The document discusses physical distribution and distribution channels. It describes distribution channels as a set of interdependent organizations that make products available for use. Channel decisions affect other marketing decisions and involve long-term commitments. Intermediaries provide efficiency, contacts, experience, specialization, and scale of operation to match supply and demand. Channel functions include information, promotion, contact, matching, negotiation, physical distribution, and financing. The document also discusses physical distribution management tasks like order processing, inventory control, inventory location and warehousing, materials handling, and transportation.

1. Physical
distribution
and
distribution
channels
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2. Distribution
Channels
• A
set
of
interdependent
organizations
(intermediaries)
involved
in
the
process
of
making
a
product
or
service
available
for
use
or
consumption.
• Channel
decisions
– affect
other
marketing
decisions
– involve
long-­‐term
commitments

3. Role of Intermediaries
• Greater
efficiency
in
making
goods
available
to
target
markets.
• Intermediaries
provide
– Contacts
– Experience
– Specialization
– Scale
of
operation
• Match
supply
and
demand.

4. Channel Functions
•Information
•Promotion
•Contact
•Matching
•Negotiation
•Physical Distribution
•Financing
•Risk taking

5. Physical Distribution - Nature and Importance
- Physical distribution: Moving tangible products
through distribution channels
- Physical distribution (or logistics) consists of all
activities involved in moving the right amount of the
right products to the right place at the right time
- In the past years, the surge of e-commerce has
underscored the importance of physical distribution
➔ the challenge relates to fulfilment, which entails
having the merchandise that is ordered by a
customer in stock and then packing and shipping
it in an efficient, timely manner

6. • Marketing channels are key because they are the means of
making goods and services available to ultimate users.
• Four functions of marketing channels:
• Channels facilitate the exchange process by reducing the
number of marketplace contacts necessary to make a sale.
• Distributors adjust for discrepancies in the market’s assortment
of goods and services via sorting, channeling products to meet
the buyer’s and producer’s needs.
• Channel members tend to standardize payment terms, delivery
schedules, prices, purchase lots, and other conditions.
• Channels facilitate searches by both buyers and sellers and
bring them together to complete the exchange process.
Role of Marketing Channel

7. • Most channel options involve at least one marketing
intermediary, an organization that operates between producers
and consumers or business users.
• A retailer owned and operated by someone other than the
manufacturer of the products it sells.
• A wholesaler who takes title to the goods it handles and then
distributes these goods to retailers, other distributors, or
sometimes end consumers.
• Service firms market primarily through short channels because
they sell intangible products and need to maintain personal
relationships within their channels.
TYPES OF MARKETING CHANNELS

8. DIRECT SELLING
• Direct channel—carries goods directly from a producer to the
business purchaser or ultimate user.
• Direct selling—a marketing strategy in which a producer
establishes direct sales contact with its product’s final users.
• Internet and direct mail are also potentially important tools for
direct selling.
CHANNELS USING MARKETING
INTERMEDIARIES
• For some products, using intermediaries may be more
efficient, less expensive, and less time-consuming.

9. DUAL DISTRIBUTION
• Movement of products through more than one channel to
reach the firm’s target market.
• Used to maximize the firm’s coverage in the marketplace or
to increase the cost-effectiveness of the firm’s marketing effort.
REVERSE CHANNELS
• Channels designed to return goods to their producers.
• Growing importance because of rising prices for raw
materials, increasing availability of recycling facilities, and
passage of additional antipollution and conservation laws.
• Also used for recalls and repairs.

10. SELECTION OF A MARKETING
CHANNEL
• Multiple factors affect selection of a marketing
channel.
Market Factors
Product Factors
Organizational Factors
Competitive Factors
CHANNEL STRATEGY DECISIONS

11. DETERMINING DISTRIBUTION INTENSITY
• Intensive distribution Distribution of a product through all available
channels.
• Selective distribution Distribution of a product through a limited
number of channels.
• Exclusive distribution Distribution of a product through a single
wholesaler or retailer in a specific geographic region.
• Restrictions are illegal if they reduce competition or create a
monopoly.

12. 12
WHO SHOULD PERFORM CHANNEL FUNCTIONS?
• Intermediary must provide better service at lower costs than
manufacturers or retailers can provide for themselves.
• Consolidation of channel functions can represent a strategic opportunity
for a company.

13. • Marketers have relationships with intermediaries in distribution channels.
• Channel captain Dominant and controlling member of a marketing channel.
CHANNEL CONFLICT
• Horizontal conflict—disagreements among channel members at the same level, such
as two competing discount stores.
• Vertical conflict occurs among members at different levels of the channel.
• The gray market—goods produced for overseas markets that re-enter the U.S.
market and compete against domestic versions.
ACHIEVING CHANNEL COOPERATION
• Best achieved when all members of channel see themselves as equal components;
channel captain should provide this leadership.
CHANNEL MANAGEMENT AND LEADERSHIP

14. Tasks in Physical Distribution Management
- Physical distribution refers to the actual physical flow of
products
- In contrast, physical distribution management is the
development and operation of processes resulting in the
effective and efficient physical flow of products
- Effective physical distribution management requires careful
attention to five interrelated activities:
1. Order processing
2. Inventory control
3. Inventory location and warehousing
4. Materials handling
5. Transportation

15. Tasks in Physical Distribution Management
1. Order Processing
- The starting point in a physical distribution system is order
processing, which is a set of procedures for receiving,
handling, and filling orders promptly and accurately
- Electronic data interchange (EDI):
- Between customer and supplier orders, invoices, and other
business functions are transmitted by computer
- Originally, EDI required a direct computer link between
supplier and customer, now it is being conducted via the
Internet
- EDI can trim the cost of order processing significantly,
which in turn may reduce purchase prices

16. Tasks in Physical Distribution Management
2. Inventory Control
- The goal of inventory control is to satisfy the order-
fulfillment expectations of customers while minimizing
both the investment and fluctuations in inventories
- Just-in-Time:
- JIT combines inventory control, purchasing, and
production scheduling
- Applying JIT, a firm buys in small quantities that arrive
just in time for production and then it produces in
quantities just in time for sale

17. Tasks in Physical Distribution Management
2. Inventory Control (continued)
- Just-in-Time:
- …
- Benefits of JIT are:
- Dramatic cost savings
- Shortened and more flexible and reliable production and
delivery schedules
- Quick responses to quality problems
- Market-Response Systems:
- The central promise is that those who intend to consume a
product should activate a process to produce and deliver
replacement items
- In this way, a product is pulled through a channel on the basis
of demand

18. Tasks in Physical Distribution Management
3. Inventory Location and Warehousing
- Management must make critical decisions about the
size, location, and transportation of inventories
- These areas are interrelated, often in complex ways
- One key consideration in managing inventories is
warehousing, which embraces a range of functions,
such as assembling, dividing, and storing
products and preparing them for reshipping

19. Tasks in Physical Distribution Management
4. Materials Handling
- Selecting the proper equipment to physically
handle products, including the warehouse building
itself, is the materials handling subsystem of physical
distribution management
- Equipment that is well matched to the task can
minimize losses from breakage, spoilage, and theft
- Efficient equipment can reduce handling costs as
well as time required for handling

20. Tasks in Physical Distribution Management
5. Transportation
- Management must decide on both the mode of
transportation and the particular carriers
- The leading modes of transportation are railroads,
trucks, pipelines, water vessels, and airplanes
- Using two or more modes of transportation to move
freight is termed intermodal transportation; this
approach is intended to seize the advantages of
multiple forms of transportation

21. Designing the Marketing Channel

22. Decisions involving the development
of new marketing channels either
where none had previously existed
or to the modification of existing
channels
Channel
Design

23. Channel Design
1. A decision made by the marketer
2. The creation or modification of channels
3. The active allocation of distribution tasks in an
attempt to develop an efficient structure
4. The selection of channel members
5. A strategic tool for gaining a differential advantage

24. Who Engages in Channel Design?
• Producers,
manufacturers, service
providers, franchisors
• Look down the
channel
toward the market
• Look up the
channel
to secure
suppliers
• Look both up and
down
the channel
Firms Wholesalers
Retailers

25. Channel Design Paradigm
1. Recognize the need for
channel design decision
7. Select
channel members
5. Evaluate
relevant variables
6. Choose the “best”
channel structure
2. Set & coordinate
distribution objectives
3. Specify
distribution tasks
4. Develop alternative
channel structures

26. When to Make a Channel
Design Decision
▪ Developing a new product or
product line
▪ Aiming an existing product at a
new market
▪ Making a major change in some
other component of the
marketing mix
▪ Establishing a new firm
▪ Adapting to changing
intermediary policies that may
inhibit attainment of distribution
objectives
▪ Dealing with changes in
availability of particular kinds of
intermediaries
▪ Opening up new geographic
marketing areas
▪ Facing the occurrence of major
environmental changes
▪ Meeting the challenge of conflict
or other behavioral problems
▪ Reviewing and evaluating