DISTRIBUTION Distribution can be defined as an operation, or a series of operations, which physically bring goods manufactured or produced by any particular manufacturer into the hands of the final consumer or user. Distribution is an integral part of marketing. Its function is to distribute or sub-divide the total product of a manufacturer on a geographical basis to various specific markets. Distribution is estimated to account for one-quarter of the price of the consumer goods people buy. Distribution creates time utility and space utility.

DISTRIBUTION Two aspects of the Distribution function : Organisational aspect – Concerned with how, and through what channels to distribute (Stockists, wholesalers, retailers, sales persons). Operational aspect – Includes all physical operations concerned with moving goods from one place to another; including warehousing, storage and transportation as well as costs involved. This is also referred to as ‘Logistics of distribution’. Market Logistics deals with all activities that facilitate product flow from the point of raw material acquisition to the point of final consumption. It also includes information flow that set the production in motion with the purpose of providing adequate levels of customer service at reasonable cost.

DISTRIBUTION A channel of distribution consists of the producer, the consumer, and any intermediary organisations that are aligned to provide a means of transferring ownership (Title) or possession of a product from producer to consumer. Logistics Development Production Sales Customer Marketing

DISTRIBUTION Market Logistics : Four Steps in Market Logistics planning : 1. Decide the company’s value proposition to the consumers (On-time delivery standards, ordering & billing accuracy levels etc.) 2. Decide the best channel design and network strategy (Whether to reach consumers directly or thru intermediaries, what products to source from where, no. and locations of warehouses etc.) 3. Developing operational excellence in sales forecasting. Warehouse-transportation and materials management. 4. Implementing the solution with the best information systems, equipment, policies and procedures.

DISTRIBUTION Market Logistics Objectives “Getting the right goods at the right place at the right time.... At the least cost”.

DISTRIBUTION Market Logistics Objectives The main objective of distribution is to move products from the manufacturer’s place to the buyer. Customer Service Needs : 1. Order Cycle Time (Time from Order placement to Delivery) 2. Consistency of O.C.T (Reliability) 3. Information on order status 4. Flexibility (In dealing with special requests) 5. Goods Returns (Damaged & surplus goods) 6. Response to emergencies 7. Zero-errors (In deliveries, paperwork etc.) 8. Zero-damage

DISTRIBUTION Market-logistics Decisions Four major decisions to be made with regard to market logistics : 1. How should orders be handles (Order processing) 2. Where should stocks be located (Warehousing) 3. How much stocks should be held (Inventory) 4. How should goods be shipped (Transportation)

DISTRIBUTION Market Logistics Primary ActivitiesSecondary Activities 1. Transportation 2. Warehousing 3. Order Processing 4. Inventory Maintenance 5. Product Packaging 6. Product Handling 7. Acquisition 8. Product Scheduling 9. Information Maintenance

DISTRIBUTION Channels of Distribution Manufacturer/ Producer Wholesaler Manufacturer’s Chain Stores Retailer Manufacturer’s Branch Offices Consumer

DISTRIBUTION PHYSICAL DISTRIBUTION FUNCTIONS : 1. Breaking Bulk : Buying in large quantities and selling in small quantities - Reduces costs for both manufacturers as well as buyers. 2. Creating Bulk : Intermediary works as an ‘assembler’. Buys in small quantities and accumulates bulk for the buyer. 3. Creating Assortments : Creation of assortments of merchandise that would otherwise not be available. Offers a variety of products to the buyer. 4. Reducing transactions : The no. of necessary transactions to accomplish the exchanges necessary for economic activity is brought down substantially. 5. Transportation and storage : Intermediaries carry goods and also provide regional and local storage.

DISTRIBUTION COMMUNICATION & TRANSACTION FUNCTIONS : Intermediaries perform a communication function, the ultimate purpose being completion of a transaction that results in an exchange of title. Intermediaries perform ‘Selling’ function for manufacturers and ‘buying’ function for retailers. Intermediaries inform others channel members about how products are to be sold, used, repaired or guaranteed. They can also explain new product developments. Intermediaries also communicate to the manufacturer re. product performance, customer feedback, complaints, service issues etc..

DISTRIBUTION FACILITATING FUNCTIONS : Extra Services : Post-sale repair services, supply of consumables, training, Services to manufacturers include help with advertising, promotional activities, accounting and inventory management etc.. Credit Services : Managing payments thru credit/ debit cards, personal credit lines to buyers, debt recovery and Bank transactions on behalf of the manufacturer etc.. Risk-Taking : Intermediaries bear the risks involved in the market re. possible product failure, non-moving inventory, credit risks, legal risks etc..

DISTRIBUTION TYPICAL CHANNELS OF DISTRIBUTION C.O.D For Consumer Goods & Services : Manufacturer Consumer Manufacturer Retailer Consumer Manufacturer Wholesaler Retailer Consumer Manufacturer Agent Consumer

DISTRIBUTION Retailer : The retail outlet distributed the product to the consumer / end-user, for personal, non-business use. Maintains limited stock of goods for sale. Wholesaler : Performs all activities involved in selling goods and services to those who buy for re-sale or business use. Maintains large stocks of goods for distribution. Agent : Is usually a direct representative of the company in the market. He approaches customers, negotiates and closes deals with customers on behalf of the company. Agents rarely stock goods with themselves.

DISTRIBUTION Steps involved in Designing a Physical Distribution System Articulating distribution objectives and specifying the minimum service level desired in product delivery. Understand customer expectations in product delivery Optimising costs Keeping the system flexible. Understand competitors distribution policies