DISTRIBUTION

MANAGEMENT
Types of Distribution
In today’s fast paced world, distribution by a company can be an
enormous competitive advantage to the company. Most companies 
target their customers far and wide. Because of the rising costs,
companies are trying to expand in various markets so that they
have a higher turnover and hence a higher margin.
To reach far and wide, you need the right distribution strategies in
place. You cannot market a product and then not deliver the product
to the end customer. This is a sheer loss of money as you waste
money on your marketing and the opportunity loss is also huge.
Not to mention, the loss to the brand when the customer wants to
purchase the product but cannot find it.
Different Ways of Distribution
Distribution strategy is mainly decided by keeping the top
management in loop because it affects overall operations.
This strategy can be summarized with 3 main points.

1.) How to get the product from the manufacturing point to

the end customer.

2.) How to control costs and save time while executing the
distribution strategy

3.) How to build a competitive advantage through

distribution
Different Types of
DISTRIBUTION
DIRECT DISTRIBUTION
Direct distribution is a strategy where manufacturers
directly sell and send products to consumers. Some
organizations may opt to take a more modern
approach and use an e-commerce website where
users can make a purchase online. This is an
effective option for companies with a client base
that’s moderately knowledgeable about technology,
requests a specific solution to meet needs or is
devoted to a particular brand.
Another direct distribution method is through catalogs
or phone orders. This option may target an older
customer base or users in specific industries that are
attuned to placing orders this way.
INDIRECT DISTRIBUTION
The term “middleman” often gets a bad reputation, but
in the case of distribution, these organizations can be
helpful in getting goods to consumers. Indirect
distribution strategies involve intermediaries that
assist in the logistics and placement of products so that
they reach customers swiftly and in an optimal
location based on consumer habits and preferences.
INTENSIVE DISTRIBUTION
Products are put into as many retail locations as possible
with the intensive distribution strategy. For example, gum
is a product that typically uses this strategy. You can find
gum at gas stations, grocery stores, in vending machines
and at retail locations like SM. This method hinges on
making a large number of goods available in multiple
locations. These items don’t typically necessitate an
involved purchase decision where the customer does
research before making a purchase. Rather, these items are
routine purchases that involve very minimal effort to sell.
EXCLUSIVE DISTRIBUTION
When manufacturers opt for exclusive distribution, they
make a deal with a retailer to sell a product through that
specific storefront only. Businesses may also sell goods
directly through their own branded stores, which is another
example of exclusive distribution. For example, customers
can’t buy a Lamborghini at any location — they need to go
to a Lamborghini dealership to purchase new luxury
vehicles.
SELECTIVE DISTRIBUTION
Selective distribution is a middle-ground option
between intensive and exclusive distribution. With this
strategy, products are distributed in more than one
location, but not as many as with an intensive
distribution strategy. For example, clothing from
different brands may be offered selectively.
DISTRIBUTION
MANAGEMENT
Elements of Distribution
 Distribution includes the various activities the company
undertakes to make the product accessible and available to
target customer.
 Distribution of products constitutes an important element of
the marketing mix of a firm.
 Distribution includes two components. They are channels of
distribution and physical distribution. There are several
channels of distribution for the consumer and the industrial
products.
 Distribution of product is the process of providing the goods
and services from the manufacturer to the final consumers.
After the development of the product, the marketing manager
has to decide channels or routes. The product will flow from
the factory to the potential customers through them. The
marketer may choose to distribute the product directly to
customers without using any intermediaries.
 Alternatively, he may use one or more middleman including
wholesalers, selling agents, and retailers. But the important
point is that the product should move efficiently and at
minimum possible cost from the company’s production
department to the ultimate customers.
 According to Philip Kotler, “Distribution includes various
activities the company undertakes to make the product
accessible and available to target customer.”
 Distribution is the function of getting goods into the hands of
the consumer. The channel of distribution denotes the
middleman engaged in moving goods from the place of
production to place of consumption.
 It is the channel through which goods move as smoothly as
possible to the desired places. It is the route by which goods
move from the place of production to the place of consumption.
ELEMENTS OF DISTRIBUTION

The distribution includes

two components.

They are channels of

distribution and physical
distribution.
 Channels of Distribution
 A channel of distribution is an organized net- work or a
system of agencies and institutions which in combination
perform all the activities required to link producers to
accomplish the marketing task.
 In another word, it stands for the path or route traced in the
direct or indirect transfer of product; as it moves from a
producer to the ultimate consumer or industrial users.
 Thus, a channel of distribution is a pathway the flow of goods
and services from producers to consumers composed of
intermediaries through their functions and attainment of the
mutual objectives.
Types of Intermediaries
These are the middlemen that ensure smooth and effective
distribution of goods over your chosen geographical market.
Middlemen are a very important factor in the distribution process.
let us take a look at the types of middlemen we usually find.
Agents
 Agents are middlemen who represent the produces to the
customer. They are merely an extension of the company but
the company is generally bound by the actions of its agents.
One thing to keep in mind, the ownership of the goods do
not pass to the agent. They only work on fees
and commissions.
Wholesalers
 Wholesalers buy the goods from the producers directly.
One important characteristic of wholesalers is that they
buy in bulk at a lower rate than retail price. They store
and warehouse huge quantities of the products and sell
them to other intermediaries in smaller quantities for a
profit.
 Wholesalers generally do not sell to the end consumer
directly. They sell to other middlemen like retailers or
distributors.
Distributors
 Distributors are similar to wholesalers in their function.
Except they have a contract to carry goods from only one
producer or company. They do not stock a variety of
products from various brands. They are under contract to
deal in particular products of only one parent company
Retailers
 Retailers are basically shop owners. Whether it is your local
grocery store or the mall in your area they are all retailers.
The only difference is in their sizes. Retailers will procure
the goods from wholesaler or distributors and sell it to the
final consumers. They will sell these products at a profit
margin to their customers.
 In the reality of the market, all producers rely on the
distribution channel to some extent. Even those who sell
directly may rely on at least one of the above intermediary
for any purpose. Hence the distribution channel is of
paramount importance in our economy.
According to American Marketing Association, “A channel of
distribution, or marketing channel is the structure of inter-
company organization units and extra – company agents and
dealers, wholesale and retail through which a commodity,
product or service is marketed.”
 Physical Distribution
 Physical distribution is a marketing activity that concerns the
handling and the movement of goods. Physical distribution is a
major component of the marketing mix and cost area of business.
It includes all those activities connected with the efficient
movement of goods from the place of production to the place of
consumption.
 Physical distribution involves the handling of raw materials,
fabricated parts, supplies and finished products from producers
to consumers via intermediaries. It is the process of strategically
managing the movement and storage of materials, parts and
finished inventory from the supplier, between enterprise facilities
and to customers.
 The physical distribution encompasses the wide range of
interrelated activities such as transportation, warehousing,
materials handling, packaging, inventory control, and plant
and warehouse location, order processing, marketing
forecasting and customer services.
 According to W.J.Stanon, “Physical distribution consists of all
activities concerned with moving the right products to the right
place at the right time.”
 Broadly, these activities can be grouped into four major
functions namely, order processing, inventory management,
transportation and material handling.
 Order Processing:
 Order-processing and inventory control are related to each other.
Order processing is considered as the key to customer service
and satisfaction. It includes receiving, recording, filling, and
assembling of products for dispatch. The amount of time
required from the dates of receipt of an order up to the date of
dispatch of goods must be reasonable and as short as possible.
 It comprises in undertaking the processes that are needed to
make certain orders processed quickly, accurately, and
efficiently. The marketing manager has to decide about these
along with such issues as what is the most efficient way to bill
customers; how cans the paper work may be minimized? And
how can the physical function of assembling orders more
efficiently?
 Inventory Planning And Control:
 Inventory refers to the stock of products a firm has on hand
and ready for sale to customers. Inventories are kept to meet
market demands promptly. Inventory is the link
interconnecting the customer’s orders and the company’s
production activity.
 In fact the entire physical distribution management rotates
around the inventory management. Inventory management is
the heart of the game of physical distribution.
 Inventory refers to the level of stock to be maintained. If a
company maintains a high level of inventory, higher will be the
level of service to customers but along with this the cost of
maintaining the inventory will also be high because lot of
capital would be tied up in the stock.
 Therefore, a firm is required to maintain a balance between
customer satisfaction and level of inventory.
 Transportation:
 It is an essential element of physical distribution. It involves
integrating the advantages of each transportation method by
adopting containers and physical handling producers to permit
transfers among different types of carriers.
 The marketing manager has to decide to (i) what mode or
combination of modes of transportation (rail, truck, pipeline, water
ways or air) should be used to transport products to warehouses
and from there to customers? (ii) Should the transportation cost be
reduced and the desired levels of customer service still maintained.
 For example, to place containers in railway flat cars and
then load the containers on motor vehicles is called “piggy
back” and if the containers are off loaded to water carriers,
it is called “flash back.” Exchange of containers between air
and truck carriers are referred to as “Air truck” or “birdy
back”.
  Materials Handling/ Warehousing:
 It involves moving products in and out of a stock. It consists of
routine tasks that can be performed through mechanization
and standardization. Efficiency is increased through use of
electronic data processing to control conveyor systems, order
picking and other traffic flaws.
 The modern mechanized handling services and protective
packaging have improved the level of customer service and at
the same time lowered physical distribution costs. Material
handling and packaging services have also speeded up the
order processing and movement of consignments.
CHANNEL OF DISTRIBUTION FOR CONSUMER
AND INDUSTRIAL PRODUCTS

 Marketing channels are basically for different types of

consumer and industrial product.
 They consist of different kinds of building blocks, producer,
consumers or industrial users, agents, wholesalers and
retailers depending upon the philosophy of the company,
nature of the market, nature of customers, scale of
operations, etc.
 Channels of Distribution for Consumer Products

 Channel of distribution can be defined as the process of distributing

goods and services to the final consumers.
 The simplest channel of distribution is zero level marketing
channel. In this, there is direct contact between the producer and the
ultimate consumer or user.
 The one level marketing channel contains one selling intermediary.
It may be the retailer in case of consumer products as a sales agent or
broker in case of industrial products.
 The two level marketing channels contain two intermediaries,
namely, wholesaler and retailer.
 The three level marketing channels contain three intermediaries –
agent middleman, wholesaler, and retailer.
• Producer- consumer:
 It is the direct channel of distribution. It is the direct sales of goods and services by the producer to the
consumers. There is no involvement of any middleman between the producer and the consumers. The
producer creates a link with the consumer directly through his own retail shops. Under this, all the marketing
activities are performed by the producer or the manufacturer himself.
• Producer – retailer- consumer:
 It is the distribution channel in which retailer is involved as the middleman. Under this, the manufacturer
sells to the retailers who in turn sell to the ultimate consumers. This channel of distribution is very popular
these days . The retailers purchase in large quantities from the manufacturer and perform certain marketing
activities in order to sell the product to the ultimate consumers.
• Producer- wholesaler- retailer- consumer:
 Under this channel wholesaler and retailer is considered as the middleman. This is a traditional channel of
distribution for the sale of consumer goods. This channel is most suitable for the products with a widely
scattered market. The agent middlemen serve as a link between the producers and retailers.
• Producer- agent- wholesaler- retailer- consumer:
 Under this channel agent& retailer is considered as the middleman. This channel is used where the
wholesalers are scattered throughout the country and agents undertake marketing on behalf of the producers.
It is also possible to have a channel of producer, wholesaler, agent, retailer and consumer.
 Channels of Distribution for Industrial Products

 The channel of distribution for consumer products is

generally long, while channels for industrial products are
short as retailers are not needed.
 Direct marketing of industrial products is generally followed
in local markets and in cases the producers have facilities to
dispatch the products to industrial users directly. Direct
channel is very popular for selling of industrial products
since industrial users place orders with the manufacturers
of industrial products directly.
• Producer- Industrial user:
 Under this channel-producer, directly provides goods and services to the industrial users. It is the most commonly
used channel in the distribution of industrial goods. This channel plays a predominant role in the sale of industrial
goods. These goods are bulky and highly technical and of high unit value. Therefore, the industrial goods are not
purchased frequently. As a result, 75% of industrial users will purchase these goods directly from the manufacturer.
• Producer- industrial distributor- industrial user:
 Under this channel, fabricating materials and parts, equipment’s and operating supplies are sold through a
wholesaler to industrial users. On behalf of the manufacturer, wholesaler makes all sorts of efforts in releasing the
goods. This channel is quite common in the case of construction Company and air conditioning plant.
• Producer- agent- industrial user:
 Under this channel, the agent is referred as the middleman. Manufacturer of operating supplies of small equipment
needs a lot of marketing efforts. Therefore, they sell their goods to the industrial users through agent middlemen
instead of merchant middlemen and also for those who are not interested in investing fund on selling activities. This
method is useful to those who are interested in introducing new products.
• Producer- agent- industrial distributor- industrial user:
 Under this method, agent and industrial distributor are used as the middleman. This method will be adopted by the
manufacturer of fabricating materials and parts, operation supplies etc. because these manufacturers will produce in
full capacity that too on a large scales. The producer sells the goods to the final consumers using agent & industrial
distributor. It is the combination of the above channels adapted to suit varying conditions on the basis of geographical
factors.
Thank You!