Distribution & Logistcs

7/30/2019 Distribution & Logistcs

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Distribution

&

Logistics Management


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Distribution Management


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Distribution channels help in the placeaspect of the marketing mix

Distribution provides place, time andpossession utility to the consumer

The Marketing Mix


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Example

Consumer wants to buy a tube of toothpaste Made available at a retail outlet close to her

residence place

Made available at 8 pm on a Tuesday evening

when she wants it time She can pay for the toothpaste and take it away

possession

The company distribution function has made all thispossible.

The situation would be similar if a customer wants tobuy a refrigerator or medicines or even an electricmotor


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Players Involved

The company and its distribution network

Direct company to consumer

Company to a C&FA / distribution center to

distributors to retailers Distributor to wholesaler to retailer

All these intermediaries help the process of

exchange of the product or service.

What is distribution management?


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Distribution Channels Defined

Are sets of interdependent organizations

involved in the process of making a product or

service available for use or consumption.

Whether selling products or services, marketingchannel decisions play a role of strategic importance

in the overall presence and success a company

enjoys in the marketplace.


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Distribution Channels

Are intermediaries or middlemen Exist because producers cannot reach all their

consumers

Multiply reach and provide efficiency to the marketingprocess

Facilitate smooth flow and create time, place andpossession utilities

Have the core competence and reach

Provide contact, experience, specialization andscales of operation


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Types of Channels

Sales: motivates buyers, shares information

between company and its consumers,

negotiates fair bargains for consumers and

finances the transactions Delivery channel meant only for physical part of

the distribution

Service channel performs after sales service

Channel members


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Listing of Channel Members

Company own sales team

C&FAs and CSAs

Distributors, dealers, stockist, value-added re-

sellers Agents and brokers

Franchisees

Electronic channels

Wholesalers

Retailers


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C&FAs / C&SAs

C&FA: carrying and forwarding agent andC&SA: carrying and selling agent both areon contract with a company

Both are transporters who work between thecompany and its distributors

Collect products from the company, store in acentral location, break bulk and despatch to

distributors against indents Goods belong to the company

C&SA also sells the goods on behalf of thecompany but remits proceeds after sale


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Distributors, Dealers,

Stockists, Agents Name denotes the extent of re-distribution

done by them

Distributors invest in the products buy

products from the company Are on commission, margins or mark-up

May or may not get credit but extend credit

Distributors cover the markets as per a beat

plan. All others merely finance the business. Distributors could be exclusive for a company

Agents bring buyer and seller together


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Wholesalers

Operate out of the main markets

Deal with a number of company products oftheir choice

Are not on contract with any company Sell to other wholesalers, retailers and

institutions

Negotiate about 15 days credit from company

distributors also provide credit to theircustomers

Operate on high volumes and low margins


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Retailers

The final contact with consumers

Operate out of their shops and sell a largeassortment and variety of goods

Located closest to consumers Buy from company, distributors or wholesalers

Highest margins in the network

Provide personalized services to their customers


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Industrial Products

Producer Producer

Industrial Distributor

Industrial Customer

Industrial Distributor

Industrial Customer

Agent/middleman

Customers may also direct from company sales force


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Consumer Products

Producer ProducerProducer

Customer /

consumer

Retailer

DistributorDistributor

Retailer

Customer/

Consumer

Wholesaler

Customer/

Consumer

Retailer

Retailers may also direct from company sales force


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Patterns of Distribution

Determines the intensity of the distribution

Intensity decides the service levelprovided

Types of distribution intensity: Intensive

Selective

Exclusive


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Distribution Intensity

Intensive: distribution through every

reasonable outlet available FMCG

Selective: multiple, but not all outlets in

the market pharma, frozen food

Exclusive: may be only one outlet in a

market - car dealers


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Intensive Distribution

Strategy is to make sure that the product

is available in as many outlets as possible

Preferred for consumer, pharmaceutical

products and automobile spares


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Selective Distribution

A few select outlets will be permitted to

keep the products

Outlets selected in line with the image the

company wants to project

Preferred for high value products Tanishq jewelry

Keeps distribution costs lower


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Exclusive Distribution

Highly selective choice of outlets may be

even one outlet in an entire market

Could include outlets set up by companies

Titan, Bata

Producer wants a close watch and control

on the distribution of his products.

Channel strategy


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Distribution Channel Strategy

Derived from the corporate strategy and themarketing strategy

Steps for designing the distribution strategy are:

Defining customer service levels Distribution objectives and steps

Structure of the network required

Policy and procedure to be followed

Key performance indicators Critical success factors


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Customer Service Levels

Defined by the nature of the industry, the

products, competition and market shares.

Affordability also decides the service level

It should at least match competition.

Customer expectations have no limit


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Distribution Objectives

Influenced by the customer expectations

Defines the extent of time, place and

possession utility which the customer can

expect out of the channel network

Set of activities.


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Set of Activities

Manner in which the company and itsmarketing channels go about achieving thecustomer service levels

Some of these steps could be:

Sales forecasts Dispatch plans

Market coverage beat plans

Journey plans for service engineers

Collection of sales proceeds Carrying out promotional activities

The company also decides as to who is toperform which task Organization.


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Distribution Organization

Extent of company support and outsourcing to

be decided

Budget for the cost of the distribution effort

Select suitable channel partners C&FAs, anddistributors

Setting clear objectives for the partners

Agree on level of financial commitments by thechannel partners.

Policy and procedure..


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Policy & Procedure

Define policy and implementationguidelines through Operating Manuals

Policy guidelines include

Code of conduct for channel members System for redressal of complaints

Any additional subsidies

Handling institutional business Service policy for engineering products

KPIs.


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Key Performance Indicators

For measurement of effectiveness. Some ofthese could be: Consistent achievement of targets by product groups,

periods and territories

Achievement of market shares

Achievement of profitability

Zero complaints from customers

No stock returns

Ability to handle emergencies and sudden spurts indemand


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Key Performance Indicators

For measurement of effectiveness. Someof these could be:

Balanced sales achievement during a period

no period end skews Market coverage with ready stocks

Excellent management of accountsreceivables

Minimize losses on account of stock-outs

Minimize damages to products

CSFs


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Critical Success Factors

The distribution strategy also needs thesupport and encouragement of topmanagement to succeed

Some of the CSFs could be:

Clear, transparent and unambiguous policy andprocedure

Serious commitment of the channel partners

Fairness in dealings

Clearly defined customer service policy

High level of integrity

Equitable distribution at times of shortage

Timely compensation of channel partners


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Key Learnings

Companies use distribution channels to reachtheir large customer base

The channel members could be nominated likedistributors or freelance like retailers

Distribution channels provide the time, place andpossession utility for consumers for the companyproducts

Distribution channels could be sales, service ordelivery focused


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Key Learnings

Companies could also choose the intensity of

distribution based on their products and

distribution objectives

Distribution could be intensive, selective orexclusive

The distribution strategy takes care of service

levels, objectives, activities, organisation to

deliver the service, measurement of

performance and critical success factors

Documents

Distribution & Logistcs