7/31/2019 Dist. Mgmt
1/57
Distribution Management
7/31/2019 Dist. Mgmt
2/57
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.
7/31/2019 Dist. Mgmt
3/57
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.
7/31/2019 Dist. Mgmt
4/57
Scope of Distribution Management
Channels ofDistribution
Retailing
Wholesaling andPhysical Distribution
7/31/2019 Dist. Mgmt
5/57
Channels of Distribution
7/31/2019 Dist. Mgmt
6/57
7/31/2019 Dist. Mgmt
7/57
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
7/31/2019 Dist. Mgmt
8/57
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
7/31/2019 Dist. Mgmt
9/57
Designing a Distribution Channel
Specifytherole
ofdistribution
Selectthe Most
SuitableType Ofchannel
DetermineIntensity
Ofdistribution
ChooseSpecificChannelmembers
WellDesigned
DistributionChannel
h l f b (
7/31/2019 Dist. Mgmt
10/57
Major Channels of Distribution (ConsumerGoods)
Producers of consumer goods
Ultimate consumers
Retailers Retailers
Merchantwholesalers
Retailers
Agents
Retailers
Agents
Merchantwholesalers
7/31/2019 Dist. Mgmt
11/57
Major Channels of Distribution(Business Goods)
Producers of business goods
Business users
Agents
Reseller
Industrialdistributors
Merchant
Wholesalers(industrialdistributors)
Agents
Merchant
Wholesalers(industrialdistributors)
7/31/2019 Dist. Mgmt
12/57
Major Channels of Distribution(Services)
Producers of services
Ultimate consumers or Business users
Agents
7/31/2019 Dist. Mgmt
13/57
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
7/31/2019 Dist. Mgmt
14/57
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
7/31/2019 Dist. Mgmt
15/57
Choice of Channels: Market
Geographicconcentration
Ordersize
Typeof
Market
Number ofpotential
customers
7/31/2019 Dist. Mgmt
16/57
Choice of Channels: Product
UnitValue
TechnicalNature
Perishability
7/31/2019 Dist. Mgmt
17/57
7/31/2019 Dist. Mgmt
18/57
Choice of Channels: Company
Desirefor channel control
Financial resources
Services providedby seller
Abilityof management
7/31/2019 Dist. Mgmt
19/57
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
7/31/2019 Dist. Mgmt
20/57
Conflict in Channels
Horizontal
Middlemenof the same type
Different types
of middlemenon the same level
RetailerRetailer Retailer Retailer
7/31/2019 Dist. Mgmt
21/57
Conflict in Channels
Vertical
Producer
vs.Wholesaler
Producervs.
Retailers
7/31/2019 Dist. Mgmt
22/57
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
7/31/2019 Dist. Mgmt
23/57
Key Terms and Concepts
Vertical conflict
Slotting fee
Channel control
Channel power
Exclusive dealing
Tying contract
Refusal to deal
Exclusive-territory policy
7/31/2019 Dist. Mgmt
24/57
7/31/2019 Dist. Mgmt
25/57
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
7/31/2019 Dist. Mgmt
26/57
Retailing
OperatingExpenses
andProfits
Classificationof
Retailers
PhysicalFacilities
Location,Size,
Design,Layout
7/31/2019 Dist. Mgmt
27/57
Retailers Classified by Ownership
Independent Stores
Corporate Chains
C t t l V ti l M k ti
7/31/2019 Dist. Mgmt
28/57
Contractual Vertical MarketingSystems
FranchiseSystems
RetailerCooperatives
VoluntaryChains
R t il Cl ifi d b M k ti
7/31/2019 Dist. Mgmt
29/57
Retailers Classified by MarketingStrategies
Product assortment
Price
Location
Promotion
Customer Services
7/31/2019 Dist. Mgmt
30/57
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
7/31/2019 Dist. Mgmt
31/57
Nonstore Retailing
TelemarketingDirectSelling
OnlineRetailing
AutomaticVending
7/31/2019 Dist. Mgmt
32/57
7/31/2019 Dist. Mgmt
33/57
7/31/2019 Dist. Mgmt
34/57
Key Terms and Concepts
Specialty store
Off-price retailer
Category-killer store
Supermarketretailing
Supermarket
Convenience store Warehouse club
Nonstore retailingDirect selling
Telemarketing
Automatic vending
Online retailing
Direct marketing
7/31/2019 Dist. Mgmt
35/57
Wholesaling andPhysical Distribution
7/31/2019 Dist. Mgmt
36/57
7/31/2019 Dist. Mgmt
37/57
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
7/31/2019 Dist. Mgmt
38/57
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
7/31/2019 Dist. Mgmt
39/57
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
7/31/2019 Dist. Mgmt
40/57
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.
7/31/2019 Dist. Mgmt
41/57
Factors suggesting which type of Middlemen
7/31/2019 Dist. Mgmt
42/57
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
7/31/2019 Dist. Mgmt
43/57
Physical Distribution
PHYSICAL DISTRIBUTION
LOGISTICS
All activities involvedin moving the right product
to the right placeat the right time
7/31/2019 Dist. Mgmt
44/57
Physical Distribution
GainDifferentialadvantage
Coordinatedlogistics
Supply
ChainManagement
Fulfillment
InE-commerce
Reducecosts
Strategic Use of Physical
7/31/2019 Dist. Mgmt
45/57
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
7/31/2019 Dist. Mgmt
46/57
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
7/31/2019 Dist. Mgmt
47/57
Tasks in Physical Distribution Management
InventoryControlOrderProcessing
Inventory Locationand Warehousing
MaterialHandling
Transportation
Tasks in Physical Distribution Management
7/31/2019 Dist. Mgmt
48/57
Tasks in Physical Distribution Management
InventoryControl
OrderProcessing
Customer
Service
Electronic
DataInterchange
Economic Order Quantity
7/31/2019 Dist. Mgmt
49/57
Economic Order Quantity
Inventory Location and
7/31/2019 Dist. Mgmt
50/57
Inventory Location andWarehousing
PrivatePublic
Typesof
Warehouses
MaterialsHandling
7/31/2019 Dist. Mgmt
51/57
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.
7/31/2019 Dist. Mgmt
52/57
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%
7/31/2019 Dist. Mgmt
53/57
Transportation
Package-delivery
IntermodalTransportation
FreightForwarders
MajorModes
Comparison of Transportation Methods
7/31/2019 Dist. Mgmt
54/57
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
Key Terms and Concepts
7/31/2019 Dist. Mgmt
55/57
Key Terms and Concepts
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
Key Terms and Concepts
7/31/2019 Dist. Mgmt
56/57
Key Terms and Concepts
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
Key Terms and Concepts
7/31/2019 Dist. Mgmt
57/57
Key Terms and Concepts
Containerization
Intermodal
transportation
One-stop shipping
Freight forwarder
Package-deliveryfirms
Top Related