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WHAT IS DISTRIBUTION PLANNING?

Distribution planning entails making decisions regarding the physical movement of merchandise and its transfer between producers and consumers. Activities such as order processing, transportation, inventory management, and customer service are the responsibility of members of the channel of distribution. Channel members (or intermediaries) include wholesalers, retailers, agents, and brokers. Their primary role is to facilitate the transfer of merchandise in an efficient, economical manner. In planning a distribution strategy a company may use a direct (short) channel or an indirect (long) channel.

If an indirect channel is used the wholesaler plays a key role on behalf of the source company. Wholesalers buy and resell merchandise to organizational users and retailers. The functions of a wholesaler include providing direct sales contact, holding inventory, processing orders, and offering sales support.

WHAT FACTORS DO MARKETERS CONSIDER WHEN PLANNING THEIR DISTRIBUTION STRATEGY?

The elements a firm considers when designing channel strategy include product characteristics, competition, company resources, and the intensity of market coverage desired. Usually, a company that wants to maintain control over marketing programs and customer contact will use direct channels. Companies that are more flexible about control will use indirect channels.

When deciding a distribution strategy an organization must assume that conflict will occur among channel members. Conflict can be horizontal (i.e., between similar members at the same level) or vertical (i.e., between members at different levels). The channel captain implements strategies that encourage cooperation between channel members. The channel captain may be the manufacturer, an intermediary such as a wholesaler, or the retailer; it depends on which organization has more economic clout in the channel or if the channel structure dictates who the captain should be.

Integrated marketing systems are a means of gaining increased control over channel operations. There are two types of integrated marketing systems: vertical and horizontal. In a vertical marketing system, a manufacturer, wholesaler, or retailer could be in control. Control in a vertical marketing system can be administered, in which case the member with the most economic influence holds control; contractual, where control is maintained through a legal agreement; and corporate, in which case one company operates at each level of the channel. In a horizontal marketing system, one firm has many members at one level of the channel.

HOW DOES AN ORGANIZATION MANAGE THE DELIVERY OF GOODS TO ITS CUSTOMERS?

Physical distribution refers to the activities involved in the delivery of merchandise. The major components of physical distribution include order processing (accepting and filling orders), warehousing (receiving, storing, and redistributing goods to customers), inventory management (managing the supply of goods so they meet customer demand), transportation (the actual delivery of goods by truck, rail, air, water, or the Internet), and customer service (offering an ordering system that combines frequency, speed, and consistency). Many firms are calling upon external expertise in logistics management and are outsourcing this responsibility to companies such as UPS and FedEx.

HOW HAS TECHNOLOGY IMPROVED SUPPLY CHAIN MANAGEMENT SYSTEMS?

Supply chain management involves an integrated flow of information (electronically), materials, and finances among channel members. It involves much collaboration and cooperation among members of the channel to optimize the efficiencies of the system. Effective supply chain management is crucial and in that regard technology plays a key role. Supply chain management has embraced technologies such a s EDI (electronic data interchange) in which information is exchanged electronically between channel members, and RFID (radio frequency identification), which allows members to track the location of goods anywhere in the channel. The objective of supply chain management is to reduce costs while maintaining the most efficient and productive distribution system possible.