Mirbis Unipa Logistic Dominici

DISTRIBUTION CHANNELS

Distribution and SCM
prof. Gandolfo DOMINICI

Definition of Distribution Channel

● Group of economical subjects doing the necessary activities
in order to transfer a good and its property, or to deliver a
service to the consumer;


Functions of intermediaries
Logistic (warehouse & transport)
•

Accumulation
• (one shipment for many goods)

Selection (information asymmetries)
•

Assortment (choice)
•

Bulk breaking
• (one big in many small)

Financial (delay)
•

Administrative simplification
•

B2C – Distribution Channels

Producer Producer Producer Producer

Agent

Wholesaler Wholesaler

Retailer
Retailer Retailer

Consumer Consumer Consumer Consumer

B2B- Distribution Channels

Producer Producer Producer Producer

Agent
Agent

Industrial Industrial
distributor distributor

Business Business
Business Business


LOGISTICS
AND
SUPPLY CHAIN MANAGEMENT


Logistics in business

● Logistics - ...the process of planning, implementing, and controlling the
efficient, effective flow and storage of goods, services, and related
information from point of origin to point of consumption for the purpose of
conforming to customer requirements.quot; Note that this definition includes
inbound, outbound, internal, and external movements, and return of
materials for environmental purposes. -- (Reference: Council of Logistics Management,
http://www.clm1.org/mission.html, 12 Feb 98)

● Logistics - The process of planning, implementing, and controlling the
efficient, cost effective flow and storage of raw materials, in-process
inventory, finished goods and related information from point of origin to
point of consumption for the purpose of meeting customer requirements. --
(Reference: Canadian Association of Logistics Management, http://www.calm.org/calm/AboutCALM/AboutCALM.html, 12

Feb, 1998)


Logistics in business

● Integrated
● Synchronized
● Purposive
● Flows
● Activity


The term: logistics

Ancient Greek:
● Λεγείν: argue, ratiocinate;
● Λογίστίκοσ: art of calculus;
Medieval Latin:
● Logisticus: calculus, computation;
Modern times:
● Logistique: General Baron A. H. De Jomini;
● Logistics: Admiral A.T.Mahan (**);


Evolution of logistics inside the firm

● 1950 - Economic Order Quantity
● 1975 -Material Requirement Planning
(MRP);
● 1980 - Just in Time - Manufacturing
Resource Planning (MRPII);
● 1990 - EDI (Electronic Data Interchange);
● Nowadays: Holonic Manufacturing,
Extended Enterprise Network, Agile
Manufacturing, Demand driven supply chain
…

Why evolving?
Why with marketing?

customer

SUPPLY CHAIN MANAGEMENT (SCM)

● Differs from firm’s logistics because it
deals also outside the firm in the relation
with clients and suppliers all along the
value chain.


SUPPLY CHAIN MANAGEMENT

INVENTORY MANAGEMENT
SUPPLIES CUSTOMER MANAGEMENT

Stock of
Stock of
Vendors Production Distribution
Finished
materials
goods


Definition of SCM

Supply chain management encompasses the planning
and management of all activities involved in sourcing
and procurement, conversion, and all logistics
management activities. Importantly, it also includes
coordination and collaboration with channel partners,
which can be suppliers, intermediaries, third party
service providers, and customers. In essence, supply
chain management integrates supply and demand
management within and across companies.


Definition of SCM

Supply chain management is an integrating function with primary
responsibility for linking major business functions and business
processes within and across companies into a cohesive and high-
performing business model. It includes all of the logistics
management activities noted above, as well as manufacturing
operations, and it drives coordination of processes and activities
with and across marketing, sales, product design, finance, and
information technology.


Flow directions in Supply chains

Push
● Flow control - look ahead-

Input of resources Demand

Pull
● Stock control - look back -

Input of resources Demand

Demand driven supply chain
and mass customization
● If is the customer to lead the chain then
it is not a “supply” chain, it is a “demand”
chain (Blackwell, 1999)
● Mass customization aims to produce
and distribute goods and services,
which can be unique and specifically
made for any single customer, but
keeping at the same time the high levels
of speed and efficiency of standard
goods and produced in line.


The 4 faces of mass customization

Source: Gilmore J. H , Pine B. J., The Four Faces of Mass Customization, Harvard Business Review, 1997


4R of Supply Chain

● Reactivity
Ability to reduce lead-time; personalization; adaptability to demand

● Regularity
Less σ = less stock; relevance of information

● Resilience
Preventing bullwhip effect; ability to resist to changes with flexibility

● Relations
Partnership, single or double sourcing


Value for the customer

Value for the Customer
=
Quality x Service

Cost x Time


What does customer do when we are out of stock?


Service surround and product value


How can SCM support innovation for customer
satisfaction?

● Internal and external collaboration to obtain communication
through the demand chain;
● Use of different sources of information: POS, e-mail, RFID
(Radio frequency identification), listening to developers of
existing products.
● Standardize all components
● Reduce lead-time:
● Understand all the company’s functions to achieve team-work
● Be ready to change

Dominici G., “Demand Driven Supply Chain ed Innovazione: il sistema logistico-produttivo per la soddisfazione dei bisogni del cliente”
,in Purpura e Fazio , Economia e Gestione dell’innovazione nelle PMI, FrancoAngeli, 2008


Dell’s success is a combination of:

● Direct Sales

● Build-to-order

● Supplier Integration

Together these allow for maximum
effectiveness with minimum cost


A direct sales system allows Dell to:

●Cut costs

●Build relationships with its
customers

●Deliver exactly what the customer
wants


A build to order system allows Dell to:
●Increase inventory velocity

●Minimize inventory costs

●Build exactly the computer that its
customers want

●Minimize the need for forecasting


Supplier integration allows Dell to
maximize the benefit of its other
core competencies

Here is how they do it:
●Location of supplier warehouses
●Extranet
●Meetings with suppliers


The secret to Dell’s success is the synergy between all of its
competencies

The direct sales system both enables and relies on the build-to-
order system

The build to order system both enables and relies on the supplier
integration system

And Dell’s focus on collaboration at every level enables it all


Manataki, Areti: A Knowledge-Based
●
Analysis and Modelling of Dell’s Supply
Chain Strategies
● Dave Jaffe and Todd Muirhead:
Implementation Study: Dell IT Scales
Supply Chain Management with Oracle 10g
RAC
Dell Case Study -
●
http://www.oppapers.com/print/Dell-Case-
Study/84223
Dell ERP - http://www.oppapers.com/print/Dell-
●
Erp/74191 11/5/2008
You Zeng: Learning from Dell - the faithful
●
implementer of 'Just in Time'
Dell on Wikipedia -
●
http://en.wikipedia.org/wiki/dell


THE “P” OF PROMOTION
THE FIRM COMMUNICATION MIX


The P of Promotion in McCarthy’s Marketing mix:
the Promotion Mix

1. Advertising- Any paid presentation of ideas, goods, or
services by an identified sponsor.
2. Personal Selling - A process of helping and persuading
one or more prospects to purchase a good or service or
to act on any idea through the use of an oral
presentation.
3. Promotions- Incentives ($) designed to stimulate the
purchase or sale of a product, usually in the short term.
4. Public relations - Paid intimate stimulation of supply for
a product, service, or business unit by planting
significant news about it or a favorable presentation of it
in the media.


Towards enterprise communication

Communication

Marketing Communication

Enterprise Communication


Marketing Communication

● Aims to improve the relation between the
company and the market;

● It is one of company’s functions trying to
influence consumer’s demand in favor of
company’s products;

● Accomplishes to affirm the company in the
market by supporting it’s products.


Enterprise Communication

● Marketing communication is not sufficient
nowadays to cover all the needs of the modern
organizations;
● Modern enterprises need to manage a complex
system of communications towards different
targets;
● In order to reach all the targets, the organization
must use a proper mix of components in order to
assure the highest efficacy of communication
process.


Systemic Approach to Communication

enterprise

Super-system
Environment


Data, Information, Communication

● Data:
a collection of facts usually collected as the result of experience, observation
or experiment, or processes within a computer system, or a set of
premises. This may consist of numbers, words, or images, particularly as
measurements or observations of a set of variables.
● Information:
Data in a circumstance transmitted one way from a source to a recipient
● Communication:
Information transmitted in a two ways process in order to obtain a feedback
about it’s response.


Lasswell’s model


Shannon and Weaver Model


Communication Process
(as we see it in offline communication)

Transmitter Feedback Receiver

Communication Process
Encoding

Channel
Message Decoding


Enterprise communication targets

External
Internal
Targets
targets

Potential employees
●
Unions
●
Pubblic opnion
●
Employees
●
External suppliers
●
Sales force
●
Consumers
●
Vertically integrated
●
suppliers Financial
●
● Vertically integrated intermediaries
clients ● Competitors
● shareholders ● Financial markets

The 4 Communication areas

Marketing communication

Institutional communication

Organizational communication

Financial Communication


Advertising

● Advertising is the nonpersonal communication of
information usually paid for and usually persuasive
in nature about products, services or ideas by
identified sponsors through the various media (Bovee, 1992)

● Paid, non-personal, public communication about
causes, goods and services, ideas, organizations,
people, and places, through means such as direct
mail, telephone, print, radio, television, and internet;
designed to inform and motivate and to change the
thinking pattern (or buying behavior) of the recipient,
so that he or she is persuaded to take the action
desired by the advertiser.


Advertising effects on Demand:
Translation effect


Communication and advertising effects on Demand:
Combined effect


Communication and advertising effects on Demand:
elasticity effect


Paradox and solution

p2

Q21 Q2

Objectives of Advertising:
The 4 Responses

1. Behavioral Response
2. Non Behavioral Response
3. Evaluative Response
4. Relational Response


Behavioral and non Behavioral
Responses


Non Behavioral- Rational Responses


Non behavioral- irrational

● Hedonistic

● Esthetic


Non behavioral- ideal

● Are all the wishes and desires of the individual
towards higher values, mental constructs,
self-image, socio-cultural growth, etc…


Evaluative Response

● Is the way to move towards a learning
process in order to give a direction to
individual preferences in an “attitude”
towards the product

● It’s a mind set which describes the
perdurable evaluation made by an
individual on a brand, a product, an
company, an idea and it includes rational,
emotional and behavioral factors.


FCB ( Foote, Cone, Belding) Model

Source: Adapted from Pastore e Vernuccio, 2006, original source VAUGHN R., 1986.


Relational Response

● Satisfaction

● Trust

● Behavioral fidelity

● Psychological fidelity

● Loyalty


Relational objectives

Evaluative objectives

Behavioral objectives Non behavioral
objectives

Influencing Factors

situational
individual


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