*Chapter_12_-_Distribution_Channels_A2L

Importance of Distribution

• Distribution is essential for effective marketing and plays a critical role in product availability.

• Good distribution strategies are necessary to persuade retailers to carry products, impacting sales and market share.

Distribution, Supply Chain Management, and Logistics Management

• Distribution Channel: Set of institutions that transfer ownership of goods and facilitate the movement from production to consumption.

• Supply Chain Management: Techniques used to seamlessly integrate suppliers, manufacturers, and other intermediaries to optimize production and distribution efficiency while minimizing costs.

• Logistics Management: Integration of activities to ensure efficient flow of materials and goods from origin to consumption.

Value Delivery Through Distribution Channels

• Distribution channels add value by increasing efficiency, lowering costs, and enhancing customer satisfaction.

• Value Addition Examples:

  • Buying, Selling, Exchange facilitation in distribution centers.

  • Improve transaction efficiency—less friction in moving goods between factories, stores, and consumers.

Functions of Intermediaries

• Transactional Functions:

  • Buying: Purchase goods for resale.

  • Risk Taking: Holding inventory.

  • Selling: Transaction interactions with customers.

• Logistical Functions:

  • Physical Distribution: Transporting goods.

  • Risk Management: Protecting stock from loss.

• Facilitating Functions:

  • Gathering Information: Sharing insights about market conditions.

  • Financing: Providing credit to consumers and facilitating purchases.

Channel Conflict

• Channel Conflict: Arises when channel members disagree on goals or roles, affecting partnerships between companies like Amazon and Procter & Gamble.

Managing Channels Through Vertical Marketing Systems

• Types of Vertical Marketing Systems:

  • Administered, Contractual, Franchise, Corporate.

• Independent vs. Vertical Marketing Channel: Explains differences in level of control and collaboration among channel members.

Designing Distribution Channels

• Channel Structure:

  • Direct Distribution: Manufacturer sells directly to consumers.

  • Indirect Distribution: Involves intermediaries like wholesalers and retailers.

  • Multichannel Distribution: Combination of both direct and indirect methods to reach different consumer segments.

Strategies in Distribution

• Push vs. Pull Strategies:

  • Push: Manufacturer promotes to wholesalers/retailers.

  • Pull: Marketing efforts aimed directly at consumers to create demand.

Distribution Intensity Levels

• Intensive Distribution: Maximize product availability (e.g., consumer goods).

• Selective Distribution: Limited number of outlets (e.g., shopping goods).

• Exclusive Distribution: High-end goods limited to selected retailers (e.g., luxury brands).

Logistics Management Elements

• Making Information Flow:

  • Use of Point of Sale (POS) data for inventory management and communication with distribution centers.

  • Electronic Data Interchange (EDI): Streamlines communications and improves efficiency.

Inventory Management Techniques

• Just-In-Time (JIT) Systems: Minimize inventory by receiving goods only as needed for production.

• Reduces lead times and boosts product availability, while lowering the cost of holding inventory.

Types of Distribution Centres

• Traditional Distribution: Goods stored until needed.

• Cross-Docking: Direct transfer from receiving to shipping, minimizing handling and storage time.

• Combination Centres: Employ both strategies to optimize logistics effectiveness.