Part 5 Place Dynamics
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standards. These standards may include
prompt delivery time, cooperative
advertising, meeting sales quotas,
product quality, treatment of lost or
damaged goods, and overall satisfaction.
Most producers annually review their
contracts with channel members. They
replace members who perform poorly
in meeting standards. For example, each
year K and K reviews the performance
of its suppliers, including Plymouth
Steel, to determine if they have met K
and Ks’ performance standards. If a
current supplier has competitive pricing
and meets or exceeds expectations,
the supplier remains on the approved
purchasing list. If it does not meet
expectations, K and K will replace the
supplier with a new channel member.
As you study physical distribution in
Chapter 27, think about the influence of
channel management in this process. What
role does channel management play in such
aspects of physical distribution as shipping,
warehouse storage, and inventory control?
Ownership in the
Distribution Channel
Distribution also involves activities
associated with the transfer of ownership
of products from the producer to the
customer. The original owner is at the
beginning of the distribution channel. The
final owner is the customer at the end of the
distribution channel. Most, but not all, of the
intermediaries take ownership of the product
as it moves through the channel. When
ownership is transferred, responsibility for
the product is transferred. The new owner
is responsible for the product. Risk for the
product is also transferred when ownership
is transferred. The new owner is the one who
will suffer any loss if the product is damaged
or lost.
In the apple example shown in Figure 26-8,
the apple wholesaler buys apples from the
apple farmer. At this step, the apple farmer
(producer) transfers ownership of the
apples to the apple buyer (wholesaler). The
producer gets payment for the product. The
wholesaler now owns the apples. At this
point, the wholesaler owns the apples and
is responsible for them and shoulders the
risk of loss. If the apples are lost or rot, the
wholesaler takes the loss.
The apple buyer (wholesaler) is now
a seller. The wholesaler sells the apples to
the grocery store. At this step, the apple
wholesaler transfers ownership of the apples
to the grocery store (retailer). The wholesaler
gets payment for the product. At this point,
the retailer owns the apples and has the
risk of loss. If the apples rot, the retailer
takes the loss.
The retailer then sells three apples to
you. You are now the owner of the apples.
If the apples rot before you eat them, it is
your loss.
The transfer of ownership is a process
governed by law. A title is a legal document
that verifies the owner of a good. For
example, when you buy a car and complete
your payments, you receive your title to the
car. The title proves that you are the owner
of the car. The phrase take title to means the
same thing as take ownership of. For small
consumer items, such as clothing and books,
the receipt you receive when you pay serves
as the document proving ownership.