Distribution and Supply Chain Strategy

Study Notes

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 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.

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).

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).

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.