Lectre 1 distribution_mgmt.

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Lectre 1 distribution_mgmt.

  1. 1. DISTRIBUTION MANAGEMENT <br />CHAPTER NO : 8<br />
  2. 2. 2<br />Learning Objectives<br />Role of distribution management in the marketing mix<br />Why distribution channels are required<br />Distribution channel strategy<br />Overview of distribution channel members<br />Intensity in the distribution effort<br />
  3. 3. The Marketing Mix<br />Product <br />Place <br />Price<br />Promotion <br />Distribution channels help in the ‘place’ aspect of the marketing mix<br />Distribution provides place, time and possession utility to the consumer <br />3<br />
  4. 4. Example <br />Consumer wants to buy a tube of toothpaste<br />Made available at a retail outlet close to her residence – place<br />Made available at 8 pm on a Tuesday evening when she wants it – time<br />She can pay for the toothpaste and take it away – possession<br />The company distribution function has made all this possible.<br />The situation would be similar if a customer wants to buy a refrigerator or medicines or even an electric motor<br />
  5. 5. Players Involved<br />The company and its distribution network<br />Direct company to consumer<br />Company to a C&FA / distribution center to distributors to retailers<br />Distributor to wholesaler to retailer<br />All these intermediaries help the process of ‘exchange’ of the product or service. <br />What is distribution management?<br />
  6. 6. Distribution Management<br />Management of all activities which facilitate movement and co-ordination of supply and demand in the creation of time and place utility in goods<br />The art and science of determining requirements, acquiring them, distributing them and finally maintaining them in an operationally ready condition for their entire life.<br />
  7. 7. Distribution Channels<br />Are intermediaries or middlemen<br />Exist because producers cannot reach all their consumers<br />Multiply reach and provide efficiency to the marketing process<br />Facilitate smooth flow and create time, place and possession utilities<br />Have the core competence and reach <br />Provide contact, experience, specialisation and scales of operation<br />
  8. 8. Listing of Channel Members<br />Company own sales team<br />C&FAs and CSAs<br />Distributors, dealers, stockists, value-added re-sellers<br />Agents and brokers<br />Franchisees <br />Electronic channels<br />Wholesalers<br />Retailers <br />
  9. 9. C&FAs / C&SAs<br />C&FA: carrying and forwarding agent and C&SA: carrying and selling agent – both are on contract with a company<br />Both are transporters who work between the company and its distributors<br />Collect products from the company, store in a central location, break bulk and despatch to distributors against indents<br />Goods belong to the company<br />C&SA also sells the goods on behalf of the company but remits proceeds after sale<br />
  10. 10. Distributors, Dealers, Stockists, Agents<br />Name denotes the extent of re-distribution done by them<br />Distributors invest in the products – buy products from the company<br />Are on commission, margins or mark-up<br />May or may not get credit – but extend credit<br />Distributors cover the markets as per a beat plan. All others merely finance the business.<br />Distributors could be exclusive for a company<br />Agents bring buyer and seller together<br />
  11. 11. Wholesalers<br />Operate out of the main markets<br />Deal with a number of company products of their choice<br />Are not on contract with any company<br />Sell to other wholesalers, retailers and institutions<br />Negotiate about 15 days credit from company distributors – also provide credit to their customers<br />Operate on high volumes and low margins<br />
  12. 12. Retailers<br />The final contact with consumers<br />Operate out of their shops and sell a large assortment and variety of goods<br />Located closest to consumers<br />Buy from company, distributors or wholesalers<br />Highest margins in the network<br />Provide personalised services to their customers<br />
  13. 13. Industrial Products<br />Customers may also direct from company sales force<br />Producer<br />Producer<br />Agent/middleman<br />Industrial Distributor<br />Industrial Distributor<br />Industrial Customer<br />Industrial Customer<br />
  14. 14. Consumer Products<br />Retailers may also direct from company sales force<br />Producer<br />Producer<br />Producer<br />Distributor<br />Distributor<br />Wholesaler<br />Retailer<br />Retailer<br />Retailer<br />Customer /<br />consumer<br />Customer/<br />Consumer<br />Customer/<br />Consumer<br />
  15. 15. Patterns of Distribution<br />Determines the intensity of the distribution<br />Intensity decides the service level provided<br />Types of distribution intensity:<br />Intensive<br />Selective<br />Exclusive <br />
  16. 16. Distribution Intensity<br />Intensive: distribution through every reasonable outlet available – FMCG<br />Selective: multiple, but not all outlets in the market – pharma, frozen food<br />Exclusive: may be only one outlet in a market - car dealers<br />
  17. 17. Intensive Distribution<br />Strategy is to make sure that the product is available in as many outlets as possible<br />Preferred for consumer, pharmaceutical products and automobile spares<br />
  18. 18. Selective Distribution<br />A few select outlets will be permitted to keep the products<br />Outlets selected in line with the image the company wants to project<br />Preferred for high value products<br />Tanishque jewelry<br />Keeps distribution costs lower<br />
  19. 19. Exclusive Distribution<br />Highly selective choice of outlets – may be even one outlet in an entire market<br />Could include outlets set up by companies – Titan, Bata<br />Producer wants a close watch and control on the distribution of his products. <br />Channel strategy…<br />
  20. 20. Distribution Channel Strategy<br />Derived from the corporate strategy and the marketing strategy<br />Steps for designing the distribution strategy are:<br />Defining customer service levels<br />Distribution objectives and steps<br />Structure of the network required <br />Policy and procedure to be followed<br />Key performance indicators<br />Critical success factors<br />
  21. 21. Distribution Organization<br />Extent of company support and outsourcing to be decided<br />Budget for the cost of the distribution effort<br />Select suitable channel partners – C&FAs, and distributors<br />Setting clear objectives for the partners<br />Agree on level of financial commitments by the channel partners.<br />Policy and procedure..<br />
  22. 22. Key Performance Indicators<br />For measurement of effectiveness. Some of these could be:<br />Consistent achievement of targets by product groups, periods and territories<br />Achievement of market shares<br />Achievement of profitability<br />Zero complaints from customers<br />No stock returns<br />Ability to handle emergencies and sudden spurts in demand<br />
  23. 23. Key Performance Indicators<br />For measurement of effectiveness. Some of these could be:<br />Balanced sales achievement during a period – no period end skews<br />Market coverage with ready stocks<br />Excellent management of accounts receivables<br />Minimize losses on account of stock-outs<br />Minimize damages to products<br />CSFs…<br />
  24. 24. Critical Success Factors<br />The distribution strategy also needs the support and encouragement of top management to succeed<br />Some of the CSFs could be:<br />Clear, transparent and unambiguous policy and procedure<br />Serious commitment of the channel partners<br />Fairness in dealings<br />Clearly defined customer service policy<br />High level of integrity<br />Equitable distribution at times of shortage<br />Timely compensation of channel partners<br />
  25. 25. Logistic Needs<br /> Land – Sufficient land so that industrial or business operations may be conducted smoothly.<br /> Water – distribution<br /> Energy – Sufficient electric power or alternative resources of power so that operations may go unhindered.<br /> Storage for equipments, construction goods.<br /> Machinery and spares.<br /> Warehousing space for movement of goods/temporary storing till the goods reach final destination.<br /> Transport equipments, trucks, trolleys, etc.<br /> Telephones, telefax and other communication equipments.<br />Cont….<br />
  26. 26. Logistic Management<br />Logistic management is a field of management which primarily deals with the co-ordination of resources in an organization.<br />The term logistic is used in the army for supplying/meeting the requirements of the troops. It means ‘art of moving’.<br />In the present times the term is applied to the movement of store activities, important not only to the military, but also to every business activity in the economy.<br />The term is common in the field agriculture, industry, trading.<br />
  27. 27. Definitions of Physical Distribution <br /> “The term ‘Physical Distribution Management’, is employed in manufacturing and commerce to describe the broad range of activities are:<br /><ul><li> Freight
  28. 28. Warehouseing
  29. 29. Material handling
  30. 30. Protective packing
  31. 31. Inventory control
  32. 32. Selection of site for various activities
  33. 33. Marketing
  34. 34. Forecasting.</li></ul> “Physical Distribution is the art and science of determining requirements, acquiring them, distributing them and, finally, maintaining them in an operationally ready condition for their entire life”.<br /> “Physical Distribution Management is specifically concerned with the flow of goods through the economic system.<br />Cont….<br />
  35. 35. Functions of Physical Distribution<br />In main, physical distribution functions may be listed as follows:<br />Locational analysis<br /> Transportation<br /> Material handling<br /> Warehousing<br /> Packing<br /> Order processing<br /> Packaging<br /> Inventory control<br /> Customer sales service.<br />
  36. 36. Key Learnings<br />Companies use distribution channels to reach their large customer base<br />The channel members could be nominated like distributors or freelance like retailers<br />Distribution channels provide the time, place and possession utility for consumers for the company products<br />Distribution channels could be sales, service or delivery focused <br />
  37. 37. Key Learnings<br />Companies could also choose the intensity of distribution based on their products and distribution objectives<br />Distribution could be intensive, selective or exclusive<br />The distribution strategy takes care of service levels, objectives, activities, organisation to deliver the service, measurement of performance and critical success factors <br />

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