Case #1: Product Evaluation products, while an individual distributor may handle SSI products exclusively. While SSI Sugar Sweets Inc. encouraged grocery and convenience stores to carry its products, regardless of whether these Sugar Sweets Inc (SSI) was stores purchase from distributors or club considering ways to increase market coverage stores, there was a concern about how the and sales volume on its candy and snack products were serviced. Distributors provide a products. Historically, the majority of SSI significant benefit in that they carry a broader products were sold to consumers through line of SSI products than most club stores various grocery and convenience stores. Also, some candy and tobacco jobbers visit Vending machines and institutional sales, such their retail customers regularly to ensure that as airports, represent the remaining consumer the stores remain stocked with a large variety market segments. The selling environment for of fresh product. In this sense, candy and candy and snack foods was increasingly tobacco jobbers provided a marketing service competitive and traditional channels of for SSI that is not achieved with club stores. distribution were being distorted, especially in As such, SSI began looking for an the grocery and convenience trade alternative channel system that would not only Grocery and convenience stores were increase market coverage in light of the new traditionally serviced through distributors competitive environment but also provide the known as candy and tobacco jobbers. These important marketing service to ensure a large distributors purchased SSI products in large variety of fresh product available for quantities and then sold them to the retail consumers. In order to accomplish this, SSI stores for sale to consumers. The number of questioned the reliance on its traditional candy and tobacco jobbers were decreasing, marketing channel, as well as the typical outlets which was distorting the traditional distribution its products were sold through. Andy Joslin, Two factors were causing this the vice president of integrated logistics, had an distortion. First, the wholesaler and distributor idea. Andy began to focus on new retail outlets industry in general was going through where SSI products could be sold and how consolidation as large distributors continued to these sales could be uniquely managed via a get larger and more profitable, while smaller new channel arrangement. It was determined and less profitable distributors either were that direct store delivery of SSI products could bought up or closed. Second, the popularity of be handled using telemarketing for order warehouse club stores threatened candy and processing and small package delivery. The tobacco jobbers. Small mom-and-pop grocery notion was that any retail outlet that had or convenience stores were able to purchase sufficient counter space and high customer many products they needed at these warehouse traffic was likely to sell high-impulse snack clubs at the same price or less than what the items such as SSI products Examples of distributors offered. Furthermore, the potential retail outlets that traditionally did not warehouse clubs provided a one-stop shopping carry snack items included dry cleaners, barbers experience, so that the grocery stores could and beauty shops, hardware stores, and purchase a wider range of products at the club drinking establishments. store than was sold by any one candy and The alternative distribution plan offers tobacco distributor. For example, a club store various benefits. First, it is a unique selling may offer a narrow selection of the most concept in that it provides retailers with a way popular SSI products as well as its competitors' to increase their business through incremental channel 1 1 Case #t: Product Evaluation sales of snack products with little risk of cannibalization by other retail outlets because of the impulse nature of the product. Furthermore, retailers are not required to make a significant capital investment to try the concept, and there is little risk to the retailer if the plan fails. SSI will provide countertop units or shelving to display the products and will suggest pricing for maximum sales volume and profit. The alternative distribution concept benefits SSI as well by providing market growth and exposing its products to a wider range of customers. Also, SSI will have direct contact with retailers, providing a great opportunity for testing and tracking new than was sold by tobacco distributor. For example, a club store various benefits. First may offer a narrow selection of the most concept in that it provi popular SSI products as well as its competitors' to increase their busin 1 Case #t: Product Evaluation sales of snack products with little risk of cannibalization by other retail outlets because of the impulse nature of the product. Furthermore, retailers are not required to make a significant capital investment to try the concept, and there is little risk to the retailer if the plan fails. SSI will provide countertop units or shelving to display the products and will suggest pricing for maximum sales volume and profit. The alternative distribution concept benefits ssi as well by providing market growth and exposing its products to a wider range of customers. Also, SSI will have direct contact with retailers, providing a opportunity testing and tracking new products while ensuring timely delivery. reat Questions: 1. What are the characteristics of SSI's product lines? How do these influence the choice of logistics alternatives? 2. Who are SSI's current customers? How does this influence the supply chain? 3. What are SSI's current distribution channels? 4. What specific information would you need to gather to evaluate SSI's foray into direct distribution? 5. What would be the issues arising from this new channel? 2