Chapter 6

Channel Conflict Management

Objectives:
1. Demonstrate the proper ways and procedure in handling channel conflict
2. Identify the different stages of conflict
3. Discuss the ways in resolving conflicts

Motivation:
Among your siblings or with your family:
A. What are the usual causes of conflict?
B. How do you usually settle the conflict?
C. If you’ll have your way, how would you settle the conflict differently?

Channel Management

Channel Conflict
Conflict is part of any social system. Getting several different entities to work together as one
unit in a channel system, particularly if one member feels that another is working in a manner that
affects the other, can be a recipe for conflict. Channel conflict arises in situation of discord or
disagreement between partners in the same channel system. It creates a negative connotation and is
driven more by feelings than facts.

Conflict can be in any of the following:

 Goal conflict – rising out of mismatch in understanding of objectives by various channel
members
 Domain conflict – resulting due to mismatch of understanding of responsibilities and
authority
 Perception conflict – due to mismatch in reading of the market place and thus, proposed
actions

Sources of Conflict
 Each channel member wants to pursue its own goals
 Each member wants to retain his independence and disagreement in decision domains
 There might be unfair allocation of limited resources which all of them want to utilize in
achieving their goals
 Roles are not properly defined
 Credit extensions
 Overlapping of territories particularly for multiple distributors
 Differences in perception of the business environment
 Future expectations not likely to materialize
 Misunderstanding or misinterpretation of routine business communication
 Clash of interest
Four Stages of Conflict
1. Latent – some amount of discord exists but does not affect the working or delivery of
customer service objectives. Disagreement could be on roles, expectations, perceptions, or
communication
2. Perceived – discords in this stage become noticeable wherein channel partners are
aware of the opposition. Channel members take the situation in stride and go about their
normal business. There is no cause for worry but then the opposition has to be recognized
3. Felt – also known as “affective” conflict, this reaches the stage of worry, concern, and
alarm. While, the causes may be economic or personal, parties are trying to outsmart each
other. This stage needs to be managed effectively and not allowed to escalate.
4. Manifest – this stage reflects open antagonistic behavior of channel partners and
confrontation happens. Initiatives taken are openly opposed affecting the performance of the
channel system. May require outside intervention to resolve.

Resolving Conflicts (Havaldar and Cavale)

Channel conflict often happens due to misunderstandings or disagreements between the channel
principal (Your business/organization) and the channel members or between channel members
themselves.

According to Havaldar and Cavale, there are four steps to be taken to resolve conflicts.
1. Understanding the nature of conflict
Ask what are the issues that have arisen between the parties concerned. If possible, take both
sides equally. This is where you will start to resolve. Are these serious issues or routine problems and
do these happen frequently? If these are routine problems the may cause certain delays, perhaps there
is a need to improve the practice. If it is serious, it is time to change the system. It is also necessary to
rank them by importance and and seriousness.

2. Tracing the source of the conflict

Consider the sources of conflict mentioned earlier in this chapter in tracing.

3. Understand the impact of the conflict

Would these conflicts cause temporary delay or major stoppage of operations, cause big
amounts of money or major setbacks to the organization? This would be the basis for ranking the
importance and severity of the conflicts.

4. Strategy and plan of action for resolution

The organization comes up with strategy on resolving the conflict.

Styles of Conflict Resolution

* Accommodation - this is where one party helps the other achieve its goals without being worried
about its own goals. The emphasis is on full cooperation and could result in the other party also
becoming flexible in its approach. This style strengthens relationship but one should be careful
however, that it could result to the exploitation of the other party, if not handled properly.

* Collaboration or problem solving - this is a win-win approach because issues on both sides are
expected to be resolved or somehow leveled. It requires however a lot of time and effort to succeed.
* Compromise - a solution where both parties agree ti give up some of the requirements and find a mid-
way solution. This is applicable only with small and less serious conflicts.
* Competition and Aggression - a purely selfish style, it involves being concerned about one’s goals
without any thought for the others.

How to manage Channel Conflict (3G Learning)

* Establish mutually agreeable and aligned business goals with partners
* Effective communication
* Segment customers and align channels to their ability to meet specific customer needs
* Encourage specialization
* Clearly define channel roles and responsibilities, and use pricing solutions, rebates and incentives to
encourage desired performance
* Develop specific channel products or offers which are not available to all channels
* Check behavioral performance through role audits and regularly monitor channels
* Ensure that partner agreements are clear

Chapter 7
Channel Information Systems

Objectives:
1. Understand the significance of Information Systems in Marketing Channels
2. Identify the characteristics of a good Marketing channel MIS
3. Identify the different classification of Marketing channel MIS.
4. Understand the Information process

Motivation:
Imagine if in your family, you have not been communicating for several months, if not of conflict but of
other reasons, discuss your answers on the following questions:
1. How do you feel if you do not have any communication with your family members?
2. What is the effect on the activities of each one and of the family as a whole?
3. With this activity, what do you think is the importance of communication in groups?

With the huge number of data that an organization receives and sends daily, a system must be in place
in order to handle them effectively and efficiently.

Purpose of Information Systems

* The primary purpose is to collect and analyse data about the operations of channels in order to assess
the performance and take timely corrective action to continuously improve performance.
* The obvious purpose is to provide timely information for decision-making.
* Specifically, the system is what makes raw data into usable information
* In a system, the information can be used many times for different purposes
* A system not only processes data, but stores it in easily retrievable formats
Developing a Channel Information System
1. Decide what information is required
2. Organise information in a manner suitable for interpretation and action
3. Decide who will use the information when and for what purpose

Characteristics of a good Channel MIS

* Be an integrated system to handle all regular data
* Be a useful decision support system
* Reflect the style of the marketing organisation
* Have to be user friendly and user oriented
* Be convincing to the providers of the information
* Should provide accurate information in time
* Be cost effective
* Not need verification from other sources, and
* Be fast and totally reliable

Elements of a Channel Information System

* Market information
* Competitor tracking
* Distributor profile and database
* Primary sales and secondary sales
* Pricing trends
* Promotion history
* Freight and storage costs
* Inventory control
* History of orders
* Distribution cost
* Channel profile and database

Chapter 8
Logistics Management, Inventory and Warehouse Management

Objectives:

1. Understand the distinction between Supply chain and Logistics

2. Understand the relationship between Logistics Management and Channel Management
3. Identify the different components of a logistic system
4. Determine the different scopes of Inventory Management and Warehouse Management

Logistics Systems and Components

Logistics was equated mainly with Transportation prior to World War 2. During the war,
military heads have seen the difficulty and importance of managing vast amounts of supply between
continents. It was at this time that much attention was given to the factors that affects the success of
the logistical processes and the interrelationships of these factors, such as transportation, materials
handling, inventory control, warehousing and packaging of goods (Rosenbloom).
 The origins of logistics and supply chain management are from materials management.
Materials management is the function in a company responsible for the coordination of planning,
moving, sorting and controlling materials in an optimum manner.

Logistics means having the right time at the right place at the right time. Havaldar and Cavale
use the Webster’s definition of Logistics as the procurement, maintenance, distribution and
replacement of personnel and materials. The Council of Logistics Management defined Logistics as “the
process of planning, implementing, and controlling the efficient, effective flow of goods, services and
related information from the point of origin to the point of consumption for the purpose of conforming
to customer requirements.

Key Logistics Activities

The following are some of the activities under Logistics:

*Customer Service - Logistics is only required to provide the time and place utility. It has to ensure that
the product or service being offered by the company is available to the final consumer or end user when
he or she wants it (time utility) and where he or she wants it (place utility).

*Demand forecasting - decisions on how much to order from suppliers and when and how much to
produce for customers. This activity normally starts with the sales forecasts given by marketing and
sales function, which becomes the basis of the planning function which is the responsibility of logistics.

*Distribution communications - Logistics is concerned with the contact with the suppliers, providing
reports and records on the ‘inbound’ side and the channel members and customers on the ‘outbound’
side. For inbound logistics which provides ‘service’ to the manufacturing function, there is a need to
follow up with vendors to get the raw materials and packing materials on time to support the
production . On the outbound logistics, communication relates to keeping customers informed about
the status of their orders. .

*Inventory control - this is trade-off between the level of inventory to be maintained and the expected
service levels to be provided to the customers.

*Materials handling - movement and storage of raw and packaging materials, work-in-process and
finished goods. This is the physical handling of the goods within the firm and in the case of finished
goods till they reach the customer.

* Order processing - getting orders in time from customers, checking the status of execution and
delivery. The salespeople get the orders and usually pass it on to the logistics function for processing
and dispatch.

*After sales parts and service support - this is very critical for all technical products, engineering goods
and consumer durables.

*Procurement - purchase of materials and service from outside organisations to support the firm’s
operations including selection of vendors, price negotiations, terms and supplier quality assessment.
*Packaging - Logistics is concerned with providing protection for the product in transit and storage.
Logistics is therefore involved In the outer packaging.

*Returned goods handling- In case of a problem with the product or the customer. Returned goods may
also be required to support production like empty bottles in soft drink industry. Returned goods could
also be date expired stocks like in the pharmaceutical industry.

*Reverse logistics-getting back materials for disposal, re-use, reprocessing or recycling purposes. This is
the logistics part of the returned goods mentioned above.

*Salvage and scrap disposal-of all materials not usable in its original from or for its original purpose.

* Traffic and transportation- They have the responsibility of reaching the products to the distribution
centres (primary transportation) and to the distributors/Institutions (secondary transportation).

*Warehousing and storage - to support the time and place utility. These warehouses could be owned by
the company or leased by it.

Order processing

Order processing is part of the logistics or the supply chain function in the company and is the
primary contact between the company (supplier) and its customer. The order processing function gets
the order, prepares the invoice, arranges for the goods to be picked and packed, and then dispatches. It
keeps track of the goods till they are delivered to the customer. The customer demand, order or indent
is the starting point of this process.

Order management is the responsibility of marketing or salespeople who keep track of

customers, get their order and pass it on to the logistics function for processing and delivery.

Types of logistics

Logistics activities are divided into inbound and outbound.

* Inbound or Upstream Logistics is the interface with the company’s supplier. It includes receiving ,
storing and issuing inputs and taking care of:

 Materials handling
 Inventory control
 Inbound quality inspection along with the quality control function
 Scheduling of production to manage ‘issues’
 Return of unacceptable materials back to suppliers.

* Outbound logistics is the actual contact with the company’s customers. Outbound or Downstream
Logistics includes collecting, storing, dispatching and physically distributing the finished goods to the
buyers/distribution channels/consumers and includes:

 Order processing of all orders received through the sales system

 Materials handling of finished goods
  Warehousing both in the plant and in the field
 Delivery vehicle operations and scheduling
 Shipping and related documentation

Chapter 9

Supply Chain Management

Objectives:
1. Provide the definition for Supply Chain Management
2. Differentiate Supply Chain Management from Logistics Management

SUPPLY CHAIN MANAGEMENT

The Council of Logistics Management defines Supply Chain Management as:

“The process of planning, implementing and controlling the efficient, cost-effective flow and storage of
raw materials, finished goods and related information from the point-of-origin to the point-of-
consumption for the purpose of conforming to customer requirements”.

SUPPLY CHAIN VS. LOGISTICS AND THEIR DEFINITIONS

Supply chain management (SCM) focuses on the processes linking the generation of demand to
the fulfillment of that demand. Obviously the starting point is the customer and what he or she wants
and all the activities are centred around this.

One Viewpoint Pete Crosby – SCM Consultant

Logistics includes physical distribution, warehousing, transportation (inbound mentioned and

outbound from manufacturing plants) and in some industries customer service also (sales order
processing, inventory planning and production planning).

Supply chain (for a manufacturer)includes the logistics business functions mentioned above,
and also includes purchasing, sourcing procurement, buying, manufacturing operations, production
scheduling, inventory control and materials management, facilities location planning, the information
technology to coordinate between suppliers, the company, and customers (wholesalers, retailers and
end-users).

A Second Viewpoint (from another Logistics consultant)

Logistics and supply chain functions can overlap. Different companies define them in their own
ways. Logistics is generally concerned with strategy and coordination of flows between marketing and
production (i.e. transportation and distribution).

A supply chain tends to focus on purchasing and procurement, but not necessarily so. It can
include materials, inventory and production planning. There is also Demand Management which focuses
on forecasting, but is sometimes included in either logistics or supply chain functions.
The Definition of Logistics

Logistics management is that part of supply chain management process that plans, implements
and controls the efficient, effective forward and reverse flow and storage of goods, services, and related
information between the point of origin and the point of consumption in order to meet customers’
requirement.

Supply Chain Management encompasses the planning and management of all activities involved
sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also
includes coordination and collaboration, and customers. In essence, Supply Chain Management
integrates supply and demand management within and across companies.