Retail Distribution and Supply
Chain Management
Dr. Gopal Thapa
Tribhuvan University

Channels and Channels Flow
 Marketing channel is the path or route taken by
goods or services as they move form producer to
final consumer
- Dictionary of Marketing
 There are different supply chain structures based
upon extended, limited and direct channels
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Channel Flows
 Physical flow – the movement of goods and
method of transport, from one part of the chain to
another;
 Ownership flow – the transfer of title for
ownership/usage from one channel member to
another.
 This is important for legal aspects of delivery,
damage and storage by the producer and
intermediary as well as for the final customer;
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Channel Flows
 Service flow – if services are rendered as part of
the process or the end product is a service or
mainly service based, it is necessary to ensure that
all the characteristics of the services are fully
understood
 Information flow – there is a need for timely and
accurate two-way information between all channel
members;
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Channels Flow
 Payment flow – there is a necessity for agreed
payment transfer terms based upon services
rendered or goods delivered;
 Promotion flow – a flow of communication
material needs to be used to influence both trade
partners and consumers.
 The objectives of the promotion will be to
produce a positive attitude and image for the
retailer.
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Supply Channel
 The supply channel is the total process by which
products reach the end consumer as goods or
services.
 This is a sequence of events that involves strategic
decisions over different resources and the
maintenance of relationships all focused on
delivering optimum value to the end consumer.
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Traditional Supply Channel for
Retail Products
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Supply channel to achieve:
 reduced inventory and storage investment in the chain;
 improved end-user and customer service benefits through
productivity and effectiveness (faster order cycle times,
improved on-time shipment, lack of damage/defects, etc.);
 development of strong relational links, and hence a strong
chain, in order to build competitive advantage; and
 lower procurement, transportation and unit costs which can
be used to price more competitively and to increase value-
added benefits.
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Distribution logistics and stock
control
 The customer’s central expectation of retail
service delivery is one of availability.
 No amount of service enhancement or added
incentives will effectively make up for an
empty shelf.
 As a customer, the ultimate measure of a
retail service is whether the goods or services
are available as required
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Distribution logistics and stock
control
 Modern retailing is underpinned by a complex
infrastructure that seeks to meet this central customer
expectation.
 All of this has its cost and, therefore, from a management
perspective it will be vital to deliver the retail service in an
efficient manner.
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Distribution logistics and stock
control
 This is becoming increasingly important as profit
growth cannot be easily achieved when sales
growth is not high; such extra profit has to be
gained from improvements in productivity.
 The achievement of productivity gains is available
from a retail logistics system infrastructure which
consists of several elements
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Logistics Definition
 Logistics is the process of strategically managing
the procurement, movement and storage of
materials, parts and finished inventory through the
organization and its marketing channels in such a
way that current and future profitability are
maximized through the cost-effective fulfillment
of orders.
 Christopher (1992)
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Retail Logistics
 The word logistics is derived from the French
word ‘loger’ which means to quarter and supply
troops
 Logistics has developed from the systematic
planning required when large numbers of troops
and their equipment move, to that of the moving
of large amounts of goods.
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Retail Logistics
 Retail logistics is the organized process of
managing the flow of merchandise from the
source of supply to the customer – from the
producer/manufacturer, wholesaler/ intermediary
through to the warehouse, transport to the retail
units until the merchandise is sold and delivered to
the customer
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Retail Logistics
 The massive increase in product variety in
stores has created a need for improved
logistics and sophisticated systems
 From a marketing point of view the system
has to satisfy the customer based upon the
old adage of getting the right product to the
right customer in the right place at the right
time.
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Retail Logistics
 This requires a starting point at the marketplace
and then working backwards to ensure everything
is put in place to provide improved delivery, better
service, lower prices through efficient logistics
and added value.
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Retail Logistics Functions
 the physical movement of goods;
 the holding of these goods in stockholding points;
 the holding of goods in quantities required to meet
demand from the end consumer;
 the management and administration of the process
which, in modern complex distribution systems, is
a function in its own right.
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Retail Logistics Functions
 All of this is based upon the aspects of:
 order processing;
 transport;
 storage;
 inventory.
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Retail logistics – the cost
structure
 Many retailers pursue distribution strategies which
explicitly or implicitly acknowledge the
importance of the total distribution concept (TDC)
which is based on the work of West (1989).
 The TDC encourages everyone in the company to
think in terms of all components of distribution –
from the moment of manufacture to when, in the
case of the retailer, goods are sold through the
checkout – as an integrated linear model.
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Total Distribution Cost (TDC)
 TDC = TC + FC + CC + IC + HC + PC +MC
 Where,
 TC = transport cost
 FC= Facilities cost
 CC = Communication cost
 IC = Inventory cost
 HC = Handling cost
 PC =Packaging cost
 MC = Management cost
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Retail marketing practices in Nepal
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