Channels of Distribution and Logistics

Chapter 6

Channels of distribution and logistics

LEARNING OBJECTIVES
By the end of this chapter you will: n n n n

comprehend key elements and decisions in distribution channel design be able to evaluate different configurations of channel structure be familiar with recent trends and developments in channels of distribution appreciate the importance of managing the physical flows of products, services and information into, through, and out of the organization to its customers n grasp the meaning and scope of physical distribution and logistics management n be aware of developments and trends in production and manufacturing, particularly the growth of ‘lean manufacturing’ and implications for logistics n recognize the role of Information Technology and marketing in logistics

Channels of distribution and logistics

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INTRODUCTION
This chapter deals with the ‘place’ element of marketing strategy (i.e. ‘placement’ of goods and services from their respective providers into the hands of customers). Before we discuss the structure of marketing channels, followed by logistics, it is useful that we look at their emergence and the functions that channels perform.

THE CONSUMER WANTS CYCLE
The word ‘channel’ has its origins in the word for canal, which for marketing can be interpreted as a route taken by products as they flow from production to points of intermediate and final use. Marketing is a key factor in a continuous cycle that begins and ends with consumer wants. It is the role of the marketer to interpret consumer wants and combine them with empirical market data such as location of consumers, their numbers and preferences, to establish the starting point for manufacture. On completion of manufacture, the finished product is moved to the consumer and the cycle is complete when he or she obtains satisfaction resulting from product ownership.

THE PRODUCER–USER GAP
Despite the growth of direct marketing (to be discussed in Chapter 10) in

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