sellers use to get products to end users?The three types of distribution channels are wholesalers, retailers, and direct-to-consumer sales.
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