unit 7 distribution.pptx
TRANSCRIPT
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 (go-between) 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 end-user. 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 stores2. One level channel: • Super markets / discount house / departmental
stores3. 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. Customers2. 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 company’s 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 partner’s performance will be evaluated.
Channel Dynamics
Behavioral Dynamism
Channel Role
Channel Power
Channel Conflicts
Structural Dynamism
Vertical Horizontal
Multi-Channel
• Channel Role: Each channel members also has certain role expectations from other channel members )
• Channel Power ( Reward/Coercion/Referent/Expert /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 efficiency2) Improved customer service3) Increased sales4) 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. warehousing,2. transportation, 3. inventory management, 4. Material Handling,5. 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 e-mail 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 today’s global market. The best management practices and processes can significantly improve a government agency’s 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 partnership3. 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.