Revision

Question 1

Briefly describe the basic components of any logistics system

Answer 1

6 components:
Transportation

Materials handling
Apply technology
E.g. Linfox CLASS → Computerised Layout and Simulation Software

Order processing
Shorten the time between customer order and receiving the product
Software
Image → process for handling customer orders

Inventory control 
Lowest possible level of inventory while still meeting customer demand (lower cost)
JIT approach
Cross-dock terminals 
Logic: Australia’s logistics hub 
Woolworth example

Warehousing 
5 things
Size
Location
Number of warehouse
Design of warehouse 
Ownership of warehouses (or does someone else own them?)

Packaging
Affects the cost of the actual product and the transportation
Main function: To protect the product

Transport: NTC Australia transport around Australia

Question 2

Promotional Push strategies

Answer 2

Pros and Cons of promotional strategies from Manufacturers and Channel Member’s pov.

Cooperative advertising
Manufacturer
Pros:
Use the channel member’s local audience/consumers in order to promote the product
Cons:
Retailers may try to bill the supplier a higher price and abuse the relationship
Need to be an effective administrator

Channel Member
Pros:
Receive support to promote the product and therefore all the channel member
Cons:
Manufacturer will want to be in control and supply the advertisement
Must follow strict co-op requirements

Promotional allowances
Manufacturer
Pros:
Appealing to customers looking for good deals and incentives
Cons:
Expensive, can amount to 5% of sales
Channel Member
Pros:
Manufacturer’s pay extra to encourage promotional activity such as extra shelf space or special displays
Can boost sales
Cons:
Extra effort, for an in-store display an extra staff member may need to be hired

Slotting fees 
Manufacturer
Pros:
Guaranteed shelf space when paid 
Cons:
Expensive
Increasing retailer market power
Discriminate against smaller manufacturers
Channel Member
Pros:
Compensates for the risk of selling new products
Compensation for promoting the products 
Can act as an early screening device 
Cons:
May make the products more expensive for consumers 
May cause conflict

Displays and selling aids
Manufacturer
Pros:
Highly effective
Cons:
May have difficulty in getting retailers to use the displays
May require extra special incentives
Takes effort
Channel Member
Pros:
Supplied by the manufacturer
Cons:
An overabundance of material may make it seem like a hindrance rather than a help

In-store promotion events
Manufacturer
Pros:
Focused promotion/sampling which is effective
Cons:
Need to hold these events
Channel Member
Pros:
May bring excitement to the store 
Cons:
May not bring benefits to the entire store which is proportionate with the effort expended
Contests and incentives 
Manufacturer
Pros:
Increases sales
Cons:
Difficult to manage effectively 
Channel Member
Pros:
Increase sales and motivation
Cons:
May encourage salespeople to pressure customers into making purchases

Special deals and merchandising campaigns 
Manufacturer
Pros:
Increased sales 
Cons:
Erode consumer brand loyalty
Foster deal-deal mentality in channel members
Increases competition for shelf-space
Increased cost  
Channel Member
Pros:
Have the power as the POS
Can choose the best deals 
Cons:
Causes excess inventory, slowing down distribution process

Question 3

Key advantages of electronic marketing channels

Answer 3

Global scope and reach
Convenience/rapid transaction processing
Information processing efficiency flexibility
Data-based management and relationship building
Lower sales and distribution costs

Question 4

4. Discuss the rationale for franchising from the franchisor and franchisee point of view

Answer 4

Advantages

Franchisors
Channel members who are highly motivated
Capital advantage
Potential to spread distribution costs

Franchisees
1. Uncertainty of success is reduced
Less risk
2. Well-known trademarked products or services
3. Initial and continuing assistance from franchisors
4. Relatively inexpensive way to enter a business
5. Prospects for ROI in short period
Turn into a table

Disadvantages

Franchisors:

1. Limited flexibility for the franchisor
2. Overly high franchisee expectations
3. Increased governmental scrutiny by state and federal regulators

Franchisee:
Ongoing fees
1. Limited independence of the franchisee
2. Royalty fees
3. The negative halo effect