Wholesaling and Logistics Management

1. 15 Wholesaling andLogistics Management

2. Learning Objectives • After studying this chapter, you should be able to: • Understand wholesaling and describe the three basic categories of wholesalers. • Identify and discuss the roles of different types of fullservice and limited-function wholesalers. • Explain differences among the functions of agents, brokers, and commission merchants. • Understand the differences between manufacturers’ sales branches and offices. • Appreciate how slow growth rates and globalization will affect wholesaling in the future. • Define logistics management and explain its key role in marketing. • Understand logistics activities, including warehousing, materials handling, inventory control, order processing, and transporting. • Discuss how some of the key ethical and legal issues affect logistics.

3. Grainer • W. W. Grainger, Inc., was founded in 1927 to meet the needs of customers who required products faster than manufacturers could deliver. Today Grainger is a leading business-to-business wholesaler. The company’s vision statement provides direction for its business: “To be a primary source through the breadth of our offering and a focus on the lowest total cost solution for each of our customers.”

4. Wholesaling and Logistics Management Wholesalers Wholesalers are intermediaries in the marketing channel that sell to customers other than individual or household consumers. Logistics Management Logistics management is the planning, implementation, and movement of goods, services, and related information from point of origin to point of consumption.

5. Wholesaling Wholesaling All marketing activities associated with selling products to purchasers that resell the products, use them to make another product, or use them to conduct business activities. Value-added Resellers Value-added resellers (VARs) sell to small and medium-sized business customers. They add value to goods and services as they pass through the channel.

6. Types of Wholesalers Exhibit 15-1

7. more Full-Service Wholesalers • Full-service wholesalers by definition perform a wide range of services for their customers and the parties from which they purchase. General Merchandise General merchandise wholesalers carry a wide variety of products and provide extensive services for their customers. Limited-Line Limited-line wholesalers do not stock as many products as general merchandise wholesalers, but they offer more depth in their products.

8. Full-Service Wholesalers (con’t) Specialty Line Specialty-line wholesalers carry the most narrow product assortment—usually a single product line or part of one. Rack Jobbers Rack jobbers, a category of specialty-line wholesalers, sell to retail stores. They set up and maintain attractive store displays and stock them with goods sold on consignment.

9. more Limited-Function Wholesalers Truck Jobbers Truck jobbers are limited-service wholesalers who deliver within a particular geographic area to ensure freshness of certain goods (bakery, meat, dairy). Drop Shippers Drop shippers arrange for shipments directly from the factory to the customer. Although they do not physically handle the product, drop shippers take title and all associated risks while the product is in transit.

10. more Limited-Function Wholesalers (con’t) Cash-and-carry Cash-and-carry wholesalers do not deliver the products they sell, nor do they extend credit. Small businesses are the primary customers for cash-and-carry wholesalers. Catalog Wholesalers Catalog wholesalers serve both major population centers and remote geographic locations and offer an alternative to cash-and-carry wholesalers.

11. Limited-Function Wholesalers (con’t) Wholesale Clubs Wholesale clubs are a growing phenomenon. These enterprises, which also serve retail customers under the same roof, are especially popular with small business customers, civic and social organizations, and church groups.

12. Functions Performed by Wholesalers

13. Agents Manufactures’ Agents Sell related but noncompeting product lines for manufacturers. Auctions Sell merchandise at a given time and place to the highest bidder. Increase in online auctions such as eBay. Import Agents Find products in foreign countries to sell in their home countries. Export Agents Locate and develop markets abroad for products manufactured in their home countries.

14. Brokers & Commission Merchants Brokers Brokers are intermediaries that bring buyers and sellers together. Commission Merchants Commission merchants provide a wider range of services than agents or brokers. Manufactures’ Sales Branch Maintain inventory and perform a wide range of functions for the parent company Manufactures’ Sales Office Do not maintain inventory, but they perform a limited range of functions for products sold.

15. Developments in Wholesaling Globalization Developments Deserving Special Attention Slow Growth Building Relationships

16. Logistics Management • Customer Expectations of Suppliers’ Logistics Systems: • Timely pickups for outgoing orders. • On-time delivery. • Prompt claim settlement for lost or damaged goods. • Accurate invoicing. • Interactive Website for tracking & customer service. • Well-trained drivers and customer support staff. • Process for analyzing and correcting service failures. • Centralized, accessible customer service. • Good communication with customers. • Responsiveness form all supplier departments.

17. Material Handling Inventory Control Order Processing Trans- portation Key Activities in Logistics Ware- housing • Companies can choose private or public warehouses or distribution centers: • Private warehouses are operated by the company using the warehouse. • Public warehouses are for-hire facilities available to any business requiring storage or handling of goods. • Distribution centers are super warehouses that serve a large geographic area.

18. Key Activities in Logistics Ware- housing Material Handling Inventory Control Order Processing Trans- portation • Materials-handling activities include: • Receiving, identifying, sorting, and storing products • Retrieving the goods for shipment. • Bar coding is used in a variety of logistics functions. • Radio frequency identification (RFID) may eventually replace bar codes.

19. Key Activities in Logistics Ware- housing Material Handling Inventory Control Order Processing Trans- portation • Inventory control attempts to ensure adequate inventory to meet customer needs without incurring additional costs for carrying excess stock. • Two such inventory control systems are in place in many industries: • just-in-time • quick-response systems.

20. Key Activities in Logistics Ware- housing Material Handling Inventory Control Order Processing Trans- portation • Order-processing activities are critical to ensure that customers get what they order, when they want it, properly billed, and with appropriate service to support its use or installation. • Accuracy and timeliness are key goals of order entry processes.

21. Key Activities in Logistics Ware- housing Material Handling Inventory Control Order Processing Trans- portation • The final logistics activity we consider in this chapter is transporting, which starts with selecting modes of transportation for delivery of products or materials. • Shippers have five basic ways to move products and materials from one point to another—rail, truck, air, pipeline, and water transport—and each has advantages and disadvantages.

22. Summary • After studying this chapter, you should be able to: • Understand wholesaling and describe the three basic categories of wholesalers. • Identify and discuss the roles of different types of fullservice and limited-function wholesalers. • Explain differences among the functions of agents, brokers, and commission merchants. • Understand the differences between manufacturers’ sales branches and offices. • Appreciate how slow growth rates and globalization will affect wholesaling in the future. • Define logistics management and explain its key role in marketing. • Understand logistics activities, including warehousing, materials handling, inventory control, order processing, and transporting. • Discuss how some of the key ethical and legal issues affect logistics.