Distribution Management Module-1 PDF

New Era University COLLEGE OF BUSINESS ADMINISTRATION Department of Marketing Management Weeks # 1 MKTG 08 – Distribution Management 1ST Semester AY 2021-2022 MODULE #1 – Intro...

New Era University COLLEGE OF BUSINESS ADMINISTRATION Department of Marketing Management Weeks # 1 MKTG 08 – Distribution Management 1ST Semester AY 2021-2022 MODULE #1 – Introduction to Distribution Management I: INTRODUCTION: Distribution management has long been a problem in the commercial world. Raw materials may arrive too soon and spoil before they are used. Alternatively, finished products may come late, allowing a competitor to take the lion's share of the market. Effective distribution is so important that sub-discipline practices like just-in-time inventory have become a fundamental aspect of supply chain and inventory management. Overall, good distribution entails a large number of moving elements and processes, necessitating a strong distribution management approach based on real-time data. II: COURSE LEARNING OUTCOME: At the end of this topic, learners will be able to: 1. Describe the meaning, importance, and challenges in distribution Management 2. Describe the function of agents, wholesalers, distributors, and retailers. 3. Elaborate on the factors that influence Distribution Management. 4. Identify the Channel Participants and their role and responsibilities in the distribution process. III: CONTENTS: LESSON 1 – The Meaning, Importance, and Challenges in Distribution Management Distribution Management - is a process of overseeing the transfer of goods from supplier to manufacturer, wholesaler, or retailer, and lastly to the end consumer is known as distribution management. Raw materials vendor management, packaging, warehousing, inventory, supply chain, logistics, and occasionally even blockchain are all engaged in the process. What is a Distributor? A distributor is a company that provides products to shops and other businesses that sell to consumers directly. Consider a wholesale liquor distributor that serves restaurants, grocery stores, and liquor stores with alcohol. A produce distributor that supplies lettuce, tomatoes, and other produce to restaurants, as well as a pharmaceutical distributor who supplies pharmacies with a variety of prescription-controlled medications, are two more examples. The Difference between the Distribution and Logistics: The term "logistics" refers to the meticulous planning and processes that go into the efficient supply and delivery of products. Supply management, bulk and shipping packaging, temperature controls, security, fleet management, delivery routing, shipment tracking, and warehousing are all examples of logistics activities and processes. Physical distribution is likely the easiest way to think of logistics. Distribution is a logistics management system that focuses on order fulfillment across distribution networks. A distribution channel is a series of agents and entities through which a product or service passes on its journey from its point of origin to a consumer. Channels of distribution examples. Why is Distribution Management Important? Distribution management is primarily concerned with coordinating everything involved in getting goods to the buyer in a timely and waste-free manner. As a result, it has a direct bearing on profitability. What is Distribution Network and What are the Benefits? A distribution network is a network of storage facilities and transportation systems that are linked together. It's built around a distribution plan for getting items from the manufacturer to wholesalers, retailers, and purchasers. What are the Advantages of Distribution Management? Apart from increasing profits, distribution management reduces waste in a variety of ways, from reduced spoilage to lower warehousing expenses, because items and goods can be delivered when needed (“just in time”) rather than being held in larger quantities (“just in case”). Reduced shipping costs and faster delivery to customers are two benefits of distribution management. It also makes things easier for purchasers by enabling "one-stop shopping" and other conveniences and rewards, such as customer loyalty rewards programs. What are Distribution Management Challenges? A multitude of disturbances might cause distribution issues. Severe weather catastrophes, raw material shortages, pest damage, and epidemics or pandemics are examples of natural disruptions. Riots, protests, wars, and strikes are examples of human disruptions. Transportation disruptions include vehicle breakdowns, maintenance outages, and accidents, as well as delayed flights and new or stringent transportation regulations, such as those observed in trucking. Recessions, depressions, unexpected declines or spikes in consumer or market demand, new or changing fees or compliance costs, changes in currency exchange rates, and payment concerns are all examples of economic challenges. LESSON 2 – FACTORS THAT INFLUENCE DISTRIBUTION MANAGEMEN:  1) Perishability of the unit – if the item is perishable, time is of the essence to avoid loss. 2) Buyer purchase habits — peaks and troughs in purchasing habits might influence distribution patterns and, as a result, predictably fluctuating distribution needs. 3) Buyer needs — for example, changes in a retailer's or manufacturer's just-in-time inventory demands. 4) Forecasting product mix - ideal product combinations fluctuate depending on seasons, weather, and other circumstances. 5) Optimization of truckloads – based on logistics and fleet management software to guarantee that each truck is fully loaded and routed according to the plan Distribution Management Strategies 1) The mass. The mass strategy tries to reach the broadest possible audience, such as those that sell to general customers in any location. 2) It's picky. The selective method tries to distribute to a limited number of retailers, such as pharmacies, hair salons, and high-end department stores. 3) It is exclusive. The exclusive distribution approach tries to reach a small number of people. Manufacturers of Ford vehicles, for example, sell only to authorized Ford dealerships, while Gucci-brand items are only sold to a select group of luxury goods stores. Choosing a Distribution Management System Choosing the best distribution management system for your business is highly dependent on your distribution goals and difficulties, as well as the distribution models and channels you utilize. However, as a general guideline, businesses should consider: 1. Ease of integration and legacy system compatibility. 2. Flexibility and scalability. 3. Safety and security. 4. Data management and analytics, including real-time data streaming and data exchange across ecosystems. 5. Adaptability, or whether the system can handle the fast changes required to overcome hurdles or capture new opportunities. What are the Channels of Distribution? 1. Wholesaler - In this channel, goods are delivered from producers to wholesalers. Booze distillers, for example, sell their brands of liquor to wholesalers. 2. Retailers – In this channel, goods are distributed to retailers by the manufacturer or wholesaler. Higher-end retailing chains such as Neiman Marcus, Nordstrom, and Macy's, for example, distribute big-name designer apparel and accessories. 3. Distributor - This channel transports goods from a producer or source to an authorized distributor. A Ford factory, for example, distributes different Ford makes and models to approved Ford dealerships for sale to consumers or company fleets. 4. Ecommerce. This is the newest and most disruptive distribution channel, in which goods and services are virtually represented online before being sent to the buyer directly. As a fourth channel, eCommerce has accelerated change and forced distributors to reconsider their previous methods. What are the elements of Distribution Management? The steps involved in getting a product from the manufacturer to the end customer are called distribution management systems, and they can include supply chain, blockchain, logistics, purchase order and invoicing system, vendor relationship management (VRM), customer relationship management (CRM), an inventory management system (IMS), a warehouse management system (WMS), and a transportation management system (TMS). LESSON 3 – THE CHANNEL PARTICIPANTS Why do manufacturers choose to use intermediaries between themselves and end- users? Major Participants in Marketing Channels Producers Intermediaries Final Users & Manufacturers Wholesale Retail Consumers Industries Intermediaries Intermediaries * Commercial Channel * Target Markets Intermediaries Intermediaries, also known as distribution intermediaries, marketing intermediaries, or middlemen, play a critical role in a company's product distribution chain. It would be nearly difficult for the firm to function without intermediaries. This is because intermediaries are third-party organizations, individuals, or enterprises who help a corporation distribute its products to the end customer. Merchants, for example, are middlemen who buy and resell goods. FUNCTIONS OF INTERMEDIARY Transactional: This function entails bringing in the intermediary's resources to develop market linkages and client contacts to offer value to the distribution channel. By acting as a link between the manufacturer and the store, the intermediary either performs marketing and sales functions directly or assists in the formation of buyer-seller relationships. Logistic: This function is concerned with the physical distribution of products. It entails organizing and storing supplies in areas where the end client can access them. It also divides the manufacturer's massive production into smaller chunks and may entail the delivery of smaller shipments to intermediaries or retailers. Facilitating: Intermediaries' facilitating functions, which are sometimes associated with logistics, augment the full marketing flow of the product and are distinct from logistics. Financially supporting the marketing chain by investing in storage capacity is one of the enabling functions. They could include facilitating sales by assisting customers in making purchases even if they do not have cash (through financing plans, purchase agreements, etc.). There are four generally broad groups of intermediaries are the following: 1. Agent or broker - are individuals or firms that work as an extension of the manufacturing company are known as agents or brokers. Their primary responsibility is to represent the manufacturer to the end customer when selling a product. While they may not directly own the product, they do take ownership of it during the distribution process. They make money by charging fees or commissions. Agent Wholesaler’s Distribution Task: 1. Manufacturer’s Agents Market coverage Sales contacts 2. Selling Agents  Market coverage Sales contacts Ordering processing Marketing Information Product availability Customer services 3. Brokers Market coverage Sales contacts Order processing Market Information Product availability Customer services 4. Commission Merchant Market coverage Sales contacts Order processing Breaking Bulk Credit Holding Inventory 2. Wholesalers - own the goods and services for which they act as middlemen. They are a privately held company that owns the things it sells. Wholesalers do not operate with little quantities of merchandise; instead, they purchase in bulk and hold the items in their warehouses and storage facilities until they are ready to resell. Wholesalers rarely sell to end users; instead, they sell to other middlemen, such as retailers, at a higher price than they paid. As a result, unlike agents, they do not work on a commission basis. Types of wholesalers: All Wholesale Firms Independent Manufacturer middlemen owned Merchant Agents, brokers, Manufacturers' wholesaler & sales branches commission & merchants offices Merchants Wholesaler Specialize in Performance Distribution Task: 1. Provide Market coverage 2. Make sales contacts 3. Hold Inventory 4. Process Orders 5. Gather market information 6. Offer customer support Merchant Wholesaler’s Distribution Tasks Serve Customers 1. Assure product availability 2. Provide customer service 3. Extend credit & financial assistance 4. Offer assortment convenience 5. Breakbulk 6. Help customers with advice and technical support 3. Distributors, like wholesalers, take possession of the goods, keep them, and then resell it to retailers or other intermediaries for a profit. The main distinction is that distributors align themselves with related products. Coca-Cola wholesalers, for example, will not sell Pepsi goods, and vice versa. They can keep a closer relationship with their suppliers this way than wholesalers can.  4. Retailers - from the neighborhood grocery store to major conglomerates like Wal- Mart and Target, retailers come in all shapes and sizes. Retailers, regardless of their size, buy things from market intermediaries and resell them to end users for a profit. Retail Structure Alternative Bases for Classifying Retailers By Ownership of Establishment By Kind of Business (Merchandise Handled) By Size of Establishment By Degree of Vertical Integration By Type of Relationship with other Business Organizations By Method of Consumer Contact By Type of Location By Type of Service Rendered By Legal Form of Organization By Management Organizations or Operational Technique Kind-of-Business Classifications Retail Trade Motor vehicle & parts dealers Furniture & home furnishings stores Electronics & appliance stores Building material & garden equip. & supply dealers Food & beverage stores Health & personal care stores Gasoline stations Clothing & clothing accessories stores Sporting goods, hobbies, books, & music stores General merchandise stores Miscellaneous store retailers Non-store retailers Distribution Tasks Performed by Retailers Offer manpower & physical facilities close to consumers’ residences Provide personal assistance to help sell products Interpret and relay consumer demand Divide large quantities into consumer-sized lots Offer storage Remove the risk by ordering in advance of the season Streamlining distribution entails making optimum use of all technologies used in logistics and distribution centers' operations. It should be noted that the scope of logistics and distribution process planning is not confined to production, transportation, or distribution planning. It includes every aspect of the logistics and distribution process. Without a doubt, the activity of logistics and distribution centers has a significant impact on the entire logistic network (supply chain), hence their proper operation is critical. To improve the efficiency of logistics and distribution facilities, the criteria by which they are evaluated should be defined. Sales Planning - can be defined as the process of converting a demand forecast into a workable operational plan that producers and salespeople can use. This procedure may include production planning and/or supply chain optimization to determine the likelihood of meeting demand. Stock planning - enables for the best volume and positioning of finished goods to fulfill end-user demand and service levels. Stock planning is used to calculate the ideal level of safety stocks at each location in principle. Supply chain Planning - Based on multi-level sources and crucial commodities, supply chain planning compares demand forecasts with actual demand to generate a "master plan" (schedule). To synchronize and optimize production, distribution, and transportation, the master plan designed encompasses the points of production and distribution destinations. Production Planning - Production planning refers to the creation of a master plan for a single factory (producers). The master plan takes into account material availability, production capacity, demand, and other operational aspects. The production planning cycle is a complicated process that, in most cases, is viewed as the beginning of the logistics and distribution operations. When similar operations are viewed from the other perspective (i.e., semi-products and raw materials are required for the creation of certain products and are delivered to the factory), they represent the plant's final products and the end of one portion of the logistical chain. Distribution Planning - The formulation of a feasible and viable plan for delivering final products from producers to end users (through logistics and distribution centers, warehouses, or cross-docking) is referred to as distribution planning. The actual transportation costs and needs that represent single goods locations are used to design distribution. Transport Planning - For dispatch cost minimization, transportation planning employs current transport prices. Transport planning entails optimizing both the external and internal goods flow to reduce transportation costs and maximize fleet utilization. Allowing and performing collective (bundled) transit of commodities, as  well as the integration of intermodal transport systems into logistics and distribution processes, are two of the most important transport planning activities. Delivery Planning - The purpose of a delivery schedule is to construct a reasonable (realistic) plan that fits the producer's time requirements for product delivery. The producer chooses the best delivery methods and times based on the number of orders received, the production schedule, and the availability (planning) of transportation. DEMAND FORECAST AND PLANNING Demand forecast and planning with empirical knowledge (forecasts based on the demand within the previous period) use statistical data and mathematical functions. It may be said that demand forecast is a one-sided process since forecasts are used as the basis for planning only the possible customers’ demand, rather than the number of goods that can be produced over the future period. CREATION OF SUPPLY CHAIN NETWORK This aspect optimizes the use of necessary resources in the current logistic network, which comprises suppliers, manufacturing facilities, distribution hubs, and end users. Analyses and simulations enable the testing of alternative combinations, such as the impact of building a facility or transferring present infrastructure facilities on overall revenue and service level. The locations of new infrastructural assets that best fulfill the needs of customers can be established by using various methods of logistic network design. These approaches are commonly used to determine whether bigger volumes of stock will be kept in one location or distributed over multiple locations. MARKETING CHANNELS Marketing Channels are the people, organizations, and actions required to transfer ownership of goods from point of production to point of consumption; they are how items reach the end-user, the customer. The function of a Channel Whether the parties are in the same town or hundreds of miles apart, the basic goal of any channel of distribution is to bridge the gap between the manufacturer of a product and the user of that commodity. The most efficient and successful way to get a product into the hands of a customer is through the channel of distribution. The channel is made up of many institutions that help with transactions and physical exchanges. Type of Marketing Channels: Direct selling is the marketing and selling of things to customers outside of a physical store. The oldest type of direct selling is peddling. Sales conducted through the party plan, one-on-one demos, personal contact arrangements, and internet sales are all examples of modern direct marketing. Selling to Intermediaries Using Intermediaries to Sell is an indirect channel in a marketing channel that uses intermediaries such as wholesalers and retailers to make a product available to the client. When there are many small manufacturers and retailers, and an agent is utilized to help coordinate a big supply of the goods, the most indirect route (Producer/manufacturer –> agent –> wholesaler –> retailer –> consumer) is used. Dual Distribution Dual distribution refers to a variety of marketing strategies in which a manufacturer or distributor employs multiple channels to reach the end consumer at the same time. They could sell to end users directly or to other businesses for resale. Channel conflict can occur when two or more channels are used to attract the same target market. Business format franchising is an example of dual distribution, in which franchisors license the operation of part of their units to franchisees while owning and operating others. Reverse Channels Technology has enabled a different flow. This one can go from consumer to intermediary to beneficiary in the opposite direction. Consider the possibility of profiting from the resale or recycling of a product. The introduction of a beneficiary is another distinction between reverse channels and more typical ones. You won't locate a producer in a reverse flow. Only a User or a Beneficiary will be found. CHANNEL SELECTIONS Consumer Preferences The consumer's habits and actions define channel strategy. If all of a company's customers shop at Walmart, it might be a good idea to start filling Walmart shelves with merchandise. Organizations should endeavor to make a given good available in a given channel if consumers have a strong desire to do so (as long as the opportunity costs down to exceed the potential benefits). Digital storefronts are another fantastic example of consumer preferences. If a record company handles a few bands with nearly all of their fans on Spotify, it might be a good idea to start using this digital distribution channel. If a studio is aware that the majority of its films will be released in the United States, it can plan accordingly. Cost Some channels will have a higher price tag than others. Low-cost goods work best at low- cost retail stores. Better further, direct selling eliminates the middleman between the consumer and the producer, resulting in even reduced costs (albeit, shipping, storing and other logistics must be considered). Wholesalers are eager to purchase massive shipments of goods, albeit at a steep price. In many circumstances, calculating the ideal volume at the optimal price for a firm to satisfy a given market demand will be aided by the overall revenue-maximizing curve. Brand Organizations form strategic alliances to provide channels for consumers, and these alliances will have an impact on both partners' entire branding objectives. If an online merchant carries a certain type of item, customers will associate the two brands together. This may have an impact on how customers perceive both businesses. Localization In today's global economy, efficient marketing channel selections can also help localize and access new markets. A manufacturer of home goods, like laundry detergent, may readily sell their products in Europe as well as in the United States. The difficulty is how to complete this task and which merchants to collaborate with, as well as how to localize the brand so that foreign consumers can identify and understand it. An organization's capacity to achieve this goal can be considerably enhanced by strategic channel selection. Digital Channel: The modern organization is drowning in potential channels from a digital perspective. References: 1. Rosenbloom, Bert (2012), Distribution Management 8th edition, Singapore Cengage Learning Asia Pte Ltd. 2. https://www.netsuite.com/portal/resource/articles/erp/distribution- management.shtml 3. https://www.marketingcrossing.com/article/220071/Why-Use-Intermediaries-in- Marketing/ 4. https://courses.lumenlearning.com/boundless-marketing/chapter/marketing- channels-in-the-supply-chain/