Lectre 1 distribution_mgmt.
- 1. DISTRIBUTION MANAGEMENT CHAPTER NO : 8
- 2. 2Learning ObjectivesRole of distribution management in the marketing mixWhy distribution channels are requiredDistribution channel strategyOverview of distribution channel membersIntensity in the distribution effort
- 3. The Marketing MixProduct Place PricePromotion Distribution channels help in the ‘place’ aspect of the marketing mixDistribution provides place, time and possession utility to the consumer 3
- 4. Example Consumer wants to buy a tube of toothpasteMade available at a retail outlet close to her residence – placeMade available at 8 pm on a Tuesday evening when she wants it – timeShe can pay for the toothpaste and take it away – possessionThe company distribution function has made all this possible.The situation would be similar if a customer wants to buy a refrigerator or medicines or even an electric motor
- 5. Players InvolvedThe company and its distribution networkDirect company to consumerCompany to a C&FA / distribution center to distributors to retailersDistributor to wholesaler to retailerAll these intermediaries help the process of ‘exchange’ of the product or service. What is distribution management?
- 6. Distribution ManagementManagement of all activities which facilitate movement and co-ordination of supply and demand in the creation of time and place utility in goodsThe art and science of determining requirements, acquiring them, distributing them and finally maintaining them in an operationally ready condition for their entire life.
- 7. Distribution ChannelsAre intermediaries or middlemenExist because producers cannot reach all their consumersMultiply reach and provide efficiency to the marketing processFacilitate smooth flow and create time, place and possession utilitiesHave the core competence and reach Provide contact, experience, specialisation and scales of operation
- 8. Listing of Channel MembersCompany own sales teamC&FAs and CSAsDistributors, dealers, stockists, value-added re-sellersAgents and brokersFranchisees Electronic channelsWholesalersRetailers
- 9. C&FAs / C&SAsC&FA: carrying and forwarding agent and C&SA: carrying and selling agent – both are on contract with a companyBoth are transporters who work between the company and its distributorsCollect products from the company, store in a central location, break bulk and despatch to distributors against indentsGoods belong to the companyC&SA also sells the goods on behalf of the company but remits proceeds after sale
- 10. Distributors, Dealers, Stockists, AgentsName denotes the extent of re-distribution done by themDistributors invest in the products – buy products from the companyAre on commission, margins or mark-upMay or may not get credit – but extend creditDistributors cover the markets as per a beat plan. All others merely finance the business.Distributors could be exclusive for a companyAgents bring buyer and seller together
- 11. WholesalersOperate out of the main marketsDeal with a number of company products of their choiceAre not on contract with any companySell to other wholesalers, retailers and institutionsNegotiate about 15 days credit from company distributors – also provide credit to their customersOperate on high volumes and low margins
- 12. RetailersThe final contact with consumersOperate out of their shops and sell a large assortment and variety of goodsLocated closest to consumersBuy from company, distributors or wholesalersHighest margins in the networkProvide personalised services to their customers
- 13. Industrial ProductsCustomers may also direct from company sales forceProducerProducerAgent/middlemanIndustrial DistributorIndustrial DistributorIndustrial CustomerIndustrial Customer
- 14. Consumer ProductsRetailers may also direct from company sales forceProducerProducerProducerDistributorDistributorWholesalerRetailerRetailerRetailerCustomer /consumerCustomer/ConsumerCustomer/Consumer
- 15. Patterns of DistributionDetermines the intensity of the distributionIntensity decides the service level providedTypes of distribution intensity:IntensiveSelectiveExclusive
- 16. Distribution IntensityIntensive: distribution through every reasonable outlet available – FMCGSelective: multiple, but not all outlets in the market – pharma, frozen foodExclusive: may be only one outlet in a market - car dealers
- 17. Intensive DistributionStrategy is to make sure that the product is available in as many outlets as possiblePreferred for consumer, pharmaceutical products and automobile spares
- 18. Selective DistributionA few select outlets will be permitted to keep the productsOutlets selected in line with the image the company wants to projectPreferred for high value productsTanishque jewelryKeeps distribution costs lower
- 19. Exclusive DistributionHighly selective choice of outlets – may be even one outlet in an entire marketCould include outlets set up by companies – Titan, BataProducer wants a close watch and control on the distribution of his products. Channel strategy…
- 20. Distribution Channel StrategyDerived from the corporate strategy and the marketing strategySteps for designing the distribution strategy are:Defining customer service levelsDistribution objectives and stepsStructure of the network required Policy and procedure to be followedKey performance indicatorsCritical success factors
- 21. Distribution OrganizationExtent of company support and outsourcing to be decidedBudget for the cost of the distribution effortSelect suitable channel partners – C&FAs, and distributorsSetting clear objectives for the partnersAgree on level of financial commitments by the channel partners.Policy and procedure..
- 22. Key Performance IndicatorsFor measurement of effectiveness. Some of these could be:Consistent achievement of targets by product groups, periods and territoriesAchievement of market sharesAchievement of profitabilityZero complaints from customersNo stock returnsAbility to handle emergencies and sudden spurts in demand
- 23. Key Performance IndicatorsFor measurement of effectiveness. Some of these could be:Balanced sales achievement during a period – no period end skewsMarket coverage with ready stocksExcellent management of accounts receivablesMinimize losses on account of stock-outsMinimize damages to productsCSFs…
- 24. Critical Success FactorsThe distribution strategy also needs the support and encouragement of top management to succeedSome of the CSFs could be:Clear, transparent and unambiguous policy and procedureSerious commitment of the channel partnersFairness in dealingsClearly defined customer service policyHigh level of integrityEquitable distribution at times of shortageTimely compensation of channel partners
- 25. Logistic Needs Land – Sufficient land so that industrial or business operations may be conducted smoothly. Water – distribution Energy – Sufficient electric power or alternative resources of power so that operations may go unhindered. Storage for equipments, construction goods. Machinery and spares. Warehousing space for movement of goods/temporary storing till the goods reach final destination. Transport equipments, trucks, trolleys, etc. Telephones, telefax and other communication equipments.Cont….
- 26. Logistic ManagementLogistic management is a field of management which primarily deals with the co-ordination of resources in an organization.The term logistic is used in the army for supplying/meeting the requirements of the troops. It means ‘art of moving’.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.The term is common in the field agriculture, industry, trading.
- 27. Definitions of Physical Distribution “The term ‘Physical Distribution Management’, is employed in manufacturing and commerce to describe the broad range of activities are: Freight
- 28. Warehouseing
- 32. Selection of site for various activities
- 33. Marketing
- 34. Forecasting. “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”. “Physical Distribution Management is specifically concerned with the flow of goods through the economic system.Cont….
- 35. Functions of Physical DistributionIn main, physical distribution functions may be listed as follows:Locational analysis Transportation Material handling Warehousing Packing Order processing Packaging Inventory control Customer sales service.
- 36. Key LearningsCompanies use distribution channels to reach their large customer baseThe channel members could be nominated like distributors or freelance like retailersDistribution channels provide the time, place and possession utility for consumers for the company productsDistribution channels could be sales, service or delivery focused
- 37. Key LearningsCompanies could also choose the intensity of distribution based on their products and distribution objectivesDistribution could be intensive, selective or exclusiveThe distribution strategy takes care of service levels, objectives, activities, organisation to deliver the service, measurement of performance and critical success factors