Dist. Mgmt

7/31/2019 Dist. Mgmt

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Distribution Management


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Preview

MarketingIdentifying customers needsand satisfying them while generating profit.

Marketeranalyzes the market, segmentsit,selects a target marketandpositionshis

products to offer differential advantagetothe customers.

Marketers satisfy the needs of the targetmarket in a better way (in other words they

position the products to offer differentialadvantage) through a proper mix ofProduct,Price, Promotion andPlace calledMarketing mixor 4Psof Marketing.


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Preview

Product - A Good, Service or an Idea that isprovided to satisfy the need and all theactivities required to plan the product.

Price

Money (or something of utility)required to exchange the product .

PromotionAll activities required to inform

and persuade the customers. PlaceAll activities required to make the

product available where they are needed.


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Scope of Distribution Management

Channels ofDistribution

Retailing

Wholesaling andPhysical Distribution


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Channels of Distribution


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Distribution Channels

DISTRIBUTION CHANNELS

People and firms involvedin the transfer of title to a product

as the product moves from producer toultimate consumer or business user

Producers Middlemen

Final

ConsumerOr

BusinessUser


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Middleman Activities

A. Sales Specialist for Producers

Provides

Marketinformation

Provides

financing

Owns

productsShares risks

Interprets

consumerswants

Promotes

Producersproducts

Stores

products

Negotiates

withcustomers

B. Purchasing Agent for Buyers

Subdivides

large quantitiesof a product

Shares

risks

Stores

products

Anticipates

Wants

Provides

financing

Guarantees

products

Transports

products

Makes Products

Readily available


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Designing a Distribution Channel

Specifytherole

ofdistribution

Selectthe Most

SuitableType Ofchannel

DetermineIntensity

Ofdistribution

ChooseSpecificChannelmembers

WellDesigned

DistributionChannel

h l f b (


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Major Channels of Distribution (ConsumerGoods)

Producers of consumer goods

Ultimate consumers

Retailers Retailers

Merchantwholesalers

Retailers

Agents

Retailers

Agents

Merchantwholesalers


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Major Channels of Distribution(Business Goods)

Producers of business goods

Business users

Agents

Reseller

Industrialdistributors

Merchant

Wholesalers(industrialdistributors)

Agents

Merchant

Wholesalers(industrialdistributors)


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Major Channels of Distribution(Services)

Producers of services

Ultimate consumers or Business users

Agents


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Vertical Marketing Systems

Types of Vertical Marketing Systems

Types of System Controlled by Examples

Corporate Ownership BPCL, Bata, Raymond

Contractual

Retailer OwnedCooperatives

Stock Ownershipby retailers

Amul (Farmers Cooper-Ative), Apna Bazaar

Franchise Organizations Contract Coca-Cola,NIIT, APTEC

Administered VMS Economic Power HUL, P&G, TELCOMaruti etc

Wholesaler-sponsoredvoluntary chain

Contract Many in Vegetables &Food Markets


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Vertical Marketing Systems

Characteristics

BPCL, Bata,Raymond

Coca-Cola,NIIT, APTEC

Economic Powerand leadership

HUL, P&G,TELCOMaruti etc

Contracts

Types of Channels

TraditionalVertical Marketing Systems

Administered Contractual Corporate

Amount of

Co-operation

Controlmaintained by

Example

Little or

none

Some to

good

Fairly good

to good

Complete

None Ownership byone company

TypicalChannels ofIndependents


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Choice of Channels: Market

Geographicconcentration

Ordersize

Typeof

Market

Number ofpotential

customers


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Choice of Channels: Product

UnitValue

TechnicalNature

Perishability


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Choice of Channels: Company

Desirefor channel control

Financial resources

Services providedby seller

Abilityof management


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Intensity of Distribution Continuum

Distribution

through

every

distributionoutlet in

the market

Distribution

through

multiple but not,

all reasonableoutlet in

the market

Distribution

through a single

wholesaling

middlemanand/or retailer

in the market

Intensive ExclusiveSelective


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Conflict in Channels

Horizontal

Middlemenof the same type

Different types

of middlemenon the same level

RetailerRetailer Retailer Retailer


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Conflict in Channels

Vertical

Producer

vs.Wholesaler

Producervs.

Retailers


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Key Terms and Concepts

Middlemen

Merchant middlemen

Agent middlemen

Disintermediation

Distribution channel

Gray marketing

Direct distribution

Indirect distribution

Multiple distributionchannels

Vertical marketing system

Corporate vertical marketing

system

Contractual verticalmarketing system

Administered vertical

marketing system Intensity of distribution

Intensive distribution

Selective distribution

Exclusive distribution

Channel conflict

Chargeback

Horizontal conflict

Scrambled merchandising


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Vertical conflict

Slotting fee

Channel control

Channel power

Exclusive dealing

Tying contract

Refusal to deal

Exclusive-territory policy


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Retailing and Retailers

RETAILING

All activities related to the sale

of goods and servicesto the ultimate consumersfor personal, nonbusiness use

RETAILER

A firm engaged primarily

in retailing


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Retailing

OperatingExpenses

andProfits

Classificationof

Retailers

PhysicalFacilities

Location,Size,

Design,Layout


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Retailers Classified by Ownership

Independent Stores

Corporate Chains

C t t l V ti l M k ti


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Contractual Vertical MarketingSystems

FranchiseSystems

RetailerCooperatives

VoluntaryChains

R t il Cl ifi d b M k ti


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Retailers Classified by MarketingStrategies

Product assortment

Price

Location

Promotion

Customer Services


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Retailers Classified by Marketing Strategies

Type of Store Breadth & Depthof assortment Price Level

CustomerService

Very broad, deep Avoids price competitionSpeciality store At least standard;extensive in some

Convenience store Narrow, shallow High prices Few

Warehouse club Very broad,very shallow

Emphasizesvery low prices

Few (open onlyto members)

Limited-line store Traditional avoid pricecompetition; newemphasize low prices

Varies by typeNarrow, deep

Category-killer store Narrow, very deep Emphasizes low prices Few to moderate

Supermarket Broad, deep Some emphasize lowprices; others avoid

Price competition

Few

Off-price retailer Narrow, deep Emphasizes low prices Few

Discount store Broad, shallow Relatively fewEmphasizes low prices

Department store Wide arrayAvoids price competitionVery broad, deep


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Nonstore Retailing

TelemarketingDirectSelling

OnlineRetailing

AutomaticVending


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Specialty store

Off-price retailer

Category-killer store

Supermarketretailing

Supermarket

Convenience store Warehouse club

Nonstore retailingDirect selling

Telemarketing

Automatic vending

Online retailing

Direct marketing


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Wholesaling andPhysical Distribution


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Economies of transaction in Distribution

A B C D Producers

1 2 3 A4 5 6

Retailers

A B C D

1 2 3 4 5 6

Retailers

Four producers each selldirectly to 6 retailers,

resulting into 24transactions

Wholesaling middleman

Four producers use the samewholesaling middleman,reducing the number of

transactions to 10


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Profile of Wholesaling Middlemen

Wholesaling middlemen

Full serviceTruck jobbersDropshippers

IndependentlyownedTake title toproducts beingdistributedOftenclassified byproduct lines for example,hardware,drugs, frozenfoods, or dairyproducts

Manufacturers

agentsBrokers

IndependentlyownedDo not taketitle to productsbeingdistributed

Activelynegotiate salesor purchase ofproducts.

Branches(carry stocksofmerchandisebeingdistributed)

Office (do notcarry stocks)

Owned andoperated bymanufacturersPerform salesfunctions

Merchant wholesalers Agent wholesalingmiddle-men

Manufacturers sales

facilities

Types Characteristics Characteristics CharacteristicsTypes Types


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Merchant Wholesalers

Full Service Wholesalers,Distributors Or Jobbers

Limited Service W/SsCash & Carry W/S, DropShippers, Truck jobber

etc

Full range of services Stocking,Advertising, personal selling etc.

Cash & Carry, Drop shippers (NoDelivery no inventory Coal, naturalProducts etc.

Full Service Wholesalers Services


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Full Service Wholesalers Services

Service Description

Buying Act as purchasing agent for customers.

Creating

Assortments

Buy from many suppliers to develop an inventory that matches customers needs.

Subdividing Buy in large quantities (such as a truck load) and then resell in smaller quantities (such as

a dozen)

Selling Provides a sales force for producers to reach small retailers and other businesses, at a

lower cost than producers would incur by having their own sales forces.

Transportation Make quick, frequent delivery to customers, reducing customers risks and investment in

inventory.

Warehousing Store products in facilities that are nearer customers locations than are manufacturing

plants.

Financing Grant credit to customers, reducing their capital requirement. Aid producers by ordering

and paying for products before purchase by customers.

Risk taking Reduce a producers risk by taking title to products.

Market

information

Supply information to customers about new products and producers special offers and to

producer-suppliers about customers needs and competitors activities.

Management

assistance

Assist customers, especially small retailers, in areas such as inventory control, allocation

of shelf space, and financial management.


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Factors suggesting which type of Middlemen


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Factors suggesting which type of Middlemenshould be used in a Channel

Factors Favoring Agent

Wholesaling Middlemen

Favoring Merchant

Wholesalers

Nature of product Nonstandard, perhapsmade to order

Standard

Products gross margin Small Relatively large

Number of customers Few Many

Concentration ofcustomers

Concentratedgeographically and in a

few industries

Dispersedgeographically and in

many industriesFrequency of ordering Relatively infrequently Frequently

Time between orderand receipt of

shipment

Customer satisfied withrelatively long lead time

Customer requires ordesires shorter lead

time

Ph i l Di t ib ti


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Physical Distribution

PHYSICAL DISTRIBUTION

LOGISTICS

All activities involvedin moving the right product

to the right placeat the right time


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Physical Distribution

GainDifferentialadvantage

Coordinatedlogistics

Supply

ChainManagement

Fulfillment

InE-commerce

Reducecosts

Strategic Use of Physical


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Strategic Use of PhysicalDistribution

CreateTime and Place

Utilities

ReduceDistribution

Costs

ImproveCustomerService

StabilizePrices

ControlShipping

Costs

InfluenceChannel

Decisions

L i ti Ph i l Di t ib ti


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Logistics or Physical Distribution

LOGISTICS is Transporting, Storing and

Handling of goods to match Customers

Needs within individual firms and alongthe channel of distribution

Tasks in Ph sical Dist ib tion Management


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Tasks in Physical Distribution Management

InventoryControlOrderProcessing

Inventory Locationand Warehousing

MaterialHandling

Transportation



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InventoryControl

OrderProcessing

Customer

Service

Electronic

DataInterchange

Economic Order Quantity


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Economic Order Quantity

Inventory Location and


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Inventory Location andWarehousing

PrivatePublic

Typesof

Warehouses

MaterialsHandling


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Transportation

Transportation costs limit the marketspread.

Transport cost add little to the cost ofproducts that are already valuablerelative to their size and weight.

It is a large part of total cost for heavyproducts of low value.


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Transportation costs

Product Cost of transporting as percent of selling price

Pharmaceuticals 1%

Electronic equipment 3%

Factory Machinery 4%

Chemicals and Plastics 6%

Manufactured food 8%

Iron Ore 20%

Cabbage 38%

Coal 42%

Sand & Gravel 55%


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Transportation

Package-delivery

IntermodalTransportation

FreightForwarders

MajorModes

Comparison of Transportation Methods


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p p

Transportation Method

Selection Criteria Rail Water Highway Pipeline Air

Speed (door-to-door

time)

Medium Slowest Fast Slow Fastest

Cost of transportation Medium Lowest High Low Highest

Reliability in meeting

delivery schedules

Medium Poor Good Excellent Good

Variety of products

carried

Widest Widest Medium Very

limited

Somewhat

limited

No. of geographic

locations served

Very many Limited Unlimited Very

limited

Many

Most suitableproducts Long hauls of carloadquantities of bulky

products, when freight

costs are high in

relation to products

value

Bulky, low-value

nonperishables

Short haulsof high-

value goods

Oil,natural

gas,

slurried

products

High-valueperishables,

where speed

of delivery is

all-important



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Wholesaling

Wholesalingmiddlemen

Merchant wholesaler

Agent wholesalingmiddleman

Manufacturers salesfacility

Manufacturers salesbranch

Manufacturers salesoffice

Full-servicewholesaler

Truck jobber

Drop shipper

Manufacturers agent Broker

Selling agent

Auction company

Import-exportagents

Physical distribution

Fulfillment



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Online categorymanager

Supply chainmanagement

Total cost concept Contract logistics

Physical distributionmanagement

Electronic datainterchange (EDI)

Economic orderquantity (EOQ)

Just-in-Time

Market responsesystem

Collaborative,planning,

forecasting, andreplenishment(CPER)

Enterprise resourceplanning (ERP)systems

Private warehouse

Public warehouse

Distribution center



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Containerization

Intermodal

transportation

One-stop shipping

Freight forwarder

Package-deliveryfirms

Dist. Mgmt

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