Introduction to Distribution Management PDF

DEPARTMENT OF BUSINESS ADMINISTRATION Introduction to Distribution Management Prepared by: Hazel Ann G. Agacer, REB Revised: Gerico G. Solis, LPT, MBA. Nerisa B. Abug, LPT, MBA. Geschelle M. Himor  Intended Learning...

DEPARTMENT OF BUSINESS ADMINISTRATION Introduction to Distribution Management Prepared by: Hazel Ann G. Agacer, REB Revised: Gerico G. Solis, LPT, MBA. Nerisa B. Abug, LPT, MBA. Geschelle M. Himor  Intended Learning Outcomes 1. identify the different concepts, principles and theories in distribution management; and 2. determine and discuss the different types of channel distribution, inventory management and warehousing DISTRIBUTION MANAGEMENT It is the management of all activities movement and coordination of supply and demand in the creation of time and place utility in goods. It is the art and science of determining requirements in acquiring, distributing, and finally maintaining them in an operationally ready condition for their entire lives. It is composed of broad range of activities concerned with the efficient movement of finished products from the end of production line to the consumer and in some cases. It also includes the movement of raw materials from the source of supply to the beginning of production line. PLACE DISTRIBUTION It is a vital aspect of marketing It ensures availability of the product in the right quantity, at the right time and right place. It is more important in international markets due to distance and transportation time. Importers, manufacturers and retailers are increasingly asking for just in time deliveries. Distribution strategy varies from market to market depending on size and local conditions. It is an integral part of a sales management. It is the heartbeat of sales management. Either sales management or distribution management cannot exist, operate or perform without each other. DISTRIBUTION PLANNING It is a systematic decision making regarding the physical transfer of goods and services from manufacturer to final user. This includes the following functions: 1.Transportation It is the way on how to transfer the finished goods from the producer/manufacturer to the ultimate buyer/consumer 2.Inventory management It is the process on keeping the product safe and maintaining its stock to avoid shortage of supply. 3.Customer transactions It describes follow-ups on customers including the feedback and satisfactory level after buying the product. DISTRIBUTION CHANNEL It is a medium by which goods and services are made available to the consumers for use or consumption. It performs the work of moving products from manufacturers to final consumers or business users. Are essentially composed of marketing intermediaries. It is a set of interdependent organizations involved in the process of making a product or service available for use or consumption by the consumer or business user. It is made up of people or organizations involved in the distribution process. Channel members may either be manufacturers, service providers, wholesalers, retailers, marketing specialist or consumers. Middlemen act as go-between the producer and consumers. It refers to whole salers, retailers and marketing specialist. DISTRIBUTION CHANNEL under Marketing Channel members may either be: Services Manufacturers Service Providers Wholesalers Retailers Marketing Specialist Consumers Who are the middlemen? Wholesalers Retailers Marketing Specialist DISTRIBUTION CHANNEL under Marketing Channel members may either be: Services Manufacturers Service Providers Wholesalers Retailers Marketing Specialist Consumers Who are the middlemen? Wholesalers Retailers Marketing Specialist BASIC TYPES OF DISTRIBUTION CHANNEL DIRECT CHANNEL DISTRIBUTION The transfer or movement of goods andservices from manufacturer tofinal user or customerwithout the intervention of independent middleman. INDIRECT CHANNEL OF DISTRIBUTION The transfer or movement of goods or tangibles products and services or intangiblegoods from manufacturer or producer to independent intermediaries to customer. INTENSITY OF CHANNEL COVERAGE 1. EXCLUSIVE DISTRIBUTION Thereis limited numberof middleman used in a geographic area. 2. SELECTIVE DISTRIBUTION There is organized moderate number of wholesalers or retailers. 3. INTENSIVE DISTRIBUTION Isorganizing many middlemen that are used to obtain widespread market coverageand channel acceptance. 4. DUALCHANNEL DISTRIBUTION It uses a combination of the three channelsto appeal to different market segmentsby selling through twoor more different channels. PHYSICAL DISTRIBUTION Physical distribution may involve: Customer Service–the ability of the organization to satisfy the customer to its maximum level. Shipping - the ability to transfer a durable product from one location to the other normally a far place. Warehousing – the ability to properly store theraw materials, semi-processed goods used to produce a final product. Inventory Control – the ability to provide sufficient supply of raw materials at the right quantity, time and quality. Packaging – the ability to make the product presentable before the physical appearance including its taste, color, size, weight and shape. Receiving materials handling - the ability to properly manage the materials for the final production TRANSPORTATION It isthe ability ofthe organization to transportthe available goods into thecustomer custody. It helpsin the proper distribution ofproducts for customer satisfaction and continuous patronage. TRANSPORTATION Five basic transportation forms: 1.Railroads–carry heavy, bulky items that are low value over long distances. 2.Motor carriers–transports mall shipments over shortdistances or in a nearby town. 3.Waterways–move goodswhich are low invalue but highbulk freight on barges via in land river sand ontankers, freighters, and inter coastal shipping. 4.Pipelines– reliablecontinuous movements of liquids,gases and semi-liquid. 5.Airways– fastest,most expensive form for perishable and emergency goodsthat needed to betransported separately from others to avoid delay. TRANSPORTATION Transportation services companies and organizations are marketing specialist that are predominantly handle the shipments of small and moderate sized packages to avoid delay and disturbancefrom the other sector of society. The three major services companies are government parcel post, private parcel (UPS) , Express (FedEx) DHL and LBC. 1. Government parcel post–are the documents or goods sent in the custody ofthe local ornational level to avoid loss and delay of delivery. 2. Containerization–placing goods in sturdy containers that can be loaded safely on trucks, ships or planes. These sealed containers are safe until delivered thus reducing damage and pilferage of goods. 3. Freight Forwarding–specialized firms consolidates mall and distinct shipments (less than 500 lbs. each)from several companies and organizations. Theypick up merchandise, finished goods, and arrange for delivery at buyers’ door and custody. CATEGORIES OF TRANSPORTATION FIRMS 1.Common Carriers– transport the goods of any firm (normally the private individual) or individual interested in their services to properly transfer the goods. They cannot refuse any shipment from the customers unless the carrier’s rules are broken and defective that will not function as it can be 2. Contract Carriers– provide one or a few shippers and specific goods with transportation services based on individual even in a group agreement. 3. Exempt Carriers– excused from legality and must only comply with safety requirement. Commodities and most agricultural goods are exempted and free from economic restrictions. 4. Private Carriers– shippers used their own facilities, subject to safety rules andregulations from the local or national government. INVENTORY MANAGEMENT Inventory Management’s objective are: 1. to provide a continuous flow of goods (tangible) 2. to match the quantity of goods kept in proper inventory as closely as possible with sales demand 3. to meet the required profit in the production and delivery of products both to t he organization and individual clients. INVENTORY MANAGEMENT Two Concepts: 1.Just In Time (JIT)– reducing the amount of inventory it keeps on hand by ordering more frequently and in lower quantity of raw materials even the semi-processed goods. This requires better planning, forecasting and information on the part of the purchaser and producer; improve buyer-seller good relationships and better production of materials and distribution facilities to the recipient of the product. Another name for this is the Quick Response (QR)Inventory System that main objective is to immediately act in accordance with the required units of materials that are needed in the production of goods. 1.Electronic Data Interchange (EDI)– computer linkups between suppliers and their manufacturers and wholesalers to increase sales through it’s timely monitoring of available stocks needed in the production both raw materials and semi processed goods. WAREHOUSING It involves the physical facilities used primarily for the storage of goods and maintenance of supply for efficient delivery held in anticipation of sales and transfers within a distribution channel in the organization. WAREHOUSING Private warehouses are owned, managed and operated by firms that store and distribute their own products. There are no other parties involved. Theowners are the users of the facility so they control the whole operation of the warehouses. Public warehouses provide storage, safekeeping of the inventory andrelated physical distribution services toany interested firm or individual on a rental basis eitherdaily, weekly and monthly manner. Bonded warehousing is where imported or taxable merchandise of the organization are stored and can be released for sale only after the appropriate taxes are paid. The items cannot be released without the sufficient payment of the Taxpayer or the customer. Field warehousing is where a receipt is issued by a public warehouse for goods or tangible products stored in public warehouse or in transit to consumers and services as collateral for a loan either in a bank of any financial institutions that provides borrowings. WHOLESALING Manufacturer Wholesaling the manufacturer or producers’ control wholesaling which performs all the functions such as owning the products who does not receive payment until a retailer buys, and deals with a smaller group of customers to maintain customer patronage. Merchant Wholesaling wholesaler controls wholesaling such as buyingin a bulk of units and performs many functions such as warehousing and inventory control. It then buys products from the manufacturer and resells to the retailer. Agents and Brokers the manufacturer owns theproducts and lets thebroker sell the property andpays the agents commission, payment is made after the products aresold. The broker willget much highercommission compare to the agent because the latter donot have anylicense compare to thebroker which is a passer of aprofessional examination intended to them. RETAILING Types of Retailing 1.Independent Retailer- operates only on outlet because of limited resources. 2.Retail Chain- involves common ownership of multiple outlets through its dealership 3.Retail Franchising- contractual agreement between a franchisor and franchisee. 4.Leased department- department in a retail store that is rented outside party. 5.Consumer Cooperative- a retail firm owned and managed by consumer members who invest and share profit. RETAILING Store Strategy Mix 1.Convenience Store- a food store that is located along passerby with a long hour and products are needed mostly by the consumer but on limited items. 2.Conventional supermarket- a food store with a wide range of product items and related products with affordable prices, self-service and one stop grocery shopping for customers. 3.Superstore- sells food and non-food items like office supplies, apparel, beverages, bakeshop products and small household appliances plus supermarket in one location. 4.Combination Store- combines food, grocery and general merchandise sales and enables the retailer to operate efficiently and effectively. 5.Specialty Store- provides one service line or line of goods to attract same line of customers. RETAILING 6.Variety Store – sells a wide and variety of assorted inexpensive and popularly priced merchandise that tailored for consumer needs and wants. 7.Department Store- sells a general line of apparel, linens, furniture, home, furnishing and appliances etc. a.Traditional department store- organization with high name recognition, fashion effective leader and often dominate the stores around the vicinity. b.Full-line discount store- department store with affordable prices broad merchandise assortment and variations, self service with shopping carts. 8.Retail Catalogue Showroom- Customer shop at a warehouse type store consumers write up their orders during the exhibit after browsing the catalogue or brochures because the products are usually stocked on the backroom. RETAILING Non-store Operations 1.Vending Machines- coin or card operated machine which dispenses goods or services. 2.Direct Selling- includes personal contact with consumers in their homes and telephone solicitations to attain satisfaction by providing convenience and safety to the consumers 3.Direct Marketing- Exposes the consumer to a good or service via non- personal medium and orderd by phone or telemarketing or through internet using email. STORE LOCATION Basic Forms of Store Locations Isolated Store- a retail outlet which is located on a street where there is no adjacent store that draws customer traffic and captures the interest as well as the impact to the passersby. Unplanned Business Districts- refers to two ore more stores which are located close to one another that sometimes produced healthy competition by attraction more customers Central Business Districts (CBD)- largest commercial facilities Secondary Business Districts (SBD)- found in intersections with medium size stores Neighborhood Business Districts(NBD)- small stores servicing the needs of neighborhood. String- is composed of group of stores or shops with similar or compatible product lines even items situated along highway or main road. STORE LOCATION Planned Shopping Centers - is centrally owned or managed facilities operated as entity for the customers with large parking area to accommodate more customers and with balanced tenancy. 1. Regional- sells mostly shopping goods to dispersed and various customers. Normally its about half an hour to reach the regional centers 2. Community- has a branch department store, variety store, large specialty store and several other smaller stores to be included under this center. It sells convenience goods and shopping goods or service for the community safety and security. 3. Neighborhood- sells mostly convenience goods and services with large supermarket and drugstore and several smaller stores that will cater to the overall needs of the people in one vicinity. SCRAMBLED MERCHANDISING It takes place when a retailer put together goods and services that are unrelated to each other or the original business of the retailer that captures the different market segments. Reasons: 1. Retailers seek to convert their stores to one-stop shopping centers that encourage customer patronage and loyalty. 2. Use od scramble can lead to competition among unrelated retailers so to attract other market segment. DISTRIBUTION STRATEGY Common distribution channels are the following: 1.Direct sale is when the company/ firm’s plan to move goods directly to the ultimate users. This is the most effective channel. 2.Original equipment manufacturer sales involve selling a manufactured products and which is later sold as a finished product to the end users. (EX. Sound system incorporated in cars) 3.Manufacturers representative is wholesalers employed by one or several producers and paid on commission according to quantity sold. 4.Wholesalers are channel members that sell to retailers or other agents for further distribution through the channel until they reach the final users. 5.Brokers are distributors who buys directly from the distributor or wholesaler and sell to retailers or end user. 6.Retailers are the ones who directly sell to customers in the store. 7.Direct mail includes printed materials used in a targeted campaign to consumers. DEPARTMENT OF BUSINESS ADMINISTRATION THANK YOU AND GOD BLESS