Distribution Channel and Supply Chain

1. Entrepreneurship
4th Quarter: Week 3
Distribution
Channels
by Meinrad C. Bautista, Ph.D.

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1. Define distribution channel;
2. Identify the different types
of distribution channel;
3. Explain the function of
distribution channel; and
4. Understand the nature of
supply chain management
Learning Objectives:
Week 3 - 4th Quarter TLE_ICTAN11/12EM-Ia-2
4

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Activity 1
1. It refers to a distribution channel with one or more intermediaries between the
manufacturer and the final customer is called.
a. Direct Distribution Channel
b. Reverse Distribution Channel
c. Marketing Distribution Channel
d. Indirect Distribution Channel
2. It is a set of interdependent organizations that eases the transfer of ownership as products
move from producer to business user or consumer.
a. Direct Channel
b. Reverse Channel
c. Marketing Channel
d. Indirect Channel
3. A channel intermediary that sells mainly to customers.
a. Agents and Brokers
b. Merchant Wholesaler
c. Retailer
d. Consumer

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Activity 1
4. An institution that buys goods from manufacturers, takes title to goods, stores them, and
resells and ships them.
a. Agents and Brokers
b. Merchant Wholesaler
c. Retailer
d. Consumer
5. Wholesaling intermediaries who facilitate the sale of a product by representing channel
members.
a. Agents and Brokers
b. Merchant Wholesaler
c. Retailer
d. Consumer

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What is It
Distribution channel is a downstream process that
answers "How do we get our merchandise to the
consumer?"
This is the opposite of the upstream process also
called Supply Chain which answers the inquiry “Who are
our suppliers?”

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Distribution Channel

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Distribution Channel Defined
Marketing distribution channel is a chain of businesses
or intermediaries through which a good or service passes
until it reaches the final buyer or the end consumer. It is
also known as a placement and is part of a company’s
marketing strategy that includes other marketing 4P’s such
as Product, Promotion and Price which consists of all the
institutions and all the marketing activities in the marketing
process.

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Distribution Channel Defined
Moreover, marketing distribution channel is a pathway
by which all products and services must travel to reach at
the intended user. It also describes the pathway payments
made from the end user to the original seller. Marketing
distribution channels can be brief or extensive, and it
depends on the number of mediators required to deliver a
product or service.
An intermediary is a third party that offers an
intermediation service between two trading parties.

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How marketing channels reduce the
number of required transactions

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How marketing channels reduce the number of
required transactions
Sometimes, goods and services make their way to
consumers through a combination of short ang long
channels. Increasing the amount of ways a consumer is
able to find a merchandise can increase sales. However, this
creates a complicated system that may result to difficulty in
distribution management. The longer the distribution
channel gets, the lesser the profit for intermediaries and the
shorter the distribution becomes, the higher profit for
intermediaries.

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Types of Marketing Product Distribution
Type Distribution Description Examples
Exclusive Distribution One (1) or few *Distribution is limited to
a selected number of
dealers
*Objective is to have
more control over how a
particular brand is
priced, displayed, and
promoted.
*Have higher mark ups
and better brand equities
*Disadvantage is brands
are not very accessible
to customers
▪ Avon
▪ Natasha
▪ Nathaniel
▪ USANA
▪ Herbalife
▪ Front Row
▪ Cinderella

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Types of Marketing Product Distribution
Type Distribution Description Examples
Intensive Distribution Many *Used mostly by fast-
moving consumer goods
and convenience goods
*It involves making
products available in as
many retail outlets as
possible
*It has the highest level
of place utility and
convenience.
*Disadvantage is product
manufacturers have very
little control of how
product is priced,
displayed and promoted.
▪ Coke, etc.
▪ San Miguel Beer
products
▪ Goldilocks products
▪ Wilkin’s Distilled Water
▪ Gardenia

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Types of Marketing Product Distribution
Type Distribution Description Examples
Selective Distribution Moderate Stands in-between
Exclusive and Intensive,
this type of product
distribution involves the
use of more than one
but not as many dealers
like in intensive
distribution.
It allows adequate
control over retail prices,
displays, and promotions
but it permits selected
products distributors
some level of
independence
▪ Brands of Canned
goods, seasoning and
personal care
products

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Marketing Intermediary Channels
Channels Description
Agents and Brokers Wholesaling intermediaries who facilitate the sale of
a product by representing channel members
Wholesaler An institution that buys goods
from manufacturers, takes title
to goods, stores them, resells and ships them.
Distributor Function similarly to wholesalers wherein they take
ownership of the product, store it, and sell it off at a
profit to retailers or other intermediaries. The key
difference is that distributors ally themselves to
complementary products.
Retailer A channel intermediary that
sells mainly to customers

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Marketing Channels for Consumer Products

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Activity 2

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Function of Market Distribution Channel
Using proper distribution channels, companies can deliver its
products effectively and efficiently to its customers. For most
companies, distribution decisions are almost permanent as it does
not change on a daily basis.
Many big companies today utilize the use of marketing
intermediaries to transport their products to consumers. Marketing
intermediaries provides access and convenience for the product’s
consumers. Marketing intermediary usage increases the price of the
product. However, the absence of this would result in greater
expense for the consumer.

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Function of Market Distribution Channel
Not all channel members perform the same role. The following
are the other major functions of marketing distribution channels:
1. Transactional functions: buying, selling, and risk assumption
2. Logistical functions: assembly, storage, sorting, and
transportation
3. Facilitating functions: post-purchase service and maintenance,
financing, information dissemination, and channel coordination
These mentioned functions are necessary for the effective flow
of product and title to the customer and payment back to the
producer.

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Function of Market Distribution Channel
Example:
A customer who wants to buy a bottle of Wilkin’s distilled water will
have to go to Wilkin’s bottling plant because the product is not
available in the grocery or convenience store (marketing channel).
Also, a customer has to buy a potato chips from the manufacturer
because it cannot be purchased at the sari-sari store (marketing
channel).

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Supply Chain
Supply chain is the network between a company and its
suppliers that is involved in the process of production and
distribution of a commodity or service.
The elements of a supply chain contain all the functions that
begins with receiving an order to meeting the customer's demand.
These elements are product development, marketing, operations,
distribution networks, finance, and customer service.

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Supply Chain

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Supply Chain Management
Supply chain management plays an important part in the
business process. There are many different links in the supply chain
that requires ample skill and expertise. When the company’s supply
chain management is effective, it can lower its over-all costs and
improve its profitability. If one link breaks down, it can affect the
rest of the chain and can be costly for the company.

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Supply Chain Management
1. Marketing distribution are chain of businesses through which a
manufacturer sends their products to a final buyer. It may involve
wholesalers, distributors, agents and retailers.
2. Companies use several indirect and direct channels of distribution.
3. A distribution channel with one or more intermediaries between the
manufacturer and the final customer is called an indirect distribution
channel.
4. The price to a customer increases for each intermediary in the
channel.
5. Direct distribution channel is where a customer directly buys from a
manufacturer and is the shortest distribution channel. It results to
lower price for the consumer.

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References