Distribution & Logistics (Channel Management)


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Distribution & Logistics (Channel Management)

  1. 1. DISTRIBUTION CHANNEL AND LOGISTICS MANAGEMENT Presented by: Dr. Prashant Mehta Assistant Professor National Law University, Jodhpur
  2. 2. AGENDA <ul><li>Definitions </li></ul><ul><li>Characteristics of Channel of Distribution </li></ul><ul><li>Functions of Channel of Distribution </li></ul><ul><li>Classification / Types of Channel of Distribution </li></ul><ul><li>Channel Systems </li></ul><ul><li>Channel Design Decisions </li></ul><ul><li>Channel Management Decisions </li></ul><ul><li>Physical Distribution and Logistics Management </li></ul><ul><li>Distribution Channel in Pharmaceutical industry </li></ul>
  3. 3. Distribution Channel <ul><li>Channel of distribution have a broad impact on the Marketing program of any firm, because it is one of the most important component of Marketing-Mix. The other components of marketing mix are Product, Price and Promotion. </li></ul><ul><li>Definition </li></ul><ul><li>The main objective of distribution strategy is getting the right goods to the right place at the right time at the least possible cost. In other words we can also define distribution channel as a way of moving goods from the point of production to the point of consumption. </li></ul><ul><li>It can also be defined as an organized network of agencies and institutions, which in combination perform all the activities required to link producers with end users and users with the producers to accomplish the Marketing task. </li></ul>
  4. 4. Characteristics of Channel of Distribution <ul><li>Characteristics of distribution channel cannot be over emphasized by any stretch of our imagination because without distribution channel marketing task would have remained incomplete. Following are few main characteristics of distribution channel: </li></ul><ul><li>Characteristics </li></ul><ul><li>It requires a minimum of buyer and a seller. Besides this it may include other middleman. </li></ul><ul><li>A basic transaction in distribution channel is the exchange of ownership / title of goods. Middlemen play an very important role in transfer of ownership / title of goods. </li></ul><ul><li>Distribution channel creates transactional efficiency. </li></ul><ul><li>A distribution channel may be simple or complex. (Handshake agreement or large contracts) </li></ul><ul><li>Distribution channel may be long or short depending on the company’s marketing requirements as well as the product of the company. </li></ul>
  5. 5. Functions of Channel of Distribution <ul><li>Assorting </li></ul><ul><li>Accumulation </li></ul><ul><li>Allocation </li></ul><ul><li>Buying   </li></ul><ul><li>Contact </li></ul><ul><li>Distribution </li></ul><ul><li>Financing </li></ul><ul><li>Market information  </li></ul><ul><li>New Products  </li></ul><ul><li>Product Planning </li></ul><ul><li>Promotion </li></ul><ul><li>Pricing  </li></ul><ul><li>Physical Possession   </li></ul><ul><li>Risk Taking </li></ul><ul><li>Service </li></ul><ul><li>Sorting </li></ul>
  6. 6. Classification/Types of Channel of Distribution Direct Channels <ul><li>  Own Retail shops </li></ul><ul><li>Personal selling (door to door) </li></ul><ul><li>Mail order selling </li></ul><ul><li>Automatic vending </li></ul><ul><li>Franchised shops </li></ul><ul><li>Telephone selling (Telemarketing) </li></ul><ul><li>Exclusive Stores/Specialty Stores </li></ul><ul><li>E-marketing </li></ul>
  7. 7. Classification/Types of Channel of Distribution Indirect Channels <ul><li>Merchandise Agents and Brokers – Works on Commission basis </li></ul><ul><li>Merchandise Wholesalers or trade channels </li></ul><ul><ul><li>Manufacturer/Producer  Consumer/End User </li></ul></ul><ul><ul><li>Manufacturer/Producer  Wholesaler  Consumer/End User </li></ul></ul><ul><ul><li>Manufacturer/Producer  Retailer  Consumer/End User </li></ul></ul><ul><ul><li>Manufacturer/Producer  Wholesaler/Distributor  Retailer  Consumer/End User  </li></ul></ul><ul><ul><li>Manufacturer/Producer  Wholesaler/Distributor  Semi-wholesaler  Retailer  Consumer/End User </li></ul></ul><ul><ul><li>Manufacturer/Producer  Agent/Broker  Retailer  Consumer/ End User  </li></ul></ul><ul><ul><li>Manufacturer/Producer  Agent/Broker  Wholesaler  Retailer  Consumer/End User </li></ul></ul>
  8. 8. Channel Systems <ul><li>Vertical Marketing System </li></ul><ul><li>A distribution channel structure in which producers, wholesalers and retailers act as a unified system. One channel member owns the other, has contracts with them and the power that they all co-operate. The economies are achieved through size, bargaining power and elimination of duplicated services. </li></ul><ul><li>Horizontal Marketing System </li></ul><ul><li>A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunities where they can combine there resources and use they optimally. </li></ul><ul><li>Hybrid Marketing Systems </li></ul><ul><li>Multi-channel distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments. </li></ul>
  9. 9. Channel Design Decisions <ul><li>In designing marketing channels, a manufacturer struggles between what is ideal and what is practical.Therefore the design aspects should involve the following. </li></ul><ul><li>  </li></ul><ul><li>Analyzing the consumer needs </li></ul><ul><li>The designing of the channel starts with finding out what values consumers in various target segments are looking from the channel. </li></ul><ul><li>Setting the channel objectives </li></ul><ul><ul><li>It must be effective and efficient </li></ul></ul><ul><ul><li>It must have low cost of implementation </li></ul></ul><ul><ul><li>It must have better control </li></ul></ul><ul><ul><li>It must have wide coverage </li></ul></ul><ul><ul><li>It must contribute to maximum overall profit </li></ul></ul>
  10. 10. Channel Design Decisions <ul><li>Factors affecting choice of Distribution channel </li></ul><ul><li>Market Factors: </li></ul><ul><li>Nature of Market </li></ul><ul><li>Number of Potential Customers </li></ul><ul><li>Geographic Concentration </li></ul><ul><li>Order Size </li></ul><ul><li>Product Factors: </li></ul><ul><li>Unit value </li></ul><ul><li>Perishable Goods </li></ul><ul><li>Technical Nature of Products </li></ul><ul><li>Company Factors: </li></ul><ul><li>Financial Resources </li></ul><ul><li>Managerial Capability </li></ul><ul><li>Desire for Channel Control </li></ul><ul><li>Service provided by the seller </li></ul>
  11. 11. Channel Design Decisions <ul><li>Middleman Factors: </li></ul><ul><li>Product launch </li></ul><ul><li>Promotional scheme </li></ul><ul><li>Market Information </li></ul><ul><li>Environmental Factors: </li></ul><ul><li>Economic conditions </li></ul><ul><li>Technological inventions </li></ul><ul><li>Socio-cultural developments </li></ul><ul><li>Political and Legal </li></ul><ul><li>Ethical factors and Rival/Competitors channel </li></ul><ul><li>Identifying the major alternatives: </li></ul><ul><ul><li>Types of intermediaries </li></ul></ul><ul><ul><li>Number of intermediaries (Intensive / Exclusive / Selective) </li></ul></ul><ul><ul><li>Responsibilities of each channel member </li></ul></ul><ul><li>Evaluating the major alternatives : </li></ul><ul><ul><li>Economic criteria </li></ul></ul><ul><ul><li>Control criteria </li></ul></ul><ul><ul><li>Adaptive criteria </li></ul></ul>
  12. 12. Channel Management Decisions <ul><li>Selecting the Channel Members </li></ul><ul><li>Motivating the Channel Members </li></ul><ul><li>Evaluating the Channel Members </li></ul>
  13. 13. Physical Distribution and Logistics Management <ul><li>Marketing logistics involves planning, implementing and controlling the physical flow of materials, final goods and related information from the point of origin to the point of consumption to meet the customer requirements at the profit. </li></ul><ul><li>Logistics goal is to provide customer satisfaction and customer service, speedy and flexible delivery system, presorting and pre-tagging of merchandise, order tracking information and willingness to take back or replace defective goods. </li></ul><ul><li>Main objective of logistics system is to provide customer satisfaction at the least cost. </li></ul>
  14. 14. Major Logistics Functions <ul><li>Order Processing </li></ul><ul><li>It includes checking customers credit, checking of stock, order to ship, bills to customers, update inventory records and send production order for new stocks </li></ul><ul><li>Warehousing </li></ul><ul><li>Owned / Rented </li></ul><ul><li>Types/ Number of Warehouses </li></ul><ul><li>Location of Warehouses </li></ul><ul><li>Inventory </li></ul><ul><li>Inventory Management (Ordering cost and Carrying cost) </li></ul><ul><li>Just in time inventory </li></ul><ul><li>Transportation </li></ul><ul><li>Rail </li></ul><ul><li>Trucks </li></ul><ul><li>Ships </li></ul><ul><li>Pipeline </li></ul><ul><li>Air </li></ul>
  15. 15. Distribution Channel in Pharmaceutical Industry <ul><li>A Profile </li></ul><ul><li>Pharmaceutical Industry – Indian v/s Multinationals </li></ul><ul><li>Product Profile – Medicines, Vaccines, IV Fluids, Disposables etc </li></ul><ul><li>Channel of Distribution – Direct, Indirect and Others </li></ul>