1. Unit 2 -- Distribution

2. Unit Objectives Define channels of distribution.
Identify channel members.
Describe merchant intermediaries.
List and explain distribution intensities
Define physical distribution.
Evaluate available distribution options.
Discuss warehousing and purchasing.
Illustrate purchasing situations.
Explore the steps of the purchasing process.

3. Channel of Distribution
Path a product takes from producer or manufacturer to final user.
A new channel of distribution begins when the product changes form or is used by the purchaser.
Direct Channels
Indirect Channels

4. Channel Members
Industrial Market - products purchased for business use.
Consumer Market - products purchased for personal use.
Intermediaries - channel members that move the product through the channel (middlemen)

5. Merchant Intermediaries
Wholesalers - Purchase large quantities of goods from manufacturers, store the goods, and resell them to other businesses
retailers institutions
electronic retail outlets governments
vending services manufacturers
professional users other wholesalers
commercial users

6. Merchant Intermediaries
Agents - Participants in the marketing channel who negotiate the sale of products between other channel members
Do not take title to the products distributed
Manufacturer’s Agents and Brokers - Work independently running their own businesses

7. Distribution Intensity
Intensive
using all suitable outlets for a product
complete market coverage
Selective
limited number of outlets in a given geographic area
maintains some control over product movement
Exclusive
total right to sell a product within an identified geographic location
prestige, image, channel control
Integrated Distribution
Manufacturer acts as wholesaler and retailer for its own products

8. Physical Distribution
The process of transporting, storing, and handling goods to make them available to customers
Third largest expense for most businesses
Includes:
freight transportation order processing
warehouse site selection warehousing
materials handling customer service
protective packaging inventory control

9. Trucking Advantages Disadvantages convenient less protective packaging
rapid deliveries
reduces inventory costs
Disadvantages
possible shipment delays
long distances - costly

10. Trucking Common Carriers Contract Carriers Private Carriers
Exempt Carriers

11. Railways Advantages Disadvantages large quantities - lower costs
few delays
Disadvantages
lack of flexibility

12. Railways Piggyback Service Fishyback Service Specialized Service
Package Cars
Diversion-in-transit
Processing-in-transit

13. Waterways Advantages Disadvantages low cost slow lack of flexibility
weather delays

14. Waterways Internal Waterways Intracoastal Waterways
International Waterways

15. Pipelines Advantages Disadvantages lower long-term costs dependable
high initial costs
risk of breakage or leaking
costs for any damages

16. Air Transportation Advantages Disadvantages speed
reduction of storage & inventory expenses
Disadvantages
costs
delays

17. Other Carriers U.S. Postal Service Express Carriers
Bus Package Carriers
Freight Forwarders

18. Warehousing or Storage
Holding goods until they are sold
Reasons for Storing Goods
sell to customers
surplus of goods
stabilize prices
obtain discounts
faster delivery

19. Warehousing Private Warehouses Public Warehouses Distribution Centers
Bonded Warehouses

20. Purchasing
Determining what to buy & making arrangements with sources regarding final price, delivery, services expected, and method of payment.
Sometimes called “buying”
Refers to industrial use
consumption
production
distribution (resale buying)

21. Purchasing Situations
New Task Purchase
Modified Rebuy
Straight Rebuy

22. Purchasing Process Selection of products Selection of suppliers
Negotiating terms of agreement
Placing the order
Payment
Evaluation of process

23. Product Selection Planning Analyze customer wants and needs
merchandise plan
planned sales
beginning-of-the-month inventory
planned reductions
planned purchases
Analyze customer wants and needs
Decide on goods and quantities
basic stock list
model stock list
never -out list

24. Selecting Suppliers Production Capabilities Past Experiences
Product & Buying Arrangements
Consignment buying
Memorandum buying
Special Services
UPC Codes
Peg man
merchandising services
bonuses & gifts

25. Negotiating Terms Discounts Dating terms Delivery Arrangements
advance dating
extra dating
end-of-month dating
receipt-of-goods dating
Delivery Arrangements
FOB destination
FOB shipping point
FOB factory freight prepaid
FOB destination charges reversed

26. Placing the Order & Payment
Purchase Order
legal contract between the buyer and the supplier that specifies the terms of the agreement
Invoice
the bill that is usually sent along with the merchandise - it requests payment - should look very similar to the purchase order

27. Evaluation Rate of Sale Stock Turnover
identify “keepers”
Stock Turnover
number of times the average stock has been sold and replaced in a given time period
Review Supplier Responsibilities