Sales and Distribution Management

Channel Information Systems : Overview

Many companies have developed information systems to suit their needs. McKesson's ECONOMOST system, United Airlines and American Airlines'Apollo and Sabre systems, Analytic Systems Automatic Purchasing (ASAP) by Baxter Healthcare, Johnson & Johnson's Cooperative Action Plus (COACT) and Abbott's Quik Link information systems are some successful information systems. PrecisionCode, DataDesigns, Archer's Retail Database Management System (ARDMS) and Product Information Management System by IBM are examples of database systems developed by companies.

Channel Information Systems (CIS) have influenced the way in which different channel functions are performed. It has streamlined operations leading to improved channel flow. CIS has also changed the order in which different functions are performed. CIS has influenced the physical distribution of products or distribution flow. Transaction flow, promotion flow, inventory flow and negotiation flow have improved with the advent of information technology in channel management.

Information systems have a profound impact on channel member relationships. They influence the balance of power, intensity of conflict and the extent of cooperation and coordination among channel members. CIS has changed the dynamics of power among channel members. EDI systems have reduced asset specificity, complexity of product specifications and coordination costs. This has led to a shift in the balance of power among channel members. Many retailers like Wal-Mart have developed efficient information systems that offer them substantial leverage over their suppliers. Even manufacturers like Philip Morris have conducted extensive programmes to build an exhaustive database about consumer preferences, which allowed them to influence downstream channel members. CIS reduce conflicts that may arise between supplier and retailer due to differences in different channel functions. Some common issues that give rise to conflicts are minimum order size, retail assortment, speed of delivery, retail inventory levels, retail promotion and performance management and the issue of retailers carrying competitors'products. However, the use of channel information systems minimizes the chances of conflicts.

Coordination and cooperation among channel members have greatly improved due to CIS. Channel members have opted for collective goals over individual goals and have started looking for benefits to the channel as a whole. Information is easily available to all channel members, resulting in an increase in trust and commitment. Channels differ based on the type of channel members involved in cooperation and the extent to which members cooperate. Different channel systems include consensus systems, vertical systems, horizontal systems and inter-type systems. Channel cooperation and coordination have led to successful and profitable relationships at different levels in the channel - between manufacturers and suppliers, suppliers and retailers and between manufacturers and retailers.

Chapter 23 : Overview