Distribution and Logistics

Decision
Distribution and Logistics Decisions
• Distribution and logistics decisions are at the
core of ensuring that products move
efficiently from producers to consumers.
These decisions influence everything from
channel design to inventory management, and
from transportation to customer satisfaction.
 Nature of Marketing Channels
Marketing channels refer to the systems or
pathways through which products and services
flow from producers to consumers. The nature of
these channels is shaped by the interaction of
different entities, including manufacturers,
wholesalers, retailers, and consumers. These
channels perform several critical functions that
ensure products are available to consumers in the
right place, at the right time, and at the right cost.
 Nature of Marketing Channels
Direct Channels: In a direct channel, producers
sell their products directly to consumers without
the involvement of intermediaries. This model
provides greater control over pricing, customer
experience, and product information.
 Nature of Marketing Channels
Indirect Channels: Indirect channels involve
intermediaries such as wholesalers, distributors,
and retailers. These intermediaries help reach
larger markets and reduce the cost of direct
selling but involve shared control over pricing
and marketing.
 Nature of Marketing Channels
Hybrid/Multichannel Models: Many companies
today use a combination of both direct and
indirect channels, creating multiple touchpoints
for customers (e.g., brick-and-mortar stores, e-
commerce websites, mobile apps).
 Channel Functions and Flows
• Transactional Functions:
Buying: Channel members purchase products
from producers for resale.
Selling: Intermediaries like wholesalers or
retailers sell the product to consumers.
Risk-taking: Taking on the risks associated with
holding inventory, such as potential product
damage or unsold stock.
 Channel Functions and Flows
• Logistical Functions:
Storage/Warehousing: Goods are stored in warehouses
before being distributed to the next point in the channel.
Transportation: Moving goods from one point to another,
such as from warehouses to retailers or directly to
customers.
Inventory Management: Maintaining stock levels to ensure
product availability without overstocking or stockouts.
Order Fulfillment: Picking, packing, and shipping the
products to fulfill customer orders.
 Channel Functions and Flows
• Facilitating Functions:
Market Research: Gathering data on customer
preferences, trends, and competitive activities.
Financing: Providing credit to facilitate transactions
within the channel.
Grading/Inspection: Ensuring product quality through
inspections or grading to meet consumer expectations.
Promotions: Marketing, advertising, and sales support
to promote products across different channels.
 Channel Functions and Flows
• Channel flows include:
Product Flow: The physical movement of goods through the
supply chain.
Information Flow: Communication between different channel
members (such as inventory levels, product availability, etc.).
Payment Flow: The movement of money from customers to
channel members.
Title Flow: The transfer of ownership of goods as they move
through the channel.
Returns Flow (Reverse Logistics): The movement of products from
customers back through the supply chain, often due to returns,
repairs.
 Channel Design and Management
Decisions
• Channel Member Selection: Choosing which
wholesalers, retailers, or agents to partner
with. This involves assessing their ability to
effectively market and distribute the product.
• Channel Leadership: Deciding who will lead the
channel in terms of decision-making. This could
be the manufacturer, a dominant wholesaler,
or a major retailer. Managing conflicts between
channel members is often a key task.
 Channel Design and Management
Decisions
• Channel Motivation: Establishing incentives
for intermediaries to align their goals with the
company's objectives, such as through pricing
strategies, promotional support, or
cooperative advertising.
Channel Design Decisions
 Channel Design Decisions
Setting Channel Objectives

• Targeted levels of customer service

• What segments to serve
• Best channels to use
• Minimizing the cost of meeting customer
service requirements
 Channel Design Decision: Identifying Major Alternatives

• Types of intermediaries
• Number of marketing intermediaries
• Responsibilities of channel members
Channel Design Decision: Identifying Major Alternatives
 Channel Design and Management
Decisions
• Target Market Coverage: Deciding how intensive
or selective distribution should be, based on the
target market’s preferences and buying behaviors.
Intensive Distribution: Products are available in as
many outlets as possible.
Selective Distribution: Products are sold through a
limited number of carefully chosen intermediaries.
Exclusive Distribution: Products are available
through only one or a few select outlets.
Channel Design Decisions: Evaluating the Major Alternatives

• Each alternative should be evaluated against:

– Economic criteria
– Control
– Adaptive criteria
 Channel Dynamics
Channel dynamics refer to the ongoing changes
and challenges that influence marketing
channels over time.
 Channel Dynamics
Market Trends: Consumer behavior shifts, such
as the rise of e-commerce and demand for faster
delivery, can force companies to adapt their
channels.
Technological Advancements: New technologies
can change how products are distributed,
including automation, real-time tracking.
 Channel Dynamics
Channel Conflict: Tensions can arise between
different members of the distribution channel
due to competition, pricing disagreements, or
overlapping territories. Managing these conflicts
is key to maintaining smooth operations.
Globalization: Companies are increasingly
operating in global markets, which brings new
challenges in terms of legal regulations, cultural
differences, and logistics management.
 Channel Dynamics
Vertical and Horizontal Integration: Companies
may integrate different levels of the supply chain
(e.g., buying suppliers or distributors) or expand
across similar levels (e.g., acquiring
competitors).
 Introduction to Wholesaling, Retailing and
Logistics

Wholesaling
Wholesalers are intermediaries who purchase goods in
large quantities from manufacturers and sell them in
smaller quantities to retailers or other businesses.
Wholesalers typically provide value-added services such as:
• Bulk purchasing and storage of goods
• Offering credit and financing to retailers
• Providing marketing and promotional support
• Shipping products to retailers in convenient quantities
 Introduction to Wholesaling, Retailing and
Logistics

• Wholesaling can be classified into:

Merchant Wholesalers: Own the products and
take title to them.
Agents/Brokers: Do not take ownership but
facilitate the sale between buyers and sellers.
 Introduction to Wholesaling, Retailing and
Logistics

Retailing
Retailers are the final link in the distribution
chain, selling goods directly to the consumer.
Retailers play a significant role in influencing
consumer behavior, providing a physical or
online store experience, and offering services
such as product advice, delivery, and returns.
 Types of Retailers

• Physical Stores: Traditional brick-and-mortar stores

like supermarkets, department stores, and specialty
shops.
• Online Retailers (E-commerce): Platforms like
Amazon, eBay, and other online marketplaces where
consumers purchase products via the internet.
• Omnichannel Retailers: Retailers that combine both
physical and online stores, allowing customers to
shop in multiple ways (in-store, online, or a mix of
both).
 Challenges in Retailing

•Competition: Facing intense competition,

both from other physical stores and online
retailers.
•Supply Chain Management: Managing
stock levels, delivery times, and supply
chain disruptions to maintain smooth
operations.
•Customer Expectations: Meeting the
growing demand for convenience, fast
delivery.
 Major Logistics Functions
•Transportation: Moving goods from one location to
another. This includes managing various transportation
modes like road, rail, air, and sea to ensure timely and
cost-efficient delivery.
•Warehousing: Storing goods in a warehouse until they
are needed. This function involves inventory management,
order picking, and packing for shipment.
•Inventory Management: Ensuring that the right amount
of stock is available at the right time to meet customer
demand without overstocking or running out of products. It
involves monitoring stock levels and managing reorders.
•Order Fulfillment: The process of receiving, processing,
and delivering customer orders. This includes picking,
packing, and shipping products.
 Major Logistics Functions
•Supply Chain Management: Overseeing and coordinating
the flow of goods, information, and finances across the
entire supply chain from suppliers to customers.
•Procurement: Acquiring raw materials, parts, or finished
goods needed for production or resale. This function
involves supplier selection, negotiation, and purchasing.
•Packaging: Designing and producing packaging that
protects products during transport and handling while also
meeting regulatory requirements.
•Reverse Logistics: Managing the return flow of products
from customers back to the seller or manufacturer, whether
it's for returns, repairs.
•Customer Service: Ensuring that customers receive the
necessary support regarding their orders, shipments, and
deliveries. This function often involves handling complaints,
returns, and exchanges.