Distribution and Supply Chain Strategy

Distribution and Supply Chain Strategy

• Distribution is the process of getting a company's products to consumers.
• Distribution channels are sets of interdependent organizations that move goods/services from producers to consumers.
• Channels can be direct (producer to consumer) or indirect (producer to agent(s) to consumer).
• Channels of distribution include merchants, agents, wholesalers, and retailers.
• Physical distribution involves activities related to getting products to customers (storage, transportation, etc.).
• Order processing is the first step in customer service, involving receiving, recording, and filling orders.
• Order filling includes retrieving, packaging, and shipping products.
• Order status reporting keeps customers informed about the order's progress.

Distribution Channel Elements

• Distribution channels have pathways (routes), flows (sequential movement), and composition (intermediaries).
• Goals of the channel include reaching the target market and objectives that may vary between channel members.
• Channel members are led by the manufacturer, with synchronized behaviors based on trade standards/codes.

Advantages of Distribution Channels

• Cost savings (channel members are experts in their roles, costs are lower than if company handled all steps themselves).
• Time savings (efficiency of the channel).
• Customer convenience (one-stop shopping).
• Purchase of small quantities (bulk-breaking by retailers).
• Resellers boosting sales (promotional efforts, displays).
• Customers may receive financial support (payment schemes, credit cards).
• Resellers assisting with product information (feedback, improvement suggestions).

Disadvantages of Distribution Channels

• Revenue losses (markups taken by channel members may reduce profits).
• Loss of communication and control (manufacturer has less control of messages to consumers).
• Loss of product significance (delays in transportation can affect customer perception).

Types of Distribution Intermediaries

• Agents and brokers act as representatives for manufacturers (do not take ownership of goods).
• Wholesalers buy goods in large quantities from producers and sell to retailers.
• Wholesalers can be full-service (handle numerous functions for multiple products) or limited-service (focus on selling specific products and fewer associated functions).
• Retailers sell directly to consumers.
• Types of retailers include those without fixed locations (street hawkers, vendors), or those with fixed locations (general stores, specialty shops).
• Direct Distributors sell directly to stores rather than taking them through a distribution center.
• Selective Distributors select specific retailers or locations for distributing goods based on target markets.
• Intensive Distributors use as many locations as possible for distributing goods.
• Exclusive Distributors sell to limited retailers in exclusive territories.

Levels of Distribution

• Zero-level (direct): Manufacturer to consumer
• One-level: Manufacturer to retailer to consumer
• Two-level: Manufacturer to wholesaler to retailer to consumer
• Three-Level: Manufacturer to wholesaler to jobber to retailer to consumer

Importance of Warehousing

• Holds products for later sale.
• Arranges products for distribution.
• Enables effective transport and fulfillment.
• Important part of supply chain management.

Transportation Considerations

• Decisions on transportation mode should consider cost, availability, suitability to product, and relationships with transport agencies.