Distribution / Place

Unit 7

Distribution
Concept:
It is important component of the marketing mix. It is
concerned with the activities involved in transferring goods from
producers to final buyers and users. It can be defined as the process
where by goods and services are delivered from producers to consumers
and to organizational buyers where and when the products are needed.
Distribution includes not only channels of distribution or
marketing intermediaries such as wholesalers, retailers and agents but
also include physical distribution such as order processing, transporting,
storing, material handling etc.
According to Philip Kotler Distribution includes the various
activities the company undertakes to make the products accessible
and available to target customers

 Product distribution (or place) is one of the four elements of

the marketing mix. An organization or set of organizations (gobetween) involved in the process of making a product or service
available for use or consumption by a consumer or business user.
Distribution is also a very important component of Logistics &
Supply chain management. Distribution in supply chain
management refers to the distribution of a good from one
business to another. It can be factory to supplier, supplier to
retailer, or retailer to end customer. It is defined as a chain of
intermediaries, each passing the product down the chain to the
next organization, before it finally reaches the consumer or enduser. This process is known as the 'distribution chain' or the
'channel.' Each of the elements in these chains will have their
own specific needs, which the producer must take into account,
along with those of the all-important end-user.

Major components
Marketing Channel:
It means middlemen or intermediaries who distribute good
and services from a manufacturer to the final consumers or
users. They make the flow of products smoothly. Merchants,
(whole seller, retailer) Agents, (Sales agents brokers etc)
Facilitators (Transporters, banks, insurance companies,
Advertising agencies etc) so a channel may be a group
people and or firms through which the goods are transferred.
Physical distribution activities:
Physically moves the products from producer to
customers. Order processing, warehousing, material
handling, inventory management, and transportation are
major activities of physical distribution.

Objectives:
Flow of goods
Availability of goods
Accessibility of goods
Efficiency
Customer satisfaction

Channel functions of Marketing

Marketing channels (Distribution channels) move goods and services for
producers to consumers. It overcomes the major time, place and possession
gaps the separate good and services from those who would use them.
Manufacturers, wholesalers, and retailers as well another channels members
exist in channel arrangements to perform one or more of the following
generic
functions: Information gathering and distributing marketing research and intelligence
information about actors and forces in the marketing environment needed for
planning
and
aiding
exchange.
Promotion: Developing and spreading persuasive communications about
an
offer.
Contact: Finding and communicating with prospective buyers.

 Matching: Shaping and fitting the offer to the buyers needs

including activities such as manufacturing, grading, assembling
and packaging.
Negotiation: Reaching an agreement on price and other terms of
the offer so that ownership or possession can be transferred.
Physical distribution: Transporting and storing goods.
Financing: Acquiring and using funds to cover the costs of the
channel work
Risk taking: assuming the risks of carrying out the channel work
Carrying of inventory, demand generation or selling, after
sales services.

Channel Structure or levels of consumers and

Business Market

1. Zero- level channel:

1. Door to door

2. Mail order

3. Telemarketing

4. on line marketing

5. TV marketing

6. Own stores
2. One level channel:
Super markets / discount house / departmental
stores
3. Two level channel 4. Three level channel

Channel design decision:

Channel selection is a complex and challenging task. It

should be based on various strategic considerations. The
channel structure is combination of channel components
and channel levels.
Objective (Control / Coverage and Cost) short or long
channel.
Market (Type of market/Target customer /order size/
competition)
Product( nature of product/unit value )
Channel (Channel availability / Range of service
provided /channel attitudes )
Organization
(Management
capability
/Financial
resources / Marketing mix / Legal provisions)

Channel Participants or design of Consumer Products

Producers ( Manufacturers, Assemblers, Processers)

Agents ( Brokers, sales agents, Negotiators )
Wholesalers ( Dealers or distributers )
Retailers ( Department store, supermarket etc )
Channel Participants or design of Industrial Products:
Producers ( Farmers are producers for agricultural
products)
Industrial Users: ( Govt. airlines, hotels etc )
Industrial Distributers
Agents

Channel Selection Factors

1. Customers
2. Distribution objective ( channel control,
Market control, costs )
3. Constraints ( Products, Intermediary,
competitive, organizational )

Channel Management
Decisions
Numerous companies in different kinds of industries are
presently using channel management solutions to manage
their distribution networks. A channel distribution network
is a set of interdependent intermediaries that are involved in
making particular goods and services available for
consumption. Intermediaries or partners are utilized
because there is greater efficiency in making these products
available to end consumers. In addition to that they provide
a parent company with more than it can ever hope to
achieve or accomplish on its own such as getting quality
contacts, experience, specialization and scale of operation.

The use of channel management solutions and

strategies is one of the biggest trends in business
right now because of the various benefits they bring
to companies or organizations. It is important to
understand that such strategies are more complicated
than they seem especially since they deal with a lot
of essential processes that are vital to the success of a
channel. They are dependent on channel decisions,
which are among the most important decisions that
managers have to make and deal with because they
influence every other marketing decision in a
channel.

 The Six Fundamental Strategic Distribution

Decisions are the following:
1. Determining the role of distribution in the companys
overall goals and strategies.
2. Discerning the role of distribution in the marketing mix.
3. Knowing how marketing channels should be designed
to effectively achieve distribution objectives.
4. Identifying the type of channel members to be selected
to meet distribution objectives.
5. Establishing how to manage the channel to effectively
and efficiently implement the channel design.
6. Finalizing how every partners performance will be
evaluated.

Channel
Behavioral
Structural
Channel
Dynamics
Dynamism
Dynamism
Conflicts

 Channel Role: Each channel members also has certain role

expectations from other channel members )
Power
(
Reward/Coercion/Referent/Expert
Channel
/Legitimate )
Channel conflict ( for resolved the conflict: problem solving,
persuasion, Bargaining, Politics )
Vertical integrated channel systems: ( two or more channel
hierarchies under one management and control, the
combination may be acquired through a purchase or acquiring a
operation of a channel members by another channel members )
Horizontally integrated channel system ( combining activities
of channel participants working at eh same level of channel
hierarchy. Here basically contractual agreement is entertained )
Multi-channel: ( A producer may sell directly to consumers,
use retailers, wholesalers to reach the consumers )

Marketing Logistics
Concept / Nature:
Logistics is a science of management of handling goods,
information, and other resources which even includes
energy and people. It is basically caters with the supply
of raw materials and produced goods in between the
place of production and market or consumers. However
this science of management had shown its identity in
early days within the military organizations, but
nowadays it has become very common and we can hear
this word very commonly in our day to day life

Logistic managers are given the task of marketing logistics as well as

communicating logistics with a purpose of positioning logistics in the
present competitive environment. The cut-throat competition so
commonly associated with many current organizations has caused most
businesses all over the world to remain proactive and any organization
which ignores the importance of logistics has to blame itself. The entire
purpose of logistics is defined when the logistics managers start to take
marketing initiatives.
Logistics and marketing management are concerned with the effective
flow of products and services in the economy and pertain to the
distribution of both consumer and industrial goods. Marketing is
considered to be a vital part of an economy and there is a need for an
efficient marketing system which can ensure that all marketing activities
are carried out in accordance with the predefined goals of the business.
Logistics managers and executives nowadays are entrusted with the
added responsibility of taking important decisions and they want a better
due in return for their work by being recognized as members of the
pivotal winning team.

 Marketing
logistics
involves
planning,
implementing and controlling the physical flow of
materials, final goods and related information from
the point of origin to the point of consumption to
meet the customer requirements at the profit.
Logistics goal is to provide customer satisfaction
and customer service, speedy and flexible delivery
system, presorting and pre-tagging of merchandise,
order tracking information and willingness to take
back or replace defective goods.
Components of logistics is warehousing,
transportation, inventory management, Material
Handling, Order processing and customer services.

Goals of Marketing Logistics

For the supply chain to be effective in a multichannel
operation, it is necessary for management to meet four
goals:
1) Increased efficiency
2) Improved customer service
3) Increased sales
4) Improved relationships
Each of these goals includes definitive and specific
objectives required within an operation. Fortunately, there
are proven best practices to help you achieve those
objectives.

Importance of logistics in business / SCM

Creating Value
Quick delivery
High degree of product availability
Economic benefit
Globalization and internationalization
Increase competitiveness
Increase market share
Identify new market
Increase profit
Available quality product at low price
Credit availability
Services can be made in shorter time
Feed back through information
Quick response philosophy has been used

 Provide better customer service

Minimize total distribution cost
Production logistic
marketing
logistic
Production
Customer service
Quality control
Pricing
Production schedule
Packaging
Equipment maintenance
Retail location
Capacity planning
Promotion
Work measurement and standards marketing research
Plan location
Product mix
Sales force management
Transport
Inventory management
Order processing

Logistics Functions
1.
2.
3.
4.
5.

warehousing,
transportation,
inventory management,
Material Handling,
Order processing and customer services.

1. Transportation:
.
It is the major tools for creating place utility on products. It
moves products from the point of origin to point of consumption. From
the logistic management view, an organization should establish a
capability to move products from supply sources to consumers. The
physical distribution (PD) manager needs to evaluate the relative benefits
of various transport options in terms of costs, (rent) speed, (actual time
taken by the transports) consistency (regularity and reliability) and
product safety. In view of the global movement of products, sea transport
is the most extensively used mode as it offers the best economy and
moderate levels of consistency of service and products safety.
.
Marketing logistics is slowly improving in the Nepalese
market. Most distributors use road transport particularly trucks for
inbound logistics and small delivery vans and three wheelers for outbound
logistics. Wholesalers usually work with three-wheelers and bicycles for
city level distribution. In the rural areas without roads, animal based
transportation such as bullock or buffalo carts are popular.
. We have consider Cost, speed, consistency, safety

2. Warehousing:
Warehouse is a fixed facility in which products are stored until
demand arises for them in the market. It is a major logistic
support function that affects the level of customer service of an
organization.
The emphasis is on product movement rather than products
storing. The PD manager needs to take four major warehousing
decisions like:
Private and public warehouses
Number of warehouses
Location of the warehouse
Third-party logistics ( Other's transport and warehousing)

Distributors and wholesalers also maintain modest

warehouses that are not well planned and laid out. Large public
enterprises such as Jabalpur Cigarette Factory, National Trading
Limited, have large warehousing facilities at the regional level.
Most of the private sector manufactures do not maintain
distribution warehouses and depend fully on distributors for
warehousing.

3. Inventory Management:

It is concerned with developing a system of

maintaining an adequate level of products assortments to
meet the customer's demand. It seeks to achieve a
delicate balance between a shortage of inventories and
excess stock. Inventory managers deal with issues, such
as when to re-order and in what quantity to re-order.

Proper inventory management practice is found in

very limited businesses in Nepal. Surya Nepal and
Nepal Lever have computer based inventory
management systems. Most of the middle range
companies use rough estimates for maintaining their
inventory of raw materials as well as finished products.

4. Material Handling, Order processing and customer

services:
Porters and to some extent push carts are used for
material handling. Material handling is closely
associated within warehouse or manufacturing site. It
may be handled according to the nature of the product.
Physical handling may be mechanical and non
mechanical.
5. Order processing is mostly based on telephone. Some
manufacturers and distributors are switching over to email due to its low cost. Customer services focusing on
buyer's problems and complaints are the weakest areas
in the Nepalese market. Order entry, handling, delivery
are main components of order processing.

Integrated Logistics Management

Integrated Logistics Management
Logistics Management Services provides clients with innovative logistics and supply
chain management solutions. Closed-loop material requirements planning, capacity
requirements planning and distribution requirements management create efficient
processes for industry best practices.
The effective integration and exploitation of 21st Century technology is a well-placed
investment in todays global market. The best management practices and processes can
significantly improve a government agencys operational effectiveness. LSI is the firm
that will ensure your investment is well placed.
LSI employs a unique combination of experienced staff members, effective analytical
and implementation tools, and new technologies to increase service levels, reduce costs,
and improve performance. LSI offers a full range of logistics analysis and consulting
services on such topics as cost analysis, asset tracking, distribution management,
inventory management, logistics systems analysis, logistics concepts, multinational
logistics, product sourcing, and supportability assessments.

 Integrated logistics management strategy is

based on the following activities:
1. Cross functional team work: The various
personnel performing different logistics
related activities within the organization
should be formed into a team. The team can
be built with personnel from various
interrelated department like sales, purchase,
dispatch, transport, finance etc
2. Channel partnership
3. Proactive distribution

 Logistics management in Nepal

Distribution system in Nepalese markets lack an organized
effort and seriousness. Materials handling is defective.
Therefore, the distribution cost in Nepal is expensive and the
market price for the products is seriously affected. The
competitive position of the Nepalese marketers is seriously
affected by defective distribution system. Similarly, due to the
difficult topographical situation of Nepal, distribution has
become difficult as well as costlier. There is lack of
warehousing facility and transportation network in Nepalese
markets. Therefore, the goods are not properly distributed to
the desired destinations in desired time period. This is the
main reason that the foreign products and distributors are
gaining from the situation.

Importance Questions
Define distribution and Explain the objective of
distribution.
Explain the importance of marketing channel
and their key functions.
Discuss about channel dynamics. How
horizontal conflict arise? Also briefly discuss
how channel conflict can be managed.
Define Marketing Logistics. Explain its
Functions.