Chapter Twelve: Distribution Channels TOOLS FOR INSTRUCTORS • Learning Objectives • Annotated Chapter Outline with Instructor’s Notes/Teaching Tips • Answers to End of Chapter Learning Aids Concept Review Marketing Application Questions Net Savvy Chapter Case Study • Video Activities Learning Objectives 1. Explain the importance of distribution and the interrelationships between distribution channels, supply chain management and logistics management 2. Describe distribution channel design and management decisions and strategies 3. Identify how distribution channels add value to businesses and consumers 4. Explain how logistics management affects distribution strategy Annotated Chapter Outline PowerPoint Slides Instructor’s Notes Chapter 12 will focus on Distribution Channels. These questions are the learning objectives guiding the chapter and will be explored in more detail in the following slides. Opening Vignette: Walmart This vignette describes distribution efficiencies through technology innovations. Walmart manages its supply chain by exploiting its position as one of the largest retailers in the world. In addition to using its power in the supply chain, Walmart employs advanced technology for better inventory management and sales forecasting and shares information with companies like P&G to strengthen their relationship and create value for both members. Ask students: How has Walmart aligned its systems. LO1: The Importance of Distribution Even if companies engage in research that yields in-depth consumer insights which they use to design new products and price them at attractive levels, it is unlikely they will succeed unless they can reach consumers by convincing retailers to distribute their products. Companies need to convince retailers their products will sell, be supported by advertising, perhaps increase category sales, etc. Entrepreneurial Marketing 12.1 Chocolate with a Purpose AWAKE Chocolate packs a caffeinated punch to help students and others stay awake. Distribution was a key element of getting this new product to market, along with good packaging. At the outset, AWAKE was sold through gas stations but later expanded to grocery and campus stores. The company has successfully launched in the US as well. Ask students to watch CBC’s Dragons’ Den video. Ask them if they have seen AWAKE Chocolate bars and where. Determine how many students saw/purchased them via gas stations versus campus or grocery stores. Relationship among Supply Chains, Distribution Channels, and Logistics A Distribution Channel • Institutions transfer the ownership of goods from the point of production to the point of consumption. • The channel thus consists of all institutions and marketing activities in the marketing process. Supply Chain Management • Manages/integrates suppliers, manufacturers, warehouses, store and transportation intermediaries. Logistics Management • Two or more activities combine to plan, integrate, and control the efficient flow of raw materials, inventory, and finished goods from the point of origin to the point of consumption. • These activities may include, but are not limited to 1. Customer service. 2. Demand forecasting. 3. Distribution communications. 4. Inventory control. 5. Materials handling. 6. Order processing. 7. Parts and service support. 8. Plant and warehouse site selection. 9. Procurement. 10. Packaging. 11. Returned goods handling. 12. Salvage and scrap disposal. 13. Traffic and transportation. 14. Warehousing and storage. Logistics Management Concentrates on the Movement and Control of Physical Products. Students may find the distinction between distribution channels and logistics management confusing because of their close relationship. Remind them that the distribution channel consists of institutions, whereas logistics refer to activities among and within institutions. However, both are part of supply chain management. Supply chain: focus on the sequence of firms required to create and deliver goods to the final consumer Logistics Management: focus on the flow of raw materials & finished goods from point of origin to final consumption Distribution Channels: focus on the companies that transfer the ownership of goods from the producer to consumers at the point of consumption LO2: Designing Distribution Channels Interactions range from close working partnerships to one-time arrangements, but in all cases, the parties want something from each other. This slide introduces the structure companies use to set up distribution channels. More in depth slides follow. Channel Structure: Direct and Indirect Ask students: Why would a company choose to distribute directly versus indirectly? Some companies choose direct distribution to cut down on the expense of middlemen while others may be forced to distribute directly because they are unable to secure shelf space. For many companies, indirect distribution makes sense, for example, appliance manufacturers know that consumers will want to compare different makes and models from a variety of companies in a retail environment when purchasing a new fridge or stove. Channel Structure: Multichannel Ask students to give examples of companies that use multichannel distribution. Some companies include Hallmark, which has company owned stores, uses catalogues and also sells through retailers such as Shoppers Drug Mart, Sears and The Bay to list just a few. Ethical Dilemma 12.1: What do customers care about? As Ethical Dilemma 12.1 reveals, North American consumers of Apple products may care more about the latest gadget vs. working conditions in those countries that produce these products. Ask students: what more can Apple do? Whose responsibility is it to ensure workers have safe and acceptable working conditions? This should entail a lively discussion. Push versus Pull Marketing Strategy With a push strategy, manufacturers focus promotional efforts on channel members to convince them to carry their product. They push their product through distribution channels to end consumers. When companies use a pull strategy, promotional efforts are directed at consumers to build demand for products that, in turn, may convince retailers to carry them. Influences on Channel Structure A. Firms must know from which manufacturers customers want to buy. B. Manufacturers need to know where their target customers expect to find their products. C. Larger, more sophisticated channel members tend not to use supply chain intermediaries. D. Smaller firms need the help of intermediaries to sell their lines. Ask students: How do customer expectations and the characteristics of the supply chain members dictate the complexity of the supply chain? What kind of supply chain do you expect a company like Zara (from the chapter end case) to use, and why? Answer: If customers have expectations of receiving merchandise quickly, then the supply chain may use a just-in-time delivery system with cross-docking warehouses, or the merchandise may be delivered directly to stores without going through a distribution centre at all. Answer: Zara uses a just-in-time system to get fashion merchandise from concept design to stores within a few weeks, rather than a few months. Determine Distribution Intensity Distribution intensity refers to the number of supply chain members at each level. • An intensive distribution strategy attempts to get products into as many outlets as possible. • An exclusive distribution strategy uses exclusive geographic territories. 1. Mandates that only a select few retail customers may sell a particular brand in a particular territory. 2. Ensures manufacturers that the most appropriate retailers represent their products. • A selective distribution strategy sells to selected customers within a territory. 1. Helps the seller maintain a particular image. 2. Controls the flow of merchandise into an area. Product characteristics drive supply chain structures, in that mass merchandise products use intensive distribution, whereas luxury goods employ exclusive distribution. Group activity: Match the following products to their likely type of distribution: Pharmaceuticals (selective) Clothing (depends on the product type) Soft drinks (Intensive) Answer B; see page 380 LO3: Distribution Channels Add Value Each participant in the supply chains adds value and reduces required transactions. A. Fewer transactions add value. B. Consumers can purchase merchandise more conveniently and less expensively. Without supply chain management, firms would face significant complications in getting their goods to consumers where they want them. Group activity: Each member of the group represents a supply chain link (e.g. manufacturer, retail distribution centre, retailer, transporter, end customer). Remove one link and attempt to move an object like a pen from one end to the other. Experiment with removing different links. What happens? Supply Chain Management Streamlines Distribution. C. It reduces inefficiencies. D. Firms can reduce their dependence on stockpiled inventory. Ask students: How does supply chain management reduce inventory levels? What effect does supply chain management have on sales? Answer: An efficient supply chain can lower overall inventory in the system because merchandise is delivered when it is needed (just-in-time). By having an efficient supply chain, the retailers stay in stock, and sales increase. Functions Performed by Intermediaries Distribution channels perform a variety of transactional, logistical and facilitating functions. One important role played by intermediaries is to reduce the number of marketplace contacts, resulting in more efficient systems. Intermediaries also match the requirements of individual consumers to the goods that manufacturers produce, handle physical distribution and storage of goods making them available for customers to purchase, facilitate searches by both buyers and sellers, and standardize exchange transactions. While channel functions may shift from one intermediary or channel member to another, it’s important to recognize that they cannot be eliminated. Managing Distribution Channels Address Supply Chain or Channel Conflicts A. Conflict occurs when supply chain members do not agree about their goals, roles, or rewards. B. Resolution occurs through negotiation. Managing distribution channels is similar to managing your personal relationships. When conflict occurs, it is best to try to come to a resolution through negotiations. Group exercise: Divide the class into group dyads: one a manufacturer and one a retailer. Make each group have a dominant member. So, one group would be Walmart (dominant), while the other group would be a small vendor. Another group would be P&G (dominant), while the other group would be a small grocery chain. Have groups negotiate a sale. Then have groups report what transpired. It will be interesting to see how the dominant group used its power. Managing Channels Through Vertical Marketing Systems A. Closely aligned supply chains share common goals and therefore are less prone to conflict. B. Independent or conventional supply chains include independent members that each attempts to satisfy its own objectives and maximize its own profits, often at the expense of other members. C. Administered vertical marketing systems contain no common ownership and no contractual relationships, but dominant channel members control relationships. D. Contractual vertical marketing systems join independent firms at different levels through contracts designed to obtain economies of scale and reduce conflict. E. Franchising describes a contractual agreement between a franchisor and a franchisee, as described previously. F. Corporate vertical marketing systems entail partial ownership of the supply chain by a firm, which dictates the priorities and objectives and thus lessens conflict. Control in distribution channels varies depending on the type of relationships. You might compare distribution channels relationships to more personal relationships familiar to students, such as a group of their friends versus a professional networking association to which they belong. Ask students: How does the formality of your relationships in each group affect your influence over other members or other members’ influence over you? The more formal the relationship, the more control one member has over the others. Group exercise: Have students describe the different types of vertical marketing systems and the level of cooperation needed in each. Explain how cooperation is fostered through more formal supply chain relationships. In essence, cooperation is naturally greater in a corporate system than in an independent supply chain. Answer: B; see page 385 LO4: Logistics Management: Making Information Flow 1. Flow One Moves from Customer to Store. A. The salesperson scans the UPC tag. B. The customer receives a receipt. 2. Flow Two Moves from Store to Buyer. A. The point-of-sale (POS) terminal records the purchase information and electronically sends it to the buyer at corporate office. B. Sales information gets incorporated into an inventory management system to plan future purchases and promotions. 3. Flow Three Moves from Store to Manufacturer. A. The retailer aggregates purchase information from each store, creates an order for new merchandise, and sends it to the firm. B. The buyer may communicate directly to get information and negotiate prices, shipping dates, promotional events, or other merchandise-related issues. 4. Flow Four Moves from Store to Manufacturer. A. Frequently reordered merchandise can use an automatic ordering process. B. This process virtually bypasses the buyer. 5. Flow Five Moves from Store to Distribution Centre. A. Stores may communicate with the distribution centre directly. B. This communication functions to coordinate deliveries and check inventory status. Each step requires the collection and dissemination of information. Group activity: List the information that each member of the supply chain hopes to gain from each flow. Now list the information each member disseminates during each flow. How can a car company develop a system to ensure customers know exactly when their car will be delivered? If you have ever ordered a car, or any product for that matter, you know that even a short wait can feel like forever. Volvo introduced its “4D system” to coordinate across its supply chain and ensure orders get efficiently processed so it can keep its delivery promises. Group activity: Visit the Volvo Web site. What services does the company offer to both its suppliers and its customers? http://www.volvo.com/logistics/global/en-gb Electronic Data Interchange Enhances Flow. • EDI refers to the computer-to-computer exchange of business documents from a retailer to a vendor and back. • In addition to sales data, EDI contains purchase orders, invoices, and data about returned merchandise. • A supplier can send an advanced shipping notice to a retailer before a shipment to indicate what to expect. • Intranets provide secure communication systems within a company, such as between buyers and distribution centres. • Extranets use collaborative networks and Internet technology to link businesses with suppliers, customers, or other businesses. • Collaboration, planning, forecasting, and replenishment (CPFR) is an inventory management system that uses EDI to transmit sales information from a retailer to a manufacturer. The manufacturer creates a computer-generated sales forecast and delivery schedule agreeable to both firms. The growth of EDI systems has allowed for advanced tracking of information. Each system can seamlessly integrate with others, which creates value for both customers and the firm. Ask students: Exactly how does EDI increase value for end customers? Answer: Since EDI facilitates information, it makes it easier for retailers to plan their deliveries (advance shipping notice) and plan their inventories. Other information is handled through EDI as well. The bottom line is the retailer has the merchandise the customer wants when he/she wants it, and in the quantities that are demanded. Manage Supply Chains through Strategic Relationships. A. In strategic or partnering relationships, members are committed to maintaining the relationship in the long term and invest in mutually beneficial opportunities. B. Mutual trust holds strategic relationships together. 1. Trust is the belief that a partner is honest and benevolent. 2. Greater trust leads to greater willingness to share relevant information. C. With open communication, members share information, develop sales forecasts together, and coordinate deliveries. D. Members must have common goals for a successful relationship to develop. E. Successful relationships demand that both parties make credible commitments to or tangible investments in the relationship. Explain how, like supply chain relationships, like personal relationships are stronger when there is mutual trust, open communication, common goals, and credible commitments. Have students provide specific examples. Answer D; see page 386 Logistics Management: Making Merchandise Flow Remind students that supply chains enable the flow of not just information but also goods. Keeping goods flowing is not a simple task. Ask students: Under what circumstances might a manufacturer deliver directly to stores (flow 2) rather than to a distribution centre (flow 1)? Answer: 1.Because the retailer demands it. 2. Because merchandise is bulky (furniture) or needs to be delivered daily (tortillas) The Distribution Centre This slide introduces the structure companies use to set up distribution channels. More in depth slides follow. Distribution centres are not best if the retailer has few outlets and/or the stores are consolidated. The following list are some advantages of having a distribution centre: • more accurate sales forecasts due to many stores • lower inventory in each story therefore lower overall inventory costs • overstock and under-stock is less of a problem • it is less expensive to store in a remote warehouse then expensive retail location. Group Project – Ask student to draw out the distribution centre for a pair of Nike shoes that are at a Footlocker distribution centre. For each stage, ask them to list 3 things that will happen to the item and 1 thing that might go wrong! 1. Inbound Transportation Entails Flow to Retailers. A. A dispatcher coordinates deliveries to distribution centres and assigns a time slot for each shipment. B. Buyers and sellers negotiate transportation costs, but in retailing, the manufacturer often pays these expenses. 2. Receive and Check Merchandise. A. Receiving recodes merchandise as it arrives at a distribution centre or store. B. Checking involves going through the goods upon receipt to ensure they arrive undamaged and match the order placed. C. Radio frequency identification (RFID) tags automatically transmit information about a container’s contents. 3. Store and Cross-Dock Merchandise. A. A traditional distribution centre (DC) unloads merchandise from trucks and places it on racks or shelves for storage. B. Cross-docking DCs receive merchandise prepackaged in the quantity required for each store, with price and theft detection tags attached, and then send it straight to a staging area and onto the store. C. Many distribution centres are a combination Inbound Transportation - Dispatcher coordinates deliveries, Manufacturer may pay transportation expenses or retailers negotiate directly with trucking companies and pay expenses. Receiving and Checking - After goods arrive at their destination, the recipient must account for them. RFID has the potential of tracking merchandise throughout the supply chain. Items wouldn’t have to be physically checked. A distribution centre or a store could know exactly where and how many of an item it has because each item has an RFID tag. Some are concerned, however, about consumer privacy—being able to track a consumer that is wearing apparel with and RFID tag. Storing and Cross-Docking - One of the most important functions of the supply chain is to hold merchandise until the next link in the chain is ready for it. But many firms strive to hold merchandise a minimum amount of time because holding merchandise in a distribution centre is expensive and the merchandise is not available for sale. So cross-docking distribution centres are part of just-in-time delivery systems. 4. Get Merchandise Floor-Ready. A. Floor-ready merchandise is ready to be placed on the selling floor immediately. B. Ticketing and marking creates price and identification labels and places them on the merchandise. 5. Ship Merchandise to Stores I. Sophisticated supply chain partners use Just-in-Time Systems. A. Also known as quick response (QR) systems. Getting Merchandise Floor Ready – Many firms now require that manufacturers ship floor-ready merchandise, which shifts the burden of ticketing and marketing to the manufacturer. Ask students: What cost implications do these requirements have for manufacturers and retailers? Shipping Merchandise to Stores – Technology facilitates shipments to stores by tracking item sales and thus triggering replacement orders. Ask students: How do automatic ordering systems benefit manufacturers, retailers, and customers? Answer: Manufacturers can plan their production schedules. Retailers get more accurate forecasts. Customers get the merchandise they want, when they want it. Just-in-Time Systems are used by sophisticated supply chain partners. A. Also known as quick response (QR) systems. B. Also known as quick response (QR) systems. These inventory management systems deliver less merchandise on a more frequent basis. A JIT System Involves Various Benefits. A. The lead time between the recognition of a need and the arrival of the needed merchandise decreases. B. Product availability increases, but inventory investments drop. C. Stores can better satisfy customer demand because they keep just the right amount of merchandise in stock. A JIT System Also Entails Costs. A. Firms and vendors must cooperate. B. They must share data. C. They require systems such as EDI. Inventory Management (JIT Systems) Because they use smaller but more frequent shipments, JIT systems reduce stock-out situations which in turn increases customer satisfaction. Ask students: Can you think of any potential problems with this inventory management approach? Answer: The systems can be expensive and the supply chain partners must be committed to accurate data or they won’t work. Also, if the system isn’t working properly, out-of-stocks can occur. Inventory management systems track goods throughout stores, warehouses, and DCs. As its name implies, just-in-time inventory management ensures goods get delivered only when they are needed. Because they use smaller but more frequent shipments, JIT systems reduce stock-out situations which in turn increase customer satisfaction. Ask students: Can you think of any potential problems with this inventory management approach? Answer: The systems can be expensive and the supply chain partners must be committed to accurate data or they won’t work. Also, if the system isn’t working properly, out-of-stocks can occur. Case-in-Point Series This slide sets up the Case in Point which follows. Perishable products pose unique challenges to supply chain management, especially those manufactured in one part of the world and sold in another. By taking control of its own inventory management, Guinness can better serve its customers’ demand, track inventory, and ensure product freshness. Group activity: Why was it crucial for Guinness to step in to control its own inventory? Guinness’s unique taste only lasts while the beer is fresh. Stale Guinness would have negative impacts on the overall brand image. Concept Review Generally, the concept questions are designed to achieve a single purpose – to encourage students to test their knowledge and understanding of the theoretical content of the chapter. These questions encourage recall and reflection, which will better prepare students to answer the marketing applications questions based on their understanding of the theory. 1. Explain why having a well thought out distribution strategy is important to a company’s success. Answer: Defining and understanding a company’s target market is only half the battle. Reaching them through convenient marketing channels is the other half. If companies are not able to secure appropriate distribution channels that reach prospective customers, their products and services are unlikely to ever meet their revenue targets. 2. Explain the factors that must be considered when designing a distribution strategy. Answer: ○ Distribution Channel Structure - direct, indirect or multi-channel ○ Customer Expectations – which manufacturers do customers want to buy from? ○ Channel Member Characteristics – large companies will likely prefer to deal directly with manufacturers while smaller ones are more apt to use intermediaries 3. Explain the differences between direct, indirect, and multi-channel distribution systems. What role do technologies and consumer behaviour play in the rise of multi-channel distribution? Answer: a. Direct - manufacturers deal directly with consumers b. Indirect – manufacturers use one or more intermediaries to provide goods and services to consumers c. Multi-channel – manufacturers use a combination of both direct and indirect distribution systems d. Multi-channel distribution has been assisted through technology and consumer behaviour. The Internet has facilitated online sales and lowered costs for companies to reach wider target audiences. Situational factors (discussed in Chapter 5) related to the purchase and shopping situation affect consumer behaviour. Time-starved consumers appreciate being able to shop for and buy products and services at their convenience. 4. Describe the functions performed by intermediaries. Why would companies choose to have intermediaries fulfill these functions rather than perform them themselves? Answer: a. Intermediaries perform a variety of transactional, logistical and facilitating functions. They reduce the number of marketplace contacts, match the requirements of consumers to manufacturers’ goods, handle physical distribution and storage of goods, facilitate searches by both buyers and sellers, and standardize exchange transactions. b. These functions must be completed by some organisation in order to get the right products to the right customers when they want them. While some companies may have the time, skill and other resources necessary to fulfill these functions, many companies do not, nor do they want to detract from their core competencies by taking responsibility for these tasks. 5. Explain how customer expectations and channel member characteristics impact a company’s distribution strategy. Answer: ○ Customer Expectations – Retailers must determine which manufacturers customers want to buy from. Manufacturers must understand where (i.e. which retail outlets) target customers expect to find their products. ○ Channel Member Characteristics – Large and more sophisticated channel members are unlikely to use intermediaries and may only buy directly via a company’s sales force. National chains may prefer to deal with regional suppliers for operational efficiency. Smaller companies will probably use intermediaries since they do not have the economies of scale to buy directly. 6. Explain intensive, selective, and exclusive distribution intensity. Under what circumstances would it be best to use each of these strategies? Answer: a. Intensive: designed to get products into as many channels as possible. Widely used for consumer packaged goods such as those found in grocery, convenience and discount stores. b. Selective: a few selected retail customers are chosen to carry a product. Helps seller maintain a particular image and control the flow of merchandise into an area. c. Exclusive: one or a few retail customers are granted exclusive rights to sell particular products within a certain geography. Helps to maintain a high-end brand image e.g. Rolex, ensures adequate supply of inventory, and protects pricing since retailers are not concerned about lower prices offered by competing stores. 7. Describe how companies manage distribution channels using vertical marketing systems. Answer: Vertical marketing channels are more closely aligned than independent entities which helps prevent conflict. Vertical marketing channels range in level of formalization: a. administered vertical marketing systems: no common ownership and no contractual relationships, dominant channel member controls the relationship b. contractual vertical marketing systems: contracts dictate terms of independent firms who join together to gain economies of scale and coordination and to reduce conflict c. corporate vertical marketing systems: common ownership, priorities and objectives can be dictated 8. Explain how supply chain management and logistics management add value to a company's consumer offerings. Answer: a. Supply chain management – Companies which have the necessary knowledge buy raw materials and components from various suppliers, make products, and then make them available to the consumer at accessible locations. This process adds value since it makes transactions more efficient and makes it more convenient and less expensive for consumers to purchase merchandise. b. Logistics management – This process ensures that inbound goods arrive at distribution centres on schedule, are stored until ready to be sent to marketing channels, are made floor ready, and shipped to stores when needed. What this means to consumers is that products are available in stores when and where they want them. Systems like Just-in-Time inventory management add value by ensuring reduced lead time to get products to retailers and increased product availability. 9. Explain how supply chain management improves marketing activities. Answer: Supply chain management helps marketing departments coordinate their delivery promises with the factory or distribution centres. It also facilitates the coordination of advertising and promotion with those departments that control inventory and transportation. This is essential so that merchandise is available when customers expect it. 10. What are the major elements of a logistics management system? Explain the benefits of a well-run just-in-time inventory management system. Answer: Logistics management systems involve inbound transportation, receiving and checking, storing and cross-docking, getting merchandise floor-ready, and shipping merchandise to stores. Just-in-time inventory management systems help to ensure that consumers are able to buy the products they want, when they want them. Benefits of a well run system include reduced lead time (by eliminating the need for paper transactions by mail and overnight deliveries), increased product availability and lower inventory investment. Marketing Applications 1. Explain supply chain management and identify the major activities that distribution channels, supply chain and logistics management involves. Identify several ways that supply chain management adds value to a company’s offerings, with regard to both consumers and business partners. Instructor’s Notes: Students should summarize the main focus of the chapter and focus on how supply chain management performs for consumers and business partners functions they could not easily or inexpensively perform themselves. Student might also acknowledge that supply chain management creates better relationships among business partners at different points in the value chain and helps the chain deliver more value to consumers than each company could deliver on its own. Example answers: Supply chain management refers to a set of approaches and techniques employed by firms to efficiently and effectively integrate suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless value chain in which merchandise is produced and distributed in the right quantities, to the right locations, and at the right time, as well as to minimize system-wide costs while satisfying the service levels required by customers. Supply chain management adds value to a company’s offerings because it brings together products and services that consumers normally would have to arrange for themselves. It also adds value for business partners by helping create business relationships that could prove profitable to each party in the value chain. Supply Chain Management (SCM) is the coordination of all activities involved in producing and delivering a product from suppliers to consumers. It integrates and manages the flow of goods, information, and finances across the supply chain. Major Activities Involved: 1. Distribution Channels: Includes warehousing, order fulfillment, and transportation management. 2. Supply Chain Management: Encompasses procurement, production planning, inventory management, and supplier relationship management. 3. Logistics Management: Involves transportation planning, logistics network design, and managing logistics service providers. Ways SCM Adds Value: 1. For Consumers: • Enhanced Product Availability: Ensures timely delivery and reduces stockouts. • Improved Product Quality: Streamlines processes to maintain consistent quality. • Cost Savings: Reduces costs through efficient procurement and logistics. 2. For Business Partners: • Stronger Relationships: Facilitates better coordination and communication. • Increased Efficiency: Streamlines processes, reducing lead times and costs. • Better Forecasting: Provides valuable data for more accurate demand forecasting. Overall, SCM enhances operational efficiency, reduces costs, and improves customer satisfaction. 2. You are hired by a small bakery that wants to distribute its products through supermarkets. The market for the bakery’s products has been steadily growing, so the bakery needs to expand its distribution capabilities to match its production capacity. You set an appointment with the manager of a local grocery chain who is familiar with the bakery’s products and excited about the possibility of selling them in the store. The contract he offers includes a $10,000 fee for stocking the product, which he claims is simply the cost of doing business, noting that bigger bakeries object to adding your product line to the chain’s offerings. The bakery cannot afford this fee. What should you do now? Instructor’s Notes: This scenario asks students to consider the common business practices at play in this particular industry and whether such practices meet their ethical standards. If such stocking fees are common within the retail grocery industry, the ethical factor is fairly low; it is more a matter of contract negotiation than an ethical violation. If students determine that such stocking fees are not common practice and that the grocery chain is attempting to exploit the small bakery, they should address the ethical considerations and decide to what degree they should challenge the grocery manager. Example answers: I would first determine whether such stocking fees are common practice in the grocery industry. If they are common, I would try to negotiate the fee down to a more reasonable level that my bakery could afford. If they are not, I would question whether we want to go into business with a firm that allows such unethical business practices. Perhaps we could broker a better deal with another grocery chain; otherwise, I would look for other ways to market and distribute the bakery’s products. You should negotiate the fee or seek alternative options. Here are steps to consider: 1. Negotiate: Discuss the possibility of reducing or waiving the $10,000 fee, emphasizing the potential mutual benefits. 2. Propose Alternatives: Suggest alternative arrangements like a trial period with lower fees or performance-based incentives. 3. Explore Other Channels: Consider other supermarkets or distribution methods that might have lower entry costs or better terms. 4. Assess Value: Evaluate if the potential exposure and sales volume justify the fee, and if so, explore financing options to cover the cost. Make sure to communicate the bakery’s potential and growth prospects to strengthen your position in negotiations. 3. Discuss the advantages and disadvantages of Dell’s decision to change from using a direct distribution strategy to a multichannel approach to distribution. Instructor’s Notes: This scenario asks students to consider when a company would use a direct only distribution strategy as Dell has done in the past and what the benefits to the company are of using intermediaries. Example answers: Using a direct model, Dell maintained 100% control over all aspects of sales and distribution. This ensured quality control, brand consistency and higher margins. However, a direct model limited distribution. By moving to a multichannel approach to distribution, (e.g. sales via intermediaries such as Walmart, Staples and Best Buy) Dell is able to reach more people in its target markets and hopefully reverse sliding sales, especially to consumers. While businesses may be willing to purchase computers from a website, many consumers are increasingly likely to purchase from stores. The ability to touch and feel the computer weighs more heavily in the purchase decision for them. Of course, there is a cost associated with this model, i.e. lower profit margins, loss of control. Advantages: 1. Broader Market Reach: A multichannel approach allows Dell to reach a wider audience by leveraging various retail and online platforms. 2. Increased Sales Opportunities: Multiple channels can drive higher sales through increased visibility and accessibility. 3. Enhanced Customer Experience: Customers have more options for purchasing, including online, in-store, and through partners. 4. Reduced Risk: Diversifying distribution channels can mitigate risks associated with reliance on a single channel. Disadvantages: 1. Complexity: Managing multiple distribution channels can increase operational complexity and require more resources. 2. Higher Costs: Additional costs for channel partners, retail space, and logistics can impact profit margins. 3. Potential Channel Conflict: Competition between direct and indirect channels might lead to conflicts and impact pricing strategies. 4. Brand Consistency: Maintaining a consistent brand experience across various channels can be challenging. Overall, while a multichannel strategy offers expanded reach and sales potential, it introduces complexity and potential costs that need careful management. 4. Research the “100 mile diet” trend and discuss how growing consumer awareness of shipping costs and environmental concerns has led to a push for more locally produced foods. Instructor’s Notes: Students need to recognize there are financial and environmental costs involved in getting food products to market, beyond the cost of growing them. Visit http://100milediet.org/ for more information to supplement this exercise. Example answers: The 100 mile diet was popularized by long-time vegetarians and environmentalists Alisa Smith and J.B. MacKinnon. They discovered that the food eaten by the average North American travels at least 1,500 miles from farm to grocery store. Driven by increasing interest and concern about fossil fuel use and global climate change, they decided to spend a year eating only food grown within a 100 mile radius of their downtown Vancouver apartment. They ate only the freshest food that had traveled the shortest possible distances and was eaten or preserved at its seasonal peak. Everything they ate was made from scratch. Nothing came out of a box. It meant giving up cherries out of season, New Zealand lamb and even bread since most wheat is grown on the Prairies. From their experience, they wrote a book “The 100-Mile Diet: A Year of Local Eating” about ethics and food. The "100 Mile Diet" trend advocates for consuming food produced within a 100-mile radius of one’s home. This movement emphasizes the benefits of local sourcing to reduce transportation emissions, support local economies, and promote fresher, seasonal produce. Consumer Awareness Impacts: 1. Shipping Costs: Rising fuel prices and transportation costs make local food more economically attractive compared to long-distance imports. 2. Environmental Concerns: Increased awareness of the carbon footprint associated with shipping goods from afar drives interest in reducing food miles and supporting sustainable practices. 3. Freshness and Quality: Local foods often have better flavor and nutritional value due to shorter time from farm to table. The trend reflects growing demand for eco-friendly and community-supportive food systems, aligning with broader sustainability goals. 5. Give an example of a retailer that participates in an independent (conventional) supply chain and one involved in a vertical marketing system. Discuss the advantages and disadvantages of each. Instructor’s Notes: In an independent supply chain, the independent members attempt to satisfy their own interests and maximize their own profits, often at the expense of other members, whereas in a vertical marketing system, members act as a unified system. Students may instinctively prefer one over another, but this question forces them to consider both advantages and disadvantages of each. Example answers: A retailer that participates in an independent supply chain is a local grocery store; to get the products it needs to put on its shelves, the grocery must deal with supply chain members that act entirely independently. Such independence leaves the grocery vulnerable to bad deals that could mean less profit or, worse, less merchandise for its consumers. In contrast, Baskin-Robbins uses a vertical marketing system. The owner of a Baskin-Robbins store gets products from the manufacturer, as well as logistical and promotional support, in return for a percentage of the store’s revenue. However, if one of the key members of the supply chain goes out of business, it would adversely affect the retailer, especially compared with when supply chain members act independently. If Baskin-Robbins, as an ice cream manufacturer, went out of business, the Baskin-Robbins retail store owner would have to rebrand the store and find products from other sources. Independent (Conventional) Supply Chain Example: • Retailer: Walmart • Description: Walmart sources products from various independent suppliers and operates a traditional supply chain model where each entity (supplier, distributor, retailer) operates independently. Advantages: • Flexibility: Multiple suppliers offer a diverse range of products. • Competitive Pricing: Suppliers compete, potentially lowering costs. Disadvantages: • Coordination Issues: Challenges in managing relationships and ensuring consistent supply. • Inefficiencies: Potential for increased costs due to less streamlined processes. Vertical Marketing System Example: • Retailer: Apple • Description: Apple controls the entire supply chain, from design and manufacturing to retail sales, integrating multiple stages of production and distribution. Advantages: • Greater Control: Enhanced oversight of product quality and brand consistency. • Efficiency: Streamlined operations and potentially lower costs through integrated processes. Disadvantages: • Higher Costs: Significant investment in infrastructure and resources. • Reduced Flexibility: Less adaptability to market changes due to a more rigid supply chain structure. Each system has its strengths, with independent chains benefiting from flexibility and competitive pricing, while vertical systems offer control and efficiency at a higher cost. 6. In what ways can the flow of information be managed in the supply chain? How can the ready flow of information increase a firm’s operating efficiencies? Instructor’s Notes: Students likely will focus on how technologies like UPCs and RFID tags interact with point-of-sale and other information technology systems to provide greater efficiencies, better forecasting, and less need for manual human intervention to keep the supply chain running smoothly. Example answers: Information in the supply chain can be managed by the smart application of key technologies. Take, for example, the use of UPC and RFID tags to track merchandise and shipments. When an item is purchased, the point-of-sale system at the cash register can scan each item, then transmit that data to the company’s mainframe computer, which can communicate via electronic data interchange (EDI) to the supplier, which replaces the product that was purchased. That supplier then can communicate with its suppliers via a similar EDI transfer. When the replacement product comes to the retail outlet, the store scans its RFID tag, so the store’s computers know it is in inventory, which completes the chain of information. Data flowing automatically throughout the supply chain reduces the need for human intervention and provides better control over inventory, which in turn leads to greater operating efficiency. Managing the Flow of Information in the Supply Chain: 1. Integrated IT Systems: Use of Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) software to synchronize data across suppliers, manufacturers, and distributors. 2. Real-Time Data Sharing: Implementing tools like Electronic Data Interchange (EDI) and cloud-based platforms to provide instant updates and visibility. 3. Collaborative Platforms: Utilizing shared platforms for forecasting, planning, and communication to align activities among all stakeholders. 4. Data Analytics: Leveraging analytics for insights into trends, performance, and demand forecasting. Increasing Operating Efficiencies Through Information Flow: 1. Improved Forecasting: Better data leads to more accurate demand predictions, reducing excess inventory and stockouts. 2. Faster Decision-Making: Real-time information allows for quicker responses to market changes and disruptions. 3. Enhanced Coordination: Streamlined communication and collaboration reduce delays and errors in the supply chain. 4. Cost Reduction: Efficient information flow minimizes waste and lowers operational costs through optimized resource allocation and process improvements. Effective management of information flow enhances overall efficiency by improving accuracy, speed, and coordination across the supply chain. 7. Describe how B2B transactions might employ EDI to process purchase information. Considering the information discussed in Chapter 5 about B2B buying situations, determine which buying situation (new task, modified rebuy, or straight rebuy) would most likely align with the use of EDI technology. Justify your answer. Instructor’s Notes: Students must integrate their knowledge from a previous chapter to address how EDI might benefit B2B suppliers in specific buying situations. Example answers: In B2B transactions, retailers could transmit purchase data to suppliers via EDI, which in turn can transmit their own merchandise needs—all without anyone having to pick up a telephone and talk to another business partner or supplier in the supply chain. The most appropriate situation for using EDI is a straight rebuy, in which the supplier exactly replenishes the same amount of product purchased by a consumer. Although EDI could work for new task and modified rebuys, they would require more human interaction and intervention. EDI in B2B Transactions: • Electronic Data Interchange (EDI) facilitates the electronic exchange of purchase orders, invoices, and other transaction documents between businesses, streamlining and automating the purchasing process. Using EDI for Purchase Information: 1. Automated Order Processing: EDI allows for the automatic generation, sending, and receipt of purchase orders and invoices. 2. Real-Time Updates: Ensures immediate and accurate updates on order status and inventory levels. 3. Error Reduction: Minimizes manual data entry errors and speeds up transaction processing. Buying Situation Most Aligned with EDI: • Straight Rebuy is the buying situation that most aligns with EDI technology. Justification: • In a Straight Rebuy, the buyer repeatedly orders the same product or service from an established supplier. EDI is ideal for this scenario because it automates and streamlines repetitive transactions, ensuring efficiency and accuracy in ordering processes. It supports the routine nature of straight rebuys by reducing the need for manual intervention and facilitating consistent, error-free transactions. 8. Discuss the advantages to a retailer like SportChek of expending the time and effort to get merchandise floor-ready at either the point of manufacture or in the distribution centre rather than having retail store staff members do it in the stores. Provide the logic behind your answer. Instructor’s Notes: Floor-ready merchandise can be placed on the sales floor immediately, which should prompt students to recognize its many benefits for retailers. Example answers: With floor-ready merchandise, SportChek can speed up its stocking process and save time and money by allowing sales associates to focus more on selling products rather than preparing products for sale. Advantages of Floor-Ready Merchandise: 1. Efficiency: Merchandise prepared at the point of manufacture or in the distribution center reduces the time spent by store staff on floor-ready tasks, allowing them to focus on customer service and sales. 2. Consistency: Centralized preparation ensures uniform presentation and quality control, leading to a more consistent and appealing in-store appearance. 3. Reduced Labor Costs: Outsourcing floor-ready tasks minimizes in-store labor costs and can streamline operations by reducing the need for additional store staff. 4. Faster Stocking: Prepped merchandise speeds up the stocking process, reducing the time products remain in storage and increasing the availability of new items on the sales floor. Logic: By preparing merchandise outside the store, SportChek can optimize store operations, enhance customer experience, and maintain consistent presentation, ultimately leading to better sales performance and operational efficiency. 9. Why would a big company like Nike want to develop strategic partnerships with locally owned running stores? Describe what Nike would have to do to maintain such relationships. Instructor’s Notes: In a strategic relationship, the supply chain members commit to maintaining the relationship, so students must consider any benefits of such relationships for a large corporation like Nike. Example answers: Nike might develop a strategic partnership with a locally owned running store for several reasons. First, with such relationships, Nike does not need to open its own retail outlets in every town and city. Second, the long-term partnership gives Nike more say in the marketing of its products at the retail level. Third, Nike obtains good marketing and sales support, possibly including insights into what runners are buying and why. To maintain such relationships, Nike must build mutual trust so that the retailer believes Nike will act honestly and benevolently, share information, establish common goals that benefit both parties, and make credible commitments to—or tangible financial investments in—the retailer. Reasons for Strategic Partnerships with Locally Owned Running Stores: 1. Market Penetration: Local stores offer access to niche markets and regional customer bases that Nike might not reach effectively through its own channels. 2. Brand Loyalty: Partnering with local stores helps build stronger brand loyalty and community engagement by aligning Nike with local interests and expertise. 3. Local Insights: These stores provide valuable feedback and insights on local preferences and trends, aiding in product development and marketing strategies. 4. Enhanced Distribution: Local partnerships can improve distribution efficiency and reach, particularly in areas where Nike lacks a direct presence. Maintaining Such Relationships: 1. Support and Training: Provide training and resources to local store staff to effectively promote and sell Nike products. 2. Co-Branding Opportunities: Collaborate on marketing initiatives, events, and promotions to boost visibility and sales. 3. Inventory Management: Ensure reliable and timely supply chain support to keep local stores well-stocked and up-to-date. 4. Feedback Integration: Actively listen to and act on feedback from local stores to align products and services with regional needs. These strategies help Nike build strong, mutually beneficial relationships with local retailers while enhancing its market presence. 10. You are hired as an assistant brand manager for a popular consumer product. One day in an emergency meeting, the brand manager informs the group of a serious problem with a supplier; she sends you to the manufacturing facilities to investigate the problem. When you arrive, you learn that one of the manufacturer’s key suppliers has become increasingly unreliable in terms of quality and delivery. When asked, the plant manager says the owner of the troubled supplier is his cousin, whose child has been very ill, and he just cannot switch suppliers right now. What course of action should you take? Instructor’s Notes: This scenario forces students to question how they might resolve a supply chain problem without violating their own sense of ethics or fairness. Using the ethical decision-making framework, students should evaluate the situation to determine an appropriate course of action. Example answers: In applying the ethical decision-making framework: • “Have you thought broadly of any ethical issues associated with the decision to be made?” I have thought broadly about the ethical issues. In this case, I have concerns about keeping the company’s customers happy but not punishing the supplier for falling on hard personal times. • “Have you involved as many possible people who might have a right to offer input into or have actual involvement in making this decision and action plan?” I have not discussed the situation with the supplier to find resolutions, nor have I talked to my company’s inventory management team to determine when and how this supply problem could start affecting our deliveries. • “Does this decision respect the rights and dignity of the stakeholders?” The supplier could fall on even harder times if we stop our orders, and the relationship we have built will suffer. • “Does this decision produce the most good and the least harm to the relevant stakeholders?” The supplier could go out of business if we cut off our relationship, which might mean the owner could not pay for her child’s medical bills. • “Does this decision uphold relevant conventional moral rules?” Although some people may think it entirely appropriate to switch suppliers from a purely business perspective, doing so could hurt our reputation in the community. • “Can you live with this decision alternative?” If the decision is to work with the supplier to find a temporary workaround until the owner’s situation improves, then yes, I can live with that decision. On the basis of these answers, I would talk to the owner directly and find out more about the situation. In the course of that discussion, I would raise my concerns about my company getting its needed merchandise but would attempt to work with the supplier to find an equitable workaround that preserves the relationship between our companies. Course of Action: 1. Document the Issue: Gather detailed information about the supplier's quality and delivery problems, including how it impacts production and your brand. 2. Evaluate Alternatives: Identify and assess alternative suppliers who can meet quality and delivery standards to mitigate the risk. 3. Communicate with Your Brand Manager: Report the situation and your findings to the brand manager, presenting potential solutions and recommending a course of action. 4. Work on a Contingency Plan: If the problem persists, develop a contingency plan to ensure continuity of supply, such as temporarily increasing orders with alternative suppliers. 5. Consider Relationship Management: If maintaining a relationship with the troubled supplier is essential, explore ways to support their situation while minimizing the impact on your production. Taking these steps helps address the immediate issue while preparing for long-term solutions and maintaining the integrity of the supply chain. Net Savvy 1. Dell is considered exemplary in its ability to manage its supply chain efficiently. Log on to the company’s website (www.dell.com) and go through the process of configuring a computer to purchase. Print out a copy of the computer system you have designed, making note of the delivery date and price. Describe how Dell has revolutionized computer sales and delivery. Is there any indication that Dell has partnered with other companies to sell peripheral equipment like printers or scanners? How would this partnership add value to customers? Instructor’s Notes: This exercise combines examinations of the source of Dell’s competitive advantage (i.e., how it manages its supply chain from Web site to shipped order) and the potential benefits to the company and the consumer of key strategic partnerships. Example answers: Dell has revolutionized sales and delivery through its online store, which enables consumers to find and customize the exact computer they want, and through its just-in-time supply chain management system. On www.dell.com, consumers can pick the type of system, customized to their particular needs, and receive an estimate of both the cost and the delivery date based on those options. After consumers complete the order, Dell’s JIT system places orders for the parts, and the suppliers ship those parts immediately to Dell, which then assembles the ordered PC. In this way, Dell avoids carrying a lot of inventory itself and saves money. According to the Web site, Dell partners with other companies for things like printers, software applications, computer cables, and accessories. Such partnerships add value for the consumer, who can now go to one place—www.dell.com—to get everything he or she needs for computing rather than having to shop laboriously at various places. Dell’s Revolution in Computer Sales and Delivery: 1. Custom Configuration: Dell allows customers to configure their computers online, selecting components and features tailored to their needs. This direct-to-customer approach eliminates the need for intermediary retailers. 2. Build-to-Order Model: Dell’s make-to-order system minimizes inventory costs and reduces lead times, as computers are assembled only after an order is placed. This results in quicker delivery and up-to-date technology. 3. Efficient Supply Chain: Dell’s efficient supply chain management ensures that components are sourced and assembled with minimal delay, optimizing delivery times and costs. Partnerships for Peripheral Equipment: • Indications of Partnerships: Dell often partners with other companies to offer peripherals like printers and scanners through its website and bundled solutions. Value to Customers: 1. One-Stop Shopping: Partnerships allow customers to purchase all necessary components and peripherals from a single source, simplifying the buying process. 2. Integrated Solutions: Bundling peripherals with computers can ensure compatibility and streamline setup, enhancing the overall user experience. 3. Convenience and Support: Partnering with established peripheral brands can provide customers with reliable options and better customer support. Overall, Dell’s model and strategic partnerships enhance efficiency, convenience, and customer satisfaction. 2. The chapter case study examines how Zara, a division of Inditex, successfully manages its supply chain. Visit Inditex’s website (www.inditex.com) and review the company’s commitment to social responsibility, particularly the section that pertains to its code of conduct. Considering the discussion in this chapter about strategic relationships, how does Inditex address the factors necessary for mutually beneficial partnerships according to its code of conduct? Instructor’s Notes: Students must recall the lessons they learned about social responsibility, as well as the factors necessary for beneficial partnerships—mutual trust, open communication, common goals, and credible commitments—to respond to this question. Example answers: According to its code of conduct, Inditex addresses the factors for mutually beneficial partnerships. It facilitates mutual trust, maintains open communication about its goals and its ethical business practices, and requires that other members of its supply chain have common goals (including social responsibility) before it will enter into business relationships in the first place. Inditex’s Commitment to Social Responsibility and Strategic Partnerships: 1. Code of Conduct: Inditex’s code of conduct emphasizes ethical practices, including fair labor conditions, safe working environments, and respect for human rights. 2. Mutually Beneficial Partnerships: • Ethical Standards: Ensuring all partners adhere to high ethical and labor standards, fostering trust and long-term collaboration. • Transparency: Promoting transparency in operations to build strong, honest relationships with suppliers. • Continuous Improvement: Encouraging ongoing dialogue and improvements in working conditions, aligning interests and enhancing mutual benefits. Addressing Strategic Relationships: Inditex’s code of conduct addresses factors necessary for strategic partnerships by focusing on ethical practices, transparency, and continuous improvement, thereby fostering trust and aligning goals with partners. End-of-Chapter Case Walmart Pioneers Supply Chain Management Questions: 1. How does an individual firm like Zara manage a supply chain? How does it get new products from design to store so quickly? Example answers: Zara has set up its supply chain so that stores can respond immediately to customer demand for merchandise. Zara has factory locations that are close in geographic proximity to the company’s headquarters in Spain. Zara has set up its supply chain to have the flexibility to modify its operations in one supply chain function to expedite processes in another, such as pricing or tagging. Zara’s Supply Chain Management: 1. Vertical Integration: Zara controls much of its supply chain, from design to retail, allowing for rapid response and coordination. 2. Fast Fashion Model: Zara employs a quick turnaround strategy, where designs move from concept to store in just a few weeks. 3. In-House Production: Key products are manufactured close to headquarters in Spain, reducing lead times and enabling fast restocking. 4. Real-Time Data: Zara uses sales data from stores to quickly adapt and adjust inventory and designs based on current trends. 5. Frequent Shipments: Zara ships new products to stores twice a week, ensuring shelves are stocked with the latest items and keeping customers engaged. By integrating design, manufacturing, and distribution, Zara achieves quick product turnover and rapid response to market trends. 2. What are some of the ways that Zara’s supply chain management system has helped create value for its customers? Provide specific examples. Example answers: Zara is able to create value for customers in several ways. First, Zara is able to provide customers with a “fast fashion” product faster than its competitors with short cycles and lead times. Secondly, Zara is able to meet customers’ demands and changes in customers’ tastes. Finally, Zara is able to reduce stock outs because it ships merchandise to stores every few days. Ways Zara’s Supply Chain Management Creates Value for Customers: 1. Trend Responsiveness: Zara quickly adapts to fashion trends by using real-time sales data to update designs and inventory, ensuring customers have access to the latest styles. 2. Frequent Inventory Refresh: Regular shipments (twice a week) keep store offerings fresh and new, enhancing the shopping experience and encouraging frequent visits. 3. Speed to Market: Zara’s rapid design-to-store process ensures that products reach stores in weeks rather than months, offering customers trendy and up-to-date fashion options. 4. Limited Stock: By producing limited quantities, Zara creates a sense of urgency and exclusivity, which drives customer interest and reduces excess inventory. 5. In-Store Experience: The efficient supply chain ensures that store shelves are consistently stocked with popular items and the latest designs, improving customer satisfaction and convenience. These strategies enhance customer satisfaction by offering current trends quickly, maintaining inventory freshness, and creating a dynamic shopping experience. 3. What challenges did Zara’s focus on supply chain efficiency create? Are all such systems destined to suffer such “growing pains”? Example answers: Zara limits the amount of inventory in stores and produces and ships in small quantities. This sometimes creates a sense of scarcity among customers. Because Zara is in a fashion business, Zara merchandise must reflect changing fashion trends. Sometimes the system does not respond fast enough and Zara encounters disappointed customers. In addition, sometimes Zara suffers from stockouts. An unfortunate problem for Zara occurs when inventory sits unused in one location while another store may desperately need the same merchandise. Challenges from Zara’s Supply Chain Efficiency: 1. High Costs: Maintaining close proximity manufacturing and frequent shipments can lead to higher operational costs. 2. Supply Chain Complexity: Rapid response and frequent updates increase the complexity of logistics and inventory management. 3. Dependency on Fast Turnover: The constant push for new designs and quick turnover can strain resources and may lead to occasional stockouts or overstock issues. Are All Such Systems Destined to Suffer “Growing Pains”? • Not Inevitable: While challenges like those faced by Zara are common, they are not unavoidable. Effective management, continuous adaptation, and technological advancements can mitigate many issues and enhance the efficiency and resilience of supply chain systems. Video Activities Video: Awake Chocolate (CBC’s Dragons’ Den) Learning Objectives: LO1, LO2 Description: This video provides a real world pitch by friends Matt Schnarr, Dan Tzotzis and Adam Deremo who parlayed their experience in Consumer Packaged Goods companies to develop a caffeinated chocolate bar called AWAKE. They pitched their story on CBC’s Dragons’ Den to help them get more distribution. David Chilton got on board and helped them expand to a host of gas stations, convenience and grocery stores, and university campus stores. Key Words: distribution, distribution channels, packaging, pricing Activity: Bring in an assortment of different chocolate bars from a variety of stores, that is, grocery store, gas bar, specialty store, etc. Have students discuss where they would expect to buy each chocolate bar and determine strategies for what sorts of distribution channels would be needed for each. Discuss push versus pull marketing strategies that could be used for three of the chocolate bars. Solution Manual for Marketing Dhruv Grewal, Michael Levy, Shirley Lichti, Ajax Persaud 9781259030659, 9781259104312
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