Distribution management 

is the process of overseeing the movement of goods

from supplier or manufacturer to point of sale. It refers to activities and
processes such as packaging, inventory, warehousing, supply chain,
and logistics

The Nature and Functions of Distribution (Place)

What is the nature and function of distribution (place)?

Distribution is efficiently managing the acquisition of raw materials by the

factory and the movement of products from the producer or manufacturer to
business-to-business (B2B) users and consumers. It includes many facets, such
as location, hours, website presence, logistics, atmospherics, inventory
management, supply-chain management, and others. Logistics activities are
usually the responsibility of the marketing department and are part of the
large series of activities included in the supply chain.

A supply chain is the system through which an organization acquires raw

material, produces products, and delivers the products and services to its
customers. Supply chain management helps increase the efficiency of logistics
service by minimizing inventory and moving goods efficiently from producers
to the ultimate users.

On their way from producers to end users and consumers, products pass
through a series of marketing entities known as a distribution channel. We will
look first at the entities that make up a distribution channel and then examine
the functions that channels serve.

Marketing Intermediaries in the Distribution Channel

A distribution channel is made up of marketing intermediaries, or organizations

that assist in moving goods and services from producers to end users and
consumers. Marketing intermediaries are in the middle of the distribution
process, between the producer and the end user. The following marketing
intermediaries most often appear in the distribution channel:

 Agents and brokers: Agents are sales representatives of manufacturers

and wholesalers, and brokers are entities that bring buyers and sellers
 together. Both agents and brokers are usually hired on commission basis by
either a buyer or a seller. Agents and brokers are go-betweens whose job is to
make deals. They do not own or take possession of goods.
 Industrial distributors: Industrial distributors are independent
wholesalers that buy related product lines from many manufacturers and sell
them to industrial users. They often have a sales force to call on purchasing
agents, make deliveries, extend credit, and provide information. Industrial
distributors are used in such industries as aircraft manufacturing, mining, and
petroleum.
 Wholesalers: Wholesalers are firms that sell finished goods to retailers,
manufacturers, and institutions (such as schools and hospitals). Historically,
their function has been to buy from manufacturers and sell to retailers.
 Retailers: Retailers are firms that sell goods to consumers and to
industrial users for their own consumption.

At the end of the distribution channel are final consumers and industrial users.
Industrial users are firms that buy products for internal use or for producing
other products or services. They include manufacturers, utilities, airlines,
railroads, and service institutions such as hotels, hospitals, and schools.

Non-traditional Channels

Often non-traditional channel arrangements help differentiate a firm’s product

from the competition. For example, manufacturers may decide to use non-
traditional channels such as the internet, mail-order channels, or infomercials
to sell products instead of going through traditional retailer channels. Although
non-traditional channels may limit a brand’s coverage, they can give a
producer serving a niche market a way to gain market access and customer
attention without having to establish channel intermediaries. Non-traditional
channels can also provide another avenue of sales for larger firms. For
example, a London publisher sells short stories through vending machines in
the London Underground. Instead of the traditional book format, the stories
are printed like folded maps, making them an easy-to-read alternative for
commuters.

Kiosks, long a popular method for ordering and registering for wedding gifts,
dispersing cash through ATMs, and facilitating airline check-in, are finding new
uses. Ethan Allen furniture stores use kiosks as a product locator tool for
consumers and salespeople. Kiosks on the campuses of Cheney
University allow students to register for classes, see their class schedule and
grades, check account balances, and even print transcripts. The general public,
when it has access to the kiosks, can use them to gather information about the
university.

Small and medium-sized New Orleans food and beverage companies and
restaurants banded together to promote their goods and establishments over
the internet on a specific website at http://www.nolacuisine.com. They also
have found that they can successfully sell their offerings through the websites
of the profiled restaurants and food outlets, such as Cochon Butcher
(https://cochonbutcher.com). With technology rapidly evolving, downloading
first-run movies to mobile devices may not be far off. The changing world of
technology opens many doors for new, non-traditional distribution channels.

The Functions of Distribution Channels

Why do distribution channels exist? Why can’t every firm sell its products
directly to the end user or consumer? Why are go-betweens needed? Channels
serve a number of functions.

Channels Reduce the Number of Transactions

Channels make distribution simpler by reducing the number of transactions

required to get a product from the manufacturer to the consumer. For
example, if there are four students in a course and a professor requires five
textbooks (each from a different publisher), a total of 20 transactions would be
necessary to accomplish the sale of the books. If the bookstore serves as a go-
between, the number of transactions is reduced to nine. Each publisher sells to
one bookstore rather than to four students. Each student buys from one
bookstore instead of from five publishers

Dealing with channel intermediaries frees producers from many of the details
of distribution activity. Producers are traditionally not as efficient or as
enthusiastic about selling products directly to end users as channel members
are. First, producers may wish to focus on production. They may feel that they
cannot both produce and distribute in a competitive way. On the other hand,
manufacturers are eager to deal directly with giant retailers, such as Walmart,
which offer huge sales opportunities to producers.

Channels Ease the Flow of Goods

 Channels make distribution easier in several ways. The first is by sorting, which
consists of the following:

 Sorting out: Breaking many different items into separate stocks that are
similar. Eggs, for instance, are sorted by grade and size. Another example
would be different lines of women’s dresses—designer, moderate, and
economy lines.
 Accumulating: Bringing similar stocks together into a larger quantity.
Twelve large Grade A eggs could be placed in some cartons and 12 medium
Grade B eggs in other cartons. Another example would be to merge several
lines of women’s dresses from different designers together.
 Allocating: Breaking similar products into smaller and smaller lots.
(Allocating at the wholesale level is called breaking bulk.) For instance, a tank-
car load of milk could be broken down into gallon jugs. The process of
allocating generally is done when the goods are dispersed by region and as
ownership of the goods changes.

Without the sorting, accumulating, and allocating processes, modern society

would not exist. Instead, there would be home-based industries providing
custom or semicustom products to local markets. In short, society would
return to a much lower level of consumption.

A second way channels ease the flow of goods is by locating buyers for
merchandise. A wholesaler must find the right retailers to sell a profitable
volume of merchandise. A sporting-goods wholesaler, for instance, must find
the retailers who are most likely to reach sporting-goods consumers. Retailers
have to understand the buying habits of consumers and put stores where
consumers want and expect to find the merchandise. Every member of a
distribution channel must locate buyers for the products it is trying to sell.

Channel members also store merchandise so that goods are available when
consumers want to buy them. The high cost of retail space often means many
goods are stored by the wholesaler or manufacturer.

1. List and define the marketing intermediaries that make up a distribution

channel.
2. Provide an example of a strategic channel alliance.
3. How do channels reduce the number of transactions?
What is the nature and function of distribution (place)?

Distribution (place) includes the efficient managing of the acquisition of raw

materials by the factory and the movement of products from the producer or
manufacturer to business-to-business users and consumers. Place includes
such activities as location selection, store layout, atmosphere and image-
building for the location, inventory, transportation, and logistics. Logistics
activities are usually the responsibility of the marketing department and are
part of the large series of activities included in the supply chain.

Distribution channels are the series of marketing entities through which goods
and services pass on their way from producers to end users. Distribution
systems focus on the physical transfer of goods and services and on their legal
ownership at each stage of the distribution process. Channels reduce the
number of transactions and ease the flow of goods.

What are the roles of distribution?

The key role that distribution plays is satisfying a firm's customer and
achieving a profit for the firm. From a distribution perspective, customer
satisfaction involves maximizing time and place utility to: the organization's
suppliers, intermediate customers, and final customers.

What is the nature and function of distribution?

Distribution channels are the series of marketing entities through which goods
and services pass on their way from producers to end
users. Distribution systems focus on the physical transfer of goods and services
and on their legal ownership at each stage of the distribution process.

What are the objectives of distribution management?

The objective of distribution function is to make or supply necessary goods to
the large masses of customers living indifferent geographical areas. The
objective of distribution is also to properly storing, handling and protecting the
goods and supplying them to the consumers in good condition.

Functions of distribution

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Channels of distribution
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