Mirbis Unipa Logistic Dominici

Distribution and SCM

prof. Gandolfo DOMINICI

DISTRIBUTION CHANNELS



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

Consumer

Retailer

Wholesaler

Agent

Consumer

Retailer

Wholesaler

Consumer

Retailer

Consumer



B2B- Distribution Channels

Producer Producer Producer

Business

Agent

Producer

Agent

BusinessBusiness

Industrial

distributor

Business

Industrial

distributor





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." 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.



VendorsStock of

materialsProduction

Stock of

Finished

goods

Distribution

SUPPLY CHAIN MANAGEMENT

SUPPLIES INVENTORY MANAGEMENT CUSTOMER MANAGEMENT



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

Pull

● Stock control - look back -

Push● Flow control - look ahead-

Input of resources Demand

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

Environment

enterprise

Super-system



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)

Communication Process

FeedbackTransmitter

Encoding

Message Channel Decoding

Receiver



Enterprise communication targets

●● UnionsUnions

●● Employees Employees

●● Sales forceSales force

●● Vertically integrated Vertically integrated supplierssuppliers

●● Vertically integrated Vertically integrated clientsclients

●● shareholdersshareholders

●● Potential employeesPotential employees

●● PubblicPubblic opnionopnion

●● External suppliersExternal suppliers

●● ConsumersConsumers

●● Financial Financial

intermediariesintermediaries

●● CompetitorsCompetitors

●● Financial marketsFinancial markets

Internal targets

ExternalTargets



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

individual situational