DISTRIBUTION

TalManuel Taro Arindam

Martin

Jung

Introduction

Product

Consumer

Partner

IT

Agenda

Imagine you become a Product Manager, and you have to decide upon your product strategy.

You are probably thinking, design, marketing, promotion operations, pricing

But have you ever thought about distribution?

Imagine …

The neglected “P”

For most people distribution is still a black box

Looking for distribution on the Value Chain

? ??

Porter’s value chain does not specifically define distribution

• Outbound logistics?

• Marketing and Sales?

• Services?

What really influence our distribution?

ProductChannel Partners

Consumer

Information Technology

Evolution of channel management

Producer Producer Producer Producer

Consumers Consumers Consumers Consumers

Retailers Retailers Retailers

Wholesalers Wholesalers

Agents orBrokers

WholesalerWholesalerChannelChannel

RetailerRetailerChannelChannel

DirectDirectChannelChannel

Agent/BrokerAgent/BrokerChannelChannel

Producer

Consumers

Retailers

Wholesalers

Agents orBrokers

Agent/BrokerAgent/BrokerChannelChannel

Conventional Marketing Channel

Vertical MarketingSystem (VMS)

What’s the value added from each

Intermediary?

Can we retain the value without

intermediary?

Factors to influence channel strategy decisions

Issues that InfluenceChannel Strategy

Issues that InfluenceChannel Strategy

Factors Factors Affecting Channel Affecting Channel

ChoiceChoice

Factors Factors Affecting Channel Affecting Channel

ChoiceChoice

Levels ofLevels ofDistributionDistribution

IntensityIntensity

Levels ofLevels ofDistributionDistribution

IntensityIntensity

ObjectiveObjectiveObjectiveObjectiveIntensity Intensity LevelLevel

Intensity Intensity LevelLevel

IntensiveIntensive

SelectiveSelective

ExclusiveExclusive

Achieve mass market selling.

Convenience goods.

Achieve mass market selling.

Convenience goods.

Work with selected intermediaries.

Shopping and some specialty goods.

Work with selected intermediaries.

Shopping and some specialty goods.

Work with singleintermediary.

Specialty goods and industrial

equipment.

Work with singleintermediary.

Specialty goods and industrial

equipment.

Number of Number of IntermediariesIntermediariesNumber of Number of

IntermediariesIntermediaries

ManyMany

SeveralSeveral

OneOne

Partner FactorsPartner Factors

Product FactorsProduct Factors

Customer FactorsCustomer Factors

Other FactorsOther Factors

Introduction

Product

Consumer

Partner

IT

Agenda

Traditional natural gas transport occurs via extensive pipeline networks.

Gas pipelines

West-African natural gas producer

Shipping

Regasification terminal

Pipeline delivery

Cooling gas to minus 162°C results in

the condensation of the gas, known as Liquefied Natural

Gas (LNG).

Liquefaction plant

Gas production

Benefits• LNG takes up about one six

hundredth of the volume of gaseous natural gas.

• LNG can be transported to distant customers via ships without expensive pipeline networks

Liquefying gas to LNG enables new distribution possibilities.

Market trends

• Major players: Shell, ENI, Gaz de France, Tractebel, Endesa, Iberdrola

• Main countries: Algeria, Lybia, Oman, Qatar, Nigeria, UEA, Trinidad, Egypt, Australia, Norway, Venezuela

LNG is a growing market especially for remotely located gas producers.

0

1

2

3

4

5

6

7

% Worldwide growth in gas

% Worldwide growth in LNG

3.8%

5.9%

Introduction

Product

Consumer

Partner

IT

Agenda

Coke versus milk – multi-channel distribution.

Coca-Cola accounts for less than 2 ounces of the 64

ounces of fluid that each of the world‘s 4.4 bn people

drink every day. The enemy is coffee, milk, water.

Super-markets, Kiosks

Airlines

Clubs, Bars

Restaur-ants, Hotels

Vending machines

Bot

tler

Consumers

Retailers

Mr. Goizueta CEO

70.4%

21.5%

100%

The Pepsi challenge or how to choose the right partner

• Venezuela was the only country in which Pepsi was bigger than Coca Cola

• In 1996 Cisneros Group switched from bottling Pepsi to Coke

• In the last quarter of 1996 Pepsi had only 15.5% market share

Introduction

Product

Consumer

Partner

IT

Agenda

In the Japanese office supply market customer needs changed over the years.

Although we are a small company... we want to buy office supplies in any number, at any time!

• Small order, frequent deliveries

• Quick delivery

• One Stop Shopping

New customer needs!

5%

95%

Number of companies in Japan based on number of employees

>30 employees

< 30 employees

< 10 employees

• Big firms: Daily replenishment by sales reps at discount price

• Small firms: Go to stationer’s shop and buy at a fixed price

Askul revolutionized the distribution of office supplies by introducing an agent-vendor system.

• Reduction of intermediaries

• Faster delivery

• Less inventory cost

• Growing customer base

• Wholesaler and retailer revert into agents. Profit sharing and little cannibalization among stakeholders possible.

New distribution

AgentBilling,

RegistrationBilling,

Registration

Order

Delivery

Customer

MakerPrimary

WholesalerSecondaryWholesaler

Retailer Customer

Inventory Inventory Inventory

Old distributionPromise: Next-day delivery on

all orders, from a single pencil to a truckload of office

supplies

Introduction

Product

Consumer

Partner

IT

Agenda

One of the largest distribution networks exist in India.

Do you know one of the largest distribution networks in the world?

Making over 200.000 transactions in one

hour?

Nutan Mumbai Tiffin Box Suppliers Charity Trust

or…Dabbawallahsor… Lunch deliverymen

Mumbai

Key facts• Started in 1890 with 25 clients –

Now over 200,000 clients• Boxes carried on heads, hand-

wagons & cycles• Each porter covers 70 - 80 km

in 2 ½ hrs

…

Transport/ Delivery

Customer at workplace

Packaging

Cooking at home

•Home-made lunch picked up 10 am

•Boxes taken to nearest railway station & sorted

•Boxes unloaded at destination and re-sorted

•Delivered at 12.30 p.m.

•At 1.30 p.m returned to houses

…

Each lunch-box-lid has a complex coding system:

• Symbols identify the house, the originating & destination stations

• Colors identify each suburb & individual sectors

• Dashes, crosses & dots identify the street, the building and the floor of delivery

IT-Free and certified!

6 Sigma performance rating by Forbes ~ 1 error in 16 million

transactions -- Treated on a par with

Motorola

Prof. C K Prahlad: “quintessential

master of supply chain management”

Distribution as strategic asset

Distribution as strategic asset

Thanks.

Any questions?

ProductChannel Partners

Consumer

Information Technology