Channel Design

A firm must become involved in the channel design process when it is considering entering the market with a new product or when existing supply chains are falling short of performance objectives.

The design process consists of the following steps:

1. Establish objectives.

2. Formulate a strategy.

3. Determine structure alternatives.

4. Evaluate structure alternatives.

5. Select structure.

6. Determine alternatives for individual channel members.

7. Evaluate and select individual members.

8. Measure and evaluate channel pertormance.

9. Evaluate alternatives when performance objectives are not met, or attractive new options become available.

Figure 4-1

4.7. Types of distribution

Three types of distribution can be used to make product available to consumers:

(1)intensive distribution, (2) selective distribution and (3) exclusive distribution.

In intensive distribution, the product is sold to as many appropriate retailers or wholesalers as possible. Intensive distribution is appropriate for products such as chewing gum, candy bars, soft drinks, bread, film, and cigarettes where the primary factor influencing the purchase decision is convenience. Industrial products that may require intensive distribution include pencils, paperclips, transparent tape, file folders, typing paper, transparency masters, screws, and nails.

In selective distribution, the number of outlets that may carry a product is limited, but not to the extent of exclusive dealing. By carefully selecting wholesalers or retailers, the manufacturer can concentrate on potentially profitable accounts and develop solid working relationships to ensure that the product is properly merchandised. The producer also may restrict the number of retail outlets if the product requires specialized servicing or sales support. Selective distribution may be used for product categories such as clothing, appliances, televisions, stereo equipment, home furnishings, and sports equipment.

When a single outlet is given an exclusive franchise to sell the product in a geographic area, the arrangement is referred to as exclusive distribution. Products such as specially automobiles, some major appliances, certain brands of furniture, and lines of clothing that enjoy a high degree of brand loyally are likely to be distributed on an exclusive basis. This is particularly true if the consumer is willing to overcome the inconvenience of traveling some distance to obtain the product. Usually, exclusive distribution is undertaken when the manufacturer desires more aggressive selling on the part of the wholesaler or retailer, or when channel control is important, exclusive distribution may enhance the product's image and enable the firm to charge higher retail prices.

Sometimes manufacturers use multiple brands in order to offer exclusive distribution to more than one retailer or distributor. Exclusive distribution occurs more frequently at the wholesale level than at the retail level. In general, exclusive distribution lends itself to direct channels (manufacturer to retailer). Intensive distribution is more likely to involve indirect channels with two or more intermediaries.

4.8. Product characteristics

Nine product characteristics should be analyzed by the channel designer:

· Product value.

· Technicality of the product.

· Degree of market acceptance.

· Degree of substitutability.

· Product bulk.

· Product perishability.

· Degree of market concentration.

· Seasonality.

· Width and depth of the product line.

4.9. Processes of integrated supply chain management

3M managers identified seven key processes requiring analysis which support the integrated SCM approach. These key processes are:

· Customer relationship management.

· Customer service management.

· Demand management.

· Order fulfillment.

· Manufacturing flow management.

· Procurement.

· Product development and commercialization.

· Returns channel process.

Date: 2015-01-02; view: 869