The document provides an overview of distribution systems and logistics management. It defines distribution as the transfer of goods from manufacture to consumption, including warehousing, packaging, and transportation. It also discusses the marketing mix, channels of distribution, elements of distribution management, and the importance of distribution strategies. Finally, it covers topics like inventory management, order processing, and the objectives and functions of logistics management.

1. Dr. Zubair Ahmad
JIT Barabanki

2. Distribution System - Overview
 Definition: The management of efficient transfer of
goods from the place of manufacture to the point of
sale or consumption, Distribution encompasses such
activities as warehousing, materials handling,
packaging, stock control, order processing and
transportation.

3. Marketing Mix
 Four P’s of Marketing:
 Product
 Price
 Place
 Promotion

4. Channels of Distribution
 Selling through direct Channels
 Selling through Indirect Channels
 Producer---------------------------------Consumer
 Producer--------------Retailer---------Consumer
 Producer---Whole seller—Retailer--Consumer

5. Elements of Distribution Mngt,
 Materials Handling: It involves moving products in
and out of a stock. ...
 Inventory Planning And Control: Inventory refers to
the stock of products a firm has on hand and ready for
sale to customers. ...
 Order Processing: ...
 Transportation: ...
 Communications: ...
 Organizational Structure:

6. Importance of Distribution for
Strategic advantage
 The use of distribution in SME sector companies does not give any unambiguous
conclusion.
 Distribution channels and applied (or not) distribution strategies depend not only on the
 business profile of the company, but also on the size of firm. Because of limited product
 offer micro, small and mid-sized companies must make a choice of distribution channel,
 which will be adequate to needs, i.e. will take into consideration competitors, market
position
 and specific situation of target segment. In micro and small companies, direct channel of
 distribution which will allow to limit costs and increase elasticity will be most effective.
 However implementation of distribution strategy in the company is not determined by
the
 size of company, but rather by applied (or not) concept of marketing management

7. Value Chain
 The value is the total amount (i.e. total revenue) that
buyers are willing to pay for a firm’s products
 The difference between the total value or revenue and
the total cost of performing all of the firm’s activities
provides the margin
 The value chain is a tool developed by Dr, Michael
Porter

8. What is Value Chain
 Porter definition includes all activities to design,
produce and market deliver and support the product/
service
 The value chain is concentrating on the activities
starting with raw materials till the conversion into
final goods or services
 Two Categories:
 Primary Activities (operations, Distribution, Sales)
 Support Activities (R & D, Human Resources)

9. Types of Value Chain
 Value Chain is categorized into types based on the
types of organizations.
 Manufacturing based
 Service based
 Both manufacturing and service based

10. Value Chain Analysis
 Used to identify sources of competetive advantage
 Specifically:
 Opportunities to secure cost advantages
 Opportunities to create product/ service
differentiation
 Includes the value creating activities of all industry
participants

11. Marketing Intermediaries
 A business firm that operates between producers and
consumers or business users also called a middleman
 May be a Whole seller, retailer or facilitating
intermediary

12. Intermediaries
 Retailing: Activities involved in selling goods and
services to ultimate consumers
 Wholesaler: An intermediary that takes title to the
goods it handles and redistributes them to retailers,
other distributors and sometimes end consumers
 Direct Marketing: A distribution channel consisting of
direct communication to a consumer or business
recipient

13. Various Marketing Intermediaries
 Wholesaling Intermediaries: Manufacturer owned
facilities, Independent Wholesaling Intermediaries,
Retailer owned cooperatives and buying offices
 Example Manufacturing owned Facilities: Sales branch,
sales office, trade fair, merchandise mart
 Example Independent Wholesaling Intermediaries:
Merchant wholesaler it includes: Rack Jobbers, Cash and
Carry wholesalers, Truck wholesalers, Drop shippers, Mail
order wholesalers other examples: Agent and Brokers it
includes Commission merchants, Auction houses, brokers,
selling agents, manufacturer agents

14. Conventional Distribution Systems
 Today online retailers offer competitive in majority of
cases better prices and services on products than
conventional retailers but have managed to garner
miniscule percentage of market share in products they
handle. The reasons for this are
 Non coverage to many areas
 Cynical attitude in tier 2 towns and rural about ordering
online

15. Conventional Distribution
 People are skeptical about quality and serviceability of
products available online
 No point of contact in case of complaints or queries
 No or limited awareness about offers and discounts
available with online retailers
 Local promotions/activations and BTL absent for online
retailers

16. Model Overview
 In order to tide over these problems and increase
market share it would be prudent for online retailers to
employ parallel offline distribution through affiliated
retail outlets which will be dealers
 Every territory will have a dealer responsible for
distribution and sales of online retailer’s products
 Dealer handles sales as well as logistics and also
promotes retailer locally

17. Model Overview
 The dealers would undertake to become point of
contact for retailer for their local area
 The dealers would be responsible for delivery,
collections and booking from his ID for the retailer
 Additionally he will promote online retailer , keep
some inventory , display merchandise for the online
retailer

18. Multiple Channel Systems
 Direct Channels:
 Own retail shops:
 1. Personal Selling
 2. Mail order selling
 3. Automatic Vending
 4. Franchised Shops
 5. Telephone selling
 6. Exclusive stores/ Specialty stores
 7. E- marketing

19. Indirect Channels
 Merchandise Agents and Brokers- Works on Commission basis
 Merchandise wholesalers or trade Channels
 1. Manufacturer/ Producer-- Consumer/ End User
 2. Manufacturer/ producer—Wholesaler—Consumer/ End User
 3. Manufacturer/ Producer—Retailer—Consumer/ End User
 4. Manufacturer/ Producer– Wholesaler/ Distributor– Retailer–
Consumer/ End User
 5. Manufacturer/ Producer– Wholesaler/ Distributor– Semi
wholesaler—Retailer—Consumer/ End User
 6. Manufacturer/ Producer—Agent broker– Retailer–
Consumer/ End User
 7. Manufacturer/ Producer– Agent broker—Wholesaler—
Retailer– Consumer/ End user

20. Channel Systems
 Vertical Marketing System
A distribution channel structure in which producers, wholesalers and retailers act as a unified
system. One channel member owns the other, has contracts with them and the power that they all
co-operate. The economies are achieved through size, bargaining power and elimination of
duplicated services.
 Horizontal Marketing System
A channel arrangement in which two or more companies at one level join together to follow a new
marketing opportunities where they can combine there resources and use they optimally.
 Hybrid Marketing Systems
Multi-channel distribution system in which a single firm sets up two or more marketing channels to
reach one or more customer segments.

21. Channel Design Decisions
In designing marketing channels, a manufacturer struggles between what is ideal and what is practical. Therefore the
design aspects should involve the following.
Analyzing the consumer needs
The designing of the channel starts with finding out what values consumers in various target segments are looking
from the channel.
Setting the channel objectives
 It must be effective and efficient
 It must have low cost of implementation
 It must have better control
 It must have wide coverage
 It must contribute to maximum overall profit

22. Channel Design Decisions
Factors affecting choice of Distribution channel
Market Factors:
Nature of Market
Number of Potential Customers
Geographic Concentration
Order Size
Product Factors:
Unit value
Perishable Goods
Technical Nature of Products
Company Factors:
Financial Resources
Managerial Capability
Desire for Channel Control
Service provided by the seller

23. Channel Design Decisions
Middleman Factors:
Product launch
Promotional scheme
Market Information
Environmental Factors:
Economic conditions
Technological inventions
Socio-cultural developments
Political and Legal
Ethical factors and Rival/Competitors channel
Identifying the major alternatives:
Types of intermediaries
Number of intermediaries (Intensive / Exclusive / Selective)
Responsibilities of each channel member
Evaluating the major alternatives:
Economic criteria
Control criteria
Adaptive criteria

24. Channel Management Decisions
 Selecting the Channel Members
 Motivating the Channel Members
 Evaluating the Channel Members

25. Physical Distribution and
Logistics Management
 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.
 Main objective of logistics system is to provide customer satisfaction at the
least cost.

26. Disintermediation
 When an intermediary remove from the supply chain
this activity called Disintermediation.
 We can remove an intermediary like wholesaler and
retailer and directly sale the product to the customer
and the benefit goes to the customer in terms of less
price

27. Re-intermediation
 When an intermediary add in the supply chain than
this activity is called re-intermediation
 Re-intermediation is doing by companies in respect of
spread the supply chain in a big area
 Re-intermediation is done mainly on requirement of
the companies

28. Cybermediary (E- Commerce)
 In today’s modern times the trading and shopping is
being done on internet websites.
 The sites like Flipkart, Snapdeal, Amazon, e-bay play a
good role in buying and selling the products on
internet.
 The people can save their time in searching the
products in local markets and can see the huge variety
of products on online sites and than order
 The Return/ Replace policy for products is very good of
these websites

29. Infomediary
 The information of the products and companies are
available on websites and any one can search about any
product or company they want
 This information is very beneficial to the company and
customers in their respect.
 Company can know what the customer wants and
customer feel satisfy by their own choice product

30. Intermediary Empowerment
 Intermediary empowerment is done through three
strategies
 Control Strategies (a). Measurement (b). Review
 Empowerment Strategies
 (a). Help the intermediary develop customer oriented
service processes
 (b). Provide needed support systems
 (c). Develop intermediaries to deliver service quality
 (d). Change to a Cooperative management structure
 Partnering Strategies: (a). Alignment of Goals (b).
Consultation and Cooperation

31. Channel Conflicts
 A channel conflict may be defined as “A situation in which
one channel member perceives another channel member to
be engaged in behaviour that prevents it for achieving
these goals
 Conflict is opposition, disagreement or discard among the
organisations
 Types of Conflicts:
 Vertical Conflict
 Horizontal Conflict
 Inter type Conflict
 Multichannel Conflict

32. Conflict Resolution Strategies
 Avoidance
 Aggression
 Accommodation
 Compromise
 Collaboration
 Maximum efforts and best results
 Least effort and results

33. Logistics Management
 Logistics management is the part of supply chain
management that plans, implements, and controls the
efficient, effective forward, and reverse flow and storage of
goods, services, and related information between the point
of origin and the point of consumption in order to meet
customer's requirements.
 Inventory management is the supervision of non-
capitalized assets (inventory) and stock items. A
component of supply chain management, inventory
management supervises the flow of goods from
manufacturers to warehouses and from these facilities to
point of sale.

34. Function of Inventory
 The primary function of inventory is to use
marketing and production to increase profitability, to
get the maximum amount for the business'
investment. There are other functions of inventory,
such as balancing supply and demand, improving
efficiency, establishing a safety stock and geographical
specialization.
 Types of Inventory: Raw materials
 Work in Process
 Finished Goods
 MRO Goods

35. Strategy of Warehousing
 Depends on the Company’s objectives in general and
logistics objectives in particular like-
 (a). Availability of goods to Consumers
 (b). Degree of Customer offered
 (c). Minimum total distribution cost

36. Blue-whip Effect
 In recent years many suppliers and retailers have
observed that while customer demand for specific
products does not vary much, inventory and back
order levels fluctuate considerably across their supply
chain
 Example: Pampers disposal diapers
 This increase in variability as we travel up the supply
chain is referred to as the Blue-whip effect

37. Order Processing
 Order processing is the process or work-flow
associated with the picking, packing and delivery of
the packed items to a shipping carrier. Order
processing is a key element
of order fulfillment.Order processing operations or
facilities are commonly called "distribution centers".

38. Objectives of logistics management
 The objective is to reduce inventory deployment to
the lowest level consistent with customer service goals
to achieve the lowest overall total logistics cost. ... The
objective is to reduce and manage inventory to the
lowest possible level while simultaneously achieving
desired operating objectives

39. Functions of Logistics management
 Logistics management activities typically include
inbound and outbound transportation management,
fleet management, warehousing, materials handling,
order fulfillment, logistics network design,
inventory management, supply/demand planning,
and management of third party logistics services
providers.

40. Formats of Retailing
 General Merchandise:
 a). Departmental Stores
 b). Full line Discount
 c). Speciality Stores
 d). Off price retailer
 e). Variety stores
 Food Retailers:
 A). Convenience Stores
 B). Conventional Supermarket
 C). Food based Superstore
 D). Combination Store
 E). Supercentres and Hypermarkets