Chapter 11 Notes - Marketing management PDF

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Marketing management...

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Chapter 11 Notes Supply Chain: The complete set of firms, facilities, and logistics activities involved in procuring materials, transforming them into intermediate and finished products, and distributing them to customers. Focus on information flows. ● Goal: right product, quantity, place, and time. ● Supplier → manufacturer→ wholesaler/ distributor→ retailer→ consumer Logistics/ Physical Distribution (PD): Transporting, storing, handling of goods in ways that match the target customer’s needs. ● Place requires logistics decisions. ● Customers don't usually care how products are moved or stored, they want it fast and to be dependable ● Customer service Level: How rapid the firm can deliver ○ Should be “invisible” to most customers, they want cheap with good service ○ All of the transporting and storing can be as one system to reduce cost. ● Requires that the manager decide what aspects of service are most important to customers ○ Order delivery time ○ Availability of products ○ Order status information Supply Chain management is all about trade offs: ● What can you afford to throw away and still make money? ○ Cost ○ Speed ○ Quality Costs and Customer Service Levels: ● As service levels increase, the transportation costs initially fall with big orders, and then rise a bit as shipments become more frequent ● Inventory costs rise as the retailer carries more (product), to meet demand ● Cost of lost sales initially falls as customers are less likely to buy a diff product. ○ However as customer service climbs to higher levels (mostly rising inventory carrying costs) the seller must raise prices to cover the higher service levels. ■ This leads to some customers choosing alternatives- and raises the cost of lost sales. ● All costs add up to the total cost. ○ The optimum level of customer service occurs where the total costs are minimized Deciding what Service Level to Offer: ● Fast deliveries are liked a lot more, and can provide a comparative advantage. ● Finding the lowest total cost is crucial to the business!!! ● Cost counting economics: costs that may be ignored (lost sales, ect.)

Physical Distribution (PD) Approach: says that all transporting, storing, and product handling activities of a business and a whole channel system should be coordinated as one system that seeks to minimize the cost of distribution for a given customer service level. ● Total Cost Approach: Evaluating each possible physical distribution system and identifying all of the costs of each alternative. Coordinating Logistics among Firms: Who will perform which part of the products life cycle (Storing, Shipping, and handling). Just in Time (JIT): reliably getting products there just before the customer needs them (Having products made shortly after order and then getting them to customer) ● Have to be very coordinated for this to work ● Key advantage is it reduces their PD costs- especially storing and handlings costs. Electronic Data Interchange: Approach that puts information in a standard format, easily steered between computer systems. ● Now information moves faster on handheld devices, but orders can sometimes be wrong. Transportation: Marketing function of moving the goods, makes products available when needed ● Helps achieve economy of scale in production ○ Produce in large quantities where it is inexpensive to produce, and then ship products to customers ● government may play a role with roads, airports, busses. ● TRANSPORTATION has environmental costs ● 5 major modes of transportation: ○ Rail: ■ Pro: can move large loads at low cost ○ Truck: ■ Pro: flexible and essential ■ Con: more expensive, ○ Water (boat): ■ Pro: lowest cost ■ Con: slowest ○ Pipelines: ■ Used primarily to move oil and natural gas ○ Airways: ■ Pro: fastest ■ Con: most expensive ■ ***Although the transporting cost of air shipments might be higher, the total cost of distribution may be lower. Containerization: Grouping individual items into an economical shipping quantity and sealing

them in protective containers for transit to the final destination. Piggyback: Loading truck trailers onto railcars to increase the speed and flexibility Storing: the marketing function of holding goods so they're available when needed ● Necessary when production of goods does not match consumption ○ Common with mass production ● Storing can increase the value of goods, but storing ALWAYS involves costs too Total Inventory cost: ● Interest expense and opportunity cost of money tied up in inventory ● Cost of storage facilities and maintaining them ● Handling costs ● Costs of damage to products while in inventory ● Costs of risks such as theft and fire ● Costs of inventory becoming obsolete (no longer used) Inventory: the amount of goods being stored. ● Why do we have Inventory? ○ Needed when production does not match consumption ○ Keeps prices steady ○ Achieves production economies of scale ○ Builds channel flexibility Private warehouses: storing facilities owned or leased by companies for their own use ● Use when: a large volume of goods must be stored regularly ● Cons: expensive and very hard to rent to others Public Warehouses: independent storing facilities ● Use when: company doesn't have a regular need for space, and when manufacturers must maintain stocks in many locations including foreign countries. When storing isn't necessary, distribute instead ● Distribution center: a special kind of warehouse designed to speed the flow of good and avoid unnecessary storing costs. ○ Speeds bulk-breaking to reduce inventory carrying costs ○ Helps centralize control and coordination of physical distribution activities ○ Products may immediately move (cross-deck) from a truck or train at an incoming loading dock to an outgoing loading dock. Ethics with global supply chain: ● Taking things like garment factories from bangladesh is bad because they are better than nothing. However could have better conditions. But that would cut profits.. ● Labor and mechanism

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Is there an obligation ■ To employees? (living wage, healthy safe workplace) ■ To displaced workers? ■ To infrastructure when jobs are lost? How much more would you pay for ethical.. ■ Opportunity for some may mean hardship for others ■ Can ethics and profit coexist?...