distribution planning & control

7/29/2019 distribution planning & control

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Unit - 3


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Distribution Management

Distribution management it providesthe customer with:

Place, Time &

Possession Utility.


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Need for DistributionChannel

There are 3 agents involved in themovement of product from themanufacturing unit to the customer :

1. Carrying & forward agent of thecompany

2.

Distributor3. Retailer

The channels help in the smooth


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Functions of the channelmembers:

1. To accumulate the right kind ofgoods to meet customer needs

2. To believe in simplified transactions

and work with large number ofproducts to minimize thedistribution cost

3. To provide information to both buyer& seller to help them manage theirbusiness better.

4. To be aware of the envt. in which


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D screpanc esDistribution channels:

Spatial discrepancy this occurs dueto the space or distance b/w theproduction & consumption point.

Temporal discrepancy the timedifference b/w the production pointand the time at which the product

may get bought or consumed. Need for breaking the bulk to

minimize the production cost ,

products have to be made in largeruantities or in bulk but consum tion


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Need for assortment the samecompany that makes one set of

products in one plant and another setof products in another plant locatedfar away. At the consumer level ,

when they visit their favoriteretailer ,they expect al the productsof the company to be available . Thisaggregation of arranging for the

entire assortment is done by thechannel member. Because of theconsumers , the retailer are forced to

keep different brands.


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Distribution Channel

Strategy

Corporate strategy

Marketing strategy

Distribution strategy


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Corporate strategy

It sets the overall strategy &direction for the company

Marketing strategy

It outlines how this overall companystrategy will be achieved using thecompany products & its distributionnetwork.

Distribution strategy

Organizing & managing the

distribution functions forms the part of


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The distribution strategy willlook at some of these factors

1. Defining customer level

2. Setting distribution objectives

3. Set of activities4. The distribution structure ( who

will do what)

5. Policy & procedure

6. Key performance indicators


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Patterns of Distribution

Intensive distribution the productis made available in as many outletsas possible.

eg: FMCG products.

Selective distribution few selected

outlets will keep the product.eg: Tanishq jewellery.

Exclusive distribution only one

outlet in the market may keep the


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Marketing channels

There are basically 3 types of channelflows:

Forward - Goods & Services

Backward - Payment for goods &return

Both ways - Information

Channel format possible :

Producer driven


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Producer driven themanufacturer produces & tries toreach the product directly to hiscustomer.

Seller driven the companymaking the products useswholesalers & retailers in the finalstage to reach their customers .

Service driven they are the

people who facilitate the


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Others

multi level marketing systems -the sales agent sells the companyproduct & also recruit other salesagent to keep the chain getting

stronger.Co operative societies particularlyset up in rural India to help the farmers

. These societies are set up by thefarmers only & have a no of outlets setup closer to the farmers location

dealing in agricultural inputs, daily useroducts & hel sell the a ricultural


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Vending machines for tea ,coffee ,soft drinks etc can reach the consumer

directly.Television home shopping.

Channel levels

1. Zero level channel- product isdirectly provided to the customer bythe company.


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Some of the channel members arepart of the reverse logistics process

whereby something from theconsumers has to go back to theproducer.

Eg: empty soft drink bottles that thesoft drink makers want to get backfrom the market. This is called as

backward channel.


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Service channels

What is the channel expected todeliver

1. Variety of products

2. Proper location

3. Speed of delivery

4. Availability of product in lot size tosuit the customer.

5. In addition to channel members theretailers provide more benefits tothe consumer like home deliver ,


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systems/dynamics1.

Vertical marketing channels each channel member including thecompany is acting independently &trying to earn profit . If all these

entities were to act together as oneteam to provide service to the enduser , it would be called as vertical

marketing channel (Types:Corporate , administered,contractual)


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3. Multi channel marketingchannels- this system is used by

companies which uses 2 or moremarketing channels to reach differentcustomer segments.

Benefit :

a. Far better coverage of the market.

Used when :a. Same product is sold to different

segments

b. Unrelated product is sold in same


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Channels Intermediaries

Middlemen

Agent or Broker

Retailing Wholesaling

Distributor


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Functions of retailing

Collect product assortment & offerthem for sale

Provide Mark prices and pay forgoods

Conclude transaction with finalconsumer


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Retailing :

1. Definition- Any business entity

selling products & services toconsumers is retailing.

2. Retail formats

. location format

. merchandise based format

.

Size based format. Price based format

. Concession based

3 T f t il


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3. Types of retailer-

Conventional (try to avoid pricecompetition)

General store

Speciality shop

Departmental store

Supermarkets

Discount houseHyper markets

Convenience stores

Automatic vendin


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4. Role of retailer

Merchandising(planning, strategy

,function)

The service

The format used

The communication process

5. Retail strategies

Positioning strategy

Product differentiation strategy

Operational superiority


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Wholesaling :

It is a trader who purchases goods in

larger quantities from themanufacturer & resells to retailer insmall quantity.

Functions of wholesalers : Sales & promotion of chosen

company products

Breaking bulk to suit customerrequirement

Storage & protection of goods tillthe are sold

Classification of


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Classification ofwholesalers :

Full service stocking, selling,

offering credit, delivery and anybusiness assistance are allprovided.eg: company distributor.

Limited service

Merchant wholesaler- independentbusinesses which include distributors

Brokers & agents bring the buyer& seller together & rarely handle thegoods themselves & get acommission out of all transactions.


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Key tasks of Wholesaler

Aggregating the goods Warehousing of goods

Order booking & execution

Transportation of the goods

Risk bearing

Grading & Packing Providing market information

Li it ti f


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Limitations ofwholesalers

The wholesaler may not always givethe correct info to he retailers ormanufacturers . Wholesaler in caseof textile or paper industry do notlike the manufacturer & customers toever meet they like them to keepapart.

Addition of wholesaler in themarketing channel increases the costwhich is reflected in the price paid by

the customer.

Major wholesaling


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Major wholesalingdecisions

Which market to operate in? Manpower

Which product to sell

Promotional support

Credit & collection

Image & customer perceptions Warehouse location& design

Inventory control


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Selection ofIntermediaries

Channel decision

- marketing mix variables

- long term commitment- degree of channel control

- level of customer services

- price of product or services


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Factors in selection of distributionchannels:

Size of prospective channel members(sales , financial strength)

Sales strength ( no. of salesmen,

technical competence)

Product lines ( competitive ,complementary products & the

quality)

Reputation well established( leadership)


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Advertising and sales promotion

Sales compensation Acceptance of training assistance

Inventory ( kind and size , safety

stocks )


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Motivation ofIntermediaries

Relationship marketing

Benefits and cost offered tointermediaries

Cooperative programmes

Distribution advisory councils

Distribution channel control

Distribution channel conflicts

es gn ng c anne


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es gn ng c annesystem

Factors that determine the nature ofthe distribution channel

Nature of the product or service

Location and nature of the customers

Nature of competition and distributionsystems

Intensity of distribution required

Nature of the markets being targeted

Channel design and


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Channel design andplanning process

1. Channel Stages in channel planning

Segmentation stage

Pharma company segments: Doctors/Chemists/ Hospitals and nursing

homes Positioning stage

Service objectives at each channel

element. Each segment has differentex ectation


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Focus stage

Doctors in all A cat towns

Chemists located in the main markets ofA towns

Only big govt and private hospitals

Developing the right channelalternative

Modifications required to make it anideal channel

Segmentation Positioning


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2. Defining the customer needs -

Lot sizeIts he most convenient size of the product

that the customer can buy at a time.Toothpaste pack sizes, Wheat flour packs.

Waiting time

Difference of Desire to purchase

Choice to the consumer

Variety and assortments


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Place utility

Service support

Sales support for maintenance andrepair

Installation and training

Credit Home delivery

Regular service follow


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3. Designing channel objectives

Industrial products require direct-marketing by the company.

Consumer products should be available

in large no of outlets Ice-cream products need cold storage

facilities.

Seeds selling will need rural distribution Multi level marketing will require their

distributors to appoint furtherdistributors.

4 Channel Alternatives study


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4. Channel Alternatives study

Business intermediaries currentlyavailable

The no and type of intermediariesrequired

Any new member to be specially

developed Roles of each channel member

5. Cost of channel system-

1. Cost of transportation of goods betweenthe company and the end user

2. Cost of order booking and execution

3. Cost of stock returns/ date expired stocks


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6. Number of intermediaries

Should be adequate for expectedcoverage of the target markets at thesame time should not be too much to

dilute the effort and add to the costs. Its not easy to get rid of channel

members

va ua on o a or


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va ua on o a oralternatives

Cost:

Every channel will have different costsassociated with

Ability to manage and control

Considering coverage, frequency, productivity,inventory, credit, distribution, promotions,after-sales-service, pre-sales-sales, channelsalespeople, stock points

Adaptability Sensitivity of channel to addition, elimination

of products, additional service, new territorycoverage, handling price change,.

Range and volume to be handled


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3/18/13

CHANNELCONFLICT

&

MANAGEMENT

Ch l t i i 3


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Channel mgmt is in 3broad phases :

1. Use of power bases / channelpower

2. Identifying & resolving theconflicts

3. Channel coordination


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1. Use of power bases / channelpower

Sources of power :

- reward- coercion

- reference

- legitimate

- expert

en y ng reso v ng


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. en y ng reso v ngthe conflicts

Conflict is the situation of disagreement

between the channel members from the same

marketing channel system.

Stages of conflict :

Latent

Perceived


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Reason for channel conflict :

a. Goal incompatibility

b. Unclear role definition

c. New channel partner

d. Multiple distributore. Difference in perception

f. Loss of opportunity

g. Clash of interest

h. Competition & conflict

M i fli t


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Managing conflict :

Understanding the nature & impact of

conflict

(importance , frequency, check perception)

Tracing the source of conflict

Understand the impact of the conflict

y es o con c


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y es o con cresolution

Avoidance

Aggression (selfish style)

Accommodation (surrender)

Compromise (mid waysol)


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Channel policies

Markets to be serviced

Customer coverage

Pricing Product lines

Selection of channel members

Termination of channel partners

Ownership of the channel


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Steps to modify

an

Existing

Channel System


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Listing of desired services levels

Level of service planned

Activities required to deliver theobjectives

Assign activities to channel

partnersDerive cost of performingactivities

Compare ideal channel structure

with existing

Derive channel total structure

Modified channel system in place

Take action to bridge the gap

Identify gaps to be covered

Channel design


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Channel designcomparison factors

Efficiency: Input versus output Effectiveness: How well channel meets

its objectives

Capacity: How effectively channel canhandle changes in volume

Agility: How well can channel handlechanging demand pattern

Consistency: of performance

Reliability: Commitment onperformance


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ChannelDesign

Implementatio

n

Define criteria for appointment of channel partners


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Document channel objectives for sales people andchannel partners

Define the profile of the customers to be services

List down all the customer service levels in detail

List the tasks in sequence which will drive theseservice levels

Get benchmark of good practices from knowledge of

competitionDefine channel structure and channel partners who

constitute itAllocate the tasks among the channel partners

Work out cost of delivering CS levels and prepare a

budgetAdvice the channel partners on the tasks and their

benefitsDefine channel partner performance appraisal system

and share it

Define criteria for appointment of channel partners

List down reports, records and frequency from each

Documents

distribution planning & control