Marketing Chapter 15 Supply Chain Management Dhruv Grewal

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15 -2 Zara l l Differentiates itself by owning the majority of their stores Produces a majority of its own clothes Makes over 40% of its own fabric Operates a worldwide distribution network © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

15 -7 Test Your Knowledge One expensive solution firms used in the past to reduce distribution time was to ________. A) hire their own truckers B) make several small shipments every day C) reduce inventory D) stockpile inventory

15 -8 Supply Chain Management Affects Marketing l l l Fulfilling delivery promises Meeting customer expectations Reliant on an efficient supply chain © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

15 -10 Case in Point: Volvo Logistics Challenge Answer Results To coordinate all systems so that exact delivery days can be issues when an order is placed. Using EDI to create “ 4 D” the world’s first distribution system that is totally integrated with order and production systems. Matches production with programmed distribution routes. Targeted at 98% reliability. Improved customer satisfaction and loyalty.

15 -11 Making Information Flow 1 (Customer to Store) Flow 2 (Store to Buyer) Flow 3 (Store to Manufacturer) Flow 4 (Store to Manufacturer) Flow 5 (Store to Distribution Center) © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

15 -14 Test Your Knowledge Why is it crucial for marketers to understand the information flows through the supply chain? A) This ensures the timely delivery of goods. B) This ensures that customers find the goods they desire in the store ready for purchase. C) This ensures that the manufacture is aware of potential stock outs and other issues at the retail level. D) All of these choices are correct.

15 -16 Inbound Transportation l l l Dispatcher coordinates deliveries Manufacturer may pay transportation expenses Or retailers negotiate directly with trucking companies and pay expenses. © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

15 -17 Receiving and Checking l Receiving – l Checking – – l Arrival receipt Undamaged Ordered = received Radio Frequency Distribution (RFID) Tags – Container computer chips

15 -19 Adding Value 15. 1: RFID Tracks Merchandise Through Marks and Spencer l l l Track individual piece of merchandise sent to vendor Used to locate mislaid products, deter theft Enables distribution centers to receive whole truckloads © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

15 -21 Test Your Knowledge Where is the take place? A) B) C) D) most efficient place for ticketing and marking to retail floor distribution center receiving area of retail store cross-dock

15 -22 Shipping Merchandise to Stores l l Shipping merchandise to stores is complex for multi-store chains Distribution centers use sophisticated routing and scheduling systems © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

15 -28 Test Your Knowledge Exclusive distribution can benefit manufacturers by assuring them that ________ buy their products. A) a large number of retailers B) the most appropriate customers C) customers with the highest profit margins D) global customers

15 -29 Managing the Supply Chain Supply chain or channel conflict

15 -31 Types of Vertical Marketing Systems Independent or conventional supply chain Administered vertical marketing system Contractual vertical marketing system Corporate vertical marketing system © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

15 -33 Test Your Knowledge Strategic relationships are created explicitly to ________, so members depend on and trust each other heavily. A) decrease distribution time B) avoid lawsuits C) uncover and exploit joint opportunities D) maintain a vertical marketing system

15 -35 Case in Point: Guinness Challenge Answer Results 99% of the product left the UK on time but only 59% arrived on time. Partner with SAP using their See Why software began to identify issues in container shipments to U. S. and track demand delivery. Set up a Supplier Management Inventory system in the U. S. Allowing Guinness to maintain stock and predict demand for the U. S. market. Better able to schedule shipping and contain costs.

15 -36 Ethical Dilemma 15. 1: Can RFIDs Keep a Secret? Cons: Pros: l l l Streamline supply chain Anti-theft Tracks whereabouts l l l Personal information not secure Privacy Tracks whereabouts © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

15 -37 Chapter 15 Glossary l l l l l Administered vertical marketing system: A supply chain system in which there is no common ownership and no contractual relationships, but the dominant channel member controls the channel relationship. Advanced shipping notice: An electronic document that the supplier sends the retailer in advance of a shipment to tell the retailer exactly what to expect in the shipment. Collaboration, planning, forecasting, and replenishment (CPFR): An inventory management system that uses an electronic data interchange (EDI) through which a retailer sends sales information to a manufacturer. Contractual vertical marketing system: A system in which independent firms at different levels of the supply chain join together through contracts to obtain economies of scale and coordination and to reduce conflict. Corporate vertical marketing system: A system in which the parent company has complete control and can dictate the priorities and objectives of the supply chain; it may own facilities such as manufacturing plants, warehouse facilities, retail outlets, and design studios. Electronic data interchange (EDI): The computer-to-computer exchange of business documents from a retailer to a vendor and back. Extranet: A collaborative network that uses Internet technology to link businesses with their suppliers, customers, or other businesses. Independent or conventional supply chain: The several independent members—a manufacturer, a wholesaler, and a retailer—each attempt to satisfy their own objectives and maximize their own profits, often at the expense of the other members. Intranet: A secure communication system contained within one company, such as between the firm’s buyers and distribution centers. © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin

15 -38 Chapter 15 Glossary (continued) l l l l Just-in-time (JIT): Inventory management systems designed to deliver less merchandise on a more frequent basis than traditional inventory systems; the firm gets the merchandise “just in time” for it to be used in the manufacture of another product, in the case of parts or components, or for sale when the customer wants it, in the case of consumer goods. Logistics management: The integration of two or more activities for the purpose of planning, implementing, and controlling the efficient flow of raw materials, in-process inventory, and finished goods from the point of origin to the point of consumption. Marketing channel: The set of institutions that transfer the ownership of and move goods from the point of production to the point of consumption; consists of all the institutions and marketing activities in the marketing process. Quick response: An inventory management system used in retailing; merchandise just in time for sale when the customer wants it. Strategic relationship (partnering relationship): A supply chain relationship that the members are committed to maintaining long term, investing in opportunities that are mutually beneficial; requires mutual trust, open communication, common goals, and credible commitments. Supply chain conflict (channel conflict): Results when supply chain members are not in agreement about their goals, roles, or rewards. Supply chain management: Refers to a set of approaches and techniques that firms employ to efficiently and effectively integrate their suppliers, manufacturers, warehouses, stores, and other firms involved in the transaction into a seamless value chain. Ticketing and marking: Creating price and identification labels and placing them on the merchandise. © 2007 Mc. Graw-Hill Companies, Inc. , Mc. Graw-Hill/Irwin