DISTRIBUTION & SUPPLY

CHAIN MANAGEMENT
Introduction to Distribution Management
 Introduction
Distribution Management or Physical Distribution
Management involves controlling the movement of materials
& goods from their source to their destination.
It is also concerned with the ensuring the product is in the right
place at the right time and in the right quantity.
Distribution deals with the “Place” which is always thought to
be the least dynamic of the “4P’s” of Marketing Mix.
 Value Addition from
Distribution Management
Distribution Management aspect of the marketing function provides place, time and
possession utility to the customer.
The distribution function using the network of the channel partners adds value to
the selling function by providing time, place and possession utility to the consumer.
1) Time Utility : It is making the product available when a consumer wants it.
2) Place Utility : Making the product available in the location convenient for
customers.
3) Possession Utility : It is provided when the consumers buy the product and the
ownership gets transferred to him at the time & place convenient to the buyer.
4) Form Utility: Breaking SKUs –Stock Tracking Units –into smaller sizes
 Physical Distribution
According to William J Stanton “ Physical distribution
involves the management of the physical flow of products and
the establishment and operation of flow systems”
According to American Management Association, “ Physical
distribution means moving of finished products from one end
of a production line to customers”
According to Cundiff and Still, “ Physical distribution involves
actual movements and storage of goods after they are produced
but before they are consumed”.
 Roles of Distribution Function
in Marketing Mix

ROLES OF DISTRIBUTION FUNCTION IN MARKETING MIX

Minimization of Distribution Costs Better Customer Service

Stabilization of Prices
Increase in Sales Volume
Size of Inventory
Effective Product Planning
Economies of Large Scale Production
Channel of Distribution
Agent of Change
Sources of Employment Where Production Location & Market are
Distanced, Physical Distribution becomes
Confers Place & Time Utility on Products more crucial

Helps Build Clientele Reducing Cycle Time

Components of Physical Distribution

Components of Physical Distribution

Managing Inventory / Stock or

Order Processing
Inventory Control

Material Handling Warehousing

Transportation Customer Service

 Patterns of Physical Distribution

1)Intensive Distribution
2)Selective Distribution
3)Exclusive Distribution
 Distribution Equity in Marketing

Distribution Equity is the term which can

be used to define the edge that a
company or business holds in a market
die to its strong distribution channel.
 Types of Distribution Equity
1) Buyer Proximity Equity
2) Channel Owner Equity

Issues in Distribution Equity

3) Network Strategy
4) Channel Management
5) Sales Force Effectiveness
 Marketing Channels

The Marketing Channel or Distribution Channel or

Channel of Distribution is the movement of goods
and services between the point of production and
the point of consumption through organization
that performs a variety of marketing activities. The
major participants in the distribution channel are :
Producers, Intermediaries and Consumers.
 Members of Marketing Channel
1) Sole-Selling Agent / Marketer
2) C& F Agents
3) Wholesalers
4) Retailers
5) Commission Merchants
6) Selling Agents
7) Value-Added Resellers
Tasks & Responsibilities of Channel
Members
1) Information Provider 9) Help in Production Function
2) Matching Buyers & Sellers 10) Matching Demand & Supply
3) Time & Place Utility 11) Pricing
4) Assortment of Products 12) Standardizing Transactions
5) Price Stability 13) Provide Salesmanship
6) Promotion 14) Assist in Merchandizing
7) Financing 15) Provide Market Intelligence
8) Title
 Types & Levels of Marketing
Channels
Producer or Manufacturer
Direct Indirect Multi Channel or Hybrid

Selling Door
Mail Multiple
Wholesaler Retailer
at to
Order Shops
Mfgs Door
Houses (Chains)
Plant Selling Retailer

CONSUMER
 Factors Affecting Choice of Channel
1) Factors Relating to Product f) Standardized Products
Characteristics:
g) Purchase Frequency
a) Industrial / Consumer
Product h) Newness and Market
b) Perishability Acceptance
c) Unit Value i) Seasonality
d) Style Obsolescence j) Product Breadth
e) Weight & Technicality
 Factors Affecting Choice of Channel
2) Factors Relating to Company 3) Factors Relating to Market or
Characteristics: Consumer Characteristics:
i. Financial Strength i. Consumer Buying Habits
ii. Marketing Policies ii. Location of the Markets
iii. Size of the Co. iii. No. of Customers
iv. Past Channel Experience iv. Size of Orders
v. Product Mix
vi. Reputation
 Factors Affecting Choice of Channel
4) Factors Relating to Middlemen 5) Factors Relating to
Considerations: Environmental Characteristics:
i. Sales Volume Potential i. Economic Conditions
ii. Availability of Middlemen ii. Legal Restrictions
iii. Middlemen’s Attitude iii. Competitors’ Channel
iv. Services Provided by iv. Fiscal Structure
Middlemen
v. Cost of Channel
 Channel Design
The design of a Marketing Channel is influenced by the foll.
Factors:
1) Nature of the Product or Service being distributed.
2) The expectations from the system. The “deliverables” of the
system.
3) Location & nature of the customers.
4) Nature of competition and its distribution systems.
5) Nature of the markets being targeted.
 Factors for Designing Channels
1) Formulating the Channel Objectives:
i. Effective coverage of target market
ii. Efficient & Cost Effective Distribution
iii. Ensuring that consumers incur minimum exertion in procuring the
product.
iv. Helping the firm to carry on manufacturing uninterrupted,
confidence that the channels will take care of sales.
v. Partnering the firm in financing and sub-distribution tasks.
 Factors for Designing Channels
2) Identifying Channel Functions
3) Linking Channel Design to Product Characteristics
4) Evaluation of the Distribution Environment
5) Evaluation of Competitors’ Channel Designs
6) Matching the Channel Design to Co. Resources:
i. Firms with limited resources settle for conventional Channels
ii. Firms with large resources have more options.
 Factors for Designing Channels
8) Evaluating the Alternatives and Selecting the Best:
i. Economic Evaluation: Balancing Cost. Efficiency & Risk
ii. Conceptual Evaluation: Flexibility & Controllability