It gives an overview on channels of distribution in SCM.

1. Supply Chain
Management
CHANNELS OF DISTRIBUTION
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2. Session Objectives
To enable the learner to understand:
 Channels of distribution
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3. Channels of Distribution
“It consists of one or more organizations or individuals who participate in the
flow of goods, services, information , and finances from the point of origin or
production to the final point of consumption.”
The channel comprises of variety of intermediary firms - distributors ,
wholesalers , retailers, transportation providers & brokers.
Creates time and place utilities of the product for customer satisfaction.
Logistics network should be aligned with the distribution channel of the firm.
Distribution channel is the place of transaction for the firm’s products .
Ensures smooth movement of products to make it available at distribution
outlets as and when they are required by the customer.
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4. Distribution Channel Structure
A= Agent
C = Consumer/Customer
M = Manufacturer
R = Retailer
W = Wholesaler
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M C
M R C
M W R C
M A W R C
(two level)
(three level)
(four level)
(five level)

5. Channel members
The marketing channel structure consists of a variety of intermediaries performing the
distribution task, which differs in terms of financial involvement, relationship with the
manufacturer , and functions performed.
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Wholesal
er
•Collect orders from retailers / institutional customers & operate large volumes
•Prefer freight consolidation for lower per unit transportation charges & work on economies of scale.
Retailers
•Last link in the distribution network before the product reaches the end users.
•Buy the materials in smaller quantities due to limited financial capacity on credit from the wholesaler or against cash.
Selling
agents
•Appointed on a contractual basis for selling the company’s products to the clients in lieu of an sales organization.
•Deployed for the collection of outstanding payments from clients , organizing loans & offering credit facilities to clients.
Dealers/st
ockists
•Carry stocks of the company’s products on a consignment sales basis.
•Have a full fledged marketing setting up with backup facilities of warehousing .
•Exclusive dealers do not deal with products of competitors.

6. Channel Strategy
“The design of a logistical programme serving a given channel structure depends
on the channel strategy of the enterprise.”
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Channel
breadth
Marketing
strategy
Length
of the
channel
The degree of
control on
intermediaries
Backup
supply
efficiency
Effectiveness
of the channel

7. Logistics and Marketing Channels
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Logistical channel Marketing channel
Supplier
Manufacturer
Distribution
centre
Retail store
Transportation
Transportation
Transportation
Customer
E- Procurement
National
account sales
Wholesaler/Dist
ributor
Retail customer

8. 8
A B
Insource Outsource
1 2 3 4 5 6
Integrated
Fulfilment
Dedicated
Fulfilment
Outsourced
Fulfilment
Drop- shipped
Fulfilment
Store
Fulfilment
Flow- Through
Fulfilment
Current
Retail DC
Dedicated
DC
Third –
party DC
Supplier/Man
ufacturer
Retail Store
Current
Retail DC
Parcel Carrier
Delivery, Parcel
Carrier or Pick-up Retail Store
Consumer
Direct – to – customer (DTC )fulfilment
Call Centre
Options
Physical
Fulfilment
Models

9. Illustration of Integrated Fulfilment
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Manufacturer
Distribution Centre
Picking Picking
Retailer Distribution
Centre
Retail Store Consumer
Consumer
Truckload
Case
Each/
Individual
Retailers operates one distribution
network to service both a ‘brick –
and - mortar’ and ‘clicks – and -
mortar’ channels.
Low start up costs.
Example: Shoppers Stop

10. Illustration of Dedicated Fulfilment
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Manufacturer
Distribution Centre
Picking
Picking
Retailer Distribution
Centre
Retail Store Consumer
Consumer
Retailer Distribution
Centre
Retailer has both a store and an
Internet presence but with two
separate distribution networks.
Example: Malabar Golds and
Diamonds

11. Illustration of Drop – Shipped Fulfilment
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Manufacturer
Distribution Centre
Manufacturer
Distribution Centre
Retail Store “A”
Retail Store “B”
Retail Store “C”
Picking Picking
Consumer
Consumer
Consumer
LTL
The manufacturer delivers
its product directly to a
retailer’s store bypassing
the retailer’s distribution
network.

12. Illustration of Store Fulfilment
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Picking Picking Picking
Manufacturer
Distribution Centre
Retail StoreRetailer Distribution
Centre Consumer
The order is placed through Internet site.
The order is sent to the nearest retail store
where it is picked & put aside for the customer to
pick up.
The retailer must have real- time visibility to in-
store inventories in order to satisfy the Internet
Order.

13. Let’s summarize
In the current scenario , organizations are considering a number of distribution channel
alternatives.
Effective management of the various choices requires coordination and integration of marketing,
logistics and finance within the firm , as well as , coordination of overall channel – wide activities
across the organizations in the channel.
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Questions, Comments, Suggestions?
Peea P. Bal