Industrial Distribution Channels

7/31/2019 Industrial Distribution Channels

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INDUSTRIAL DISTRIBUTION CHANNEL AND MARKETING

LOGISTICS


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MarketingChannel/Distribution Channel/TradeChannel

A set of interdependent

organisations that make aproduct or serviceavailable to customers foruse.

Marketing

Logistics/Physical Distribution

Consists of deliveringthe completed products

to customers andchannel intermediaries.


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Factors Affecting the Nature ofIndustrial Channels

Geographic Distribution

Channel Size Characteristics of Intermediaries

Mixed System


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Why Industrial Marketers useIntermediaries?

Buying

Promotion and Selling

Assorting

Financing Warehousing

Grading

Transportation Information

Risk taking

Technical Service


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Why Industrial Customers Buyfrom Distributors?

Dependable Delivery

Information

Variety

Liberal Credit


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Types of IndustrialMiddlemen/Intermediaries

Manufacturers Representatives

Industrial Distributors(Dealers)

Responsibilities

Main Categories

Brokers Commission Merchants

Value-added Resellers(VARs)


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Channel Design FrameworkChannel

Objectives

ChannelAlternatives

Evaluation ofAlternatives

Selection ofChannel

ChannelConstraints

ChannelTasks


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Channel Design Contd.

Developing Channel Objectives Analysing Channel Constraints:

External Environment

Competition

Company

Product Characteristics

Customer

Analysing Channel Tasks


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Channel Design Contd.Identifying Channel Alternatives

Involves 4 major issues:

1. Types of intermediaries:

Value Added Resellers

Industrial Distributors or Dealers

Manufacturers representative or AgentsBrokers

Commission Merchants

2. Number of Intermediaries:

Selective Distribution

Intensive Distribution

Exclusive Distribution

3. Number of Channels

4. Terms and Res onsibilities of Channel Members


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Channel Design Contd.

Evaluating the Channel Alternatives:Economic Performance

Degree of Control

Adaptability to changing market situations

Selection of Channel


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CHANNEL ALTERNATIVE

Break Even Point

Agent / Manufacturer'sChannel

Company's Sales-ForceChannel


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Managing Channel Members

Selecting Intermediaries Motivating Middlemen

Partnership Concept

Vendor (or Supplier) Managed InventorySystem (VMI)

Reasonable Discounts and Commission

Distributor Councils

Other Motivational Practices


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Controlling Channel Conflicts

Sources of Channel Conflicts

Differences in Objectives

Dealings with Customers

Differences in Interests

Differences in Perceptions

Compensation

Unclear Territory boundaries


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Evaluating Channel Members

SlNo

Evaluation Factors Weightage Evaluation MiddlemenScore

1 Sales Achieved vs SalesQuota

0.40 8 3.20

2 Customer Delivery Service 0.20 6 1.20

3 Customer Complaints 0.15 6 0.90

4 Market Feedback 0.10 5 0.50

5 New Customers Generated 0.15 4 0.60

Min Total Score = 6.0 6.40


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Supply Chain Management Framework

Suppliersof raw

materialsandcompone

nts

Planningand

forecasting

Purchase

Production or

Operati

on

Distributionand

logistic

s

Customer

Service

Performance

and

evaluation

BusinessCustome

rs or endusers

Information Flow

Cash Flow

Product Flow


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Logistics Management

Planning and coordinating activitiesnecessary to achieve superior levels ofservice at lowest cost.

Logistics management optimises materialflow within the organisation, while supplychain management extends material flow

integration upstream to suppliers anddownstream to customers.


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Marketing Logistics/PhysicalDistribution

In business, logistics system has two majorproduct movement:

1. Physical Supply

2. Physical Distribution


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BUSINESS LOGISTIC SYSTEMPhysical supply Industrial Manufacturer Physical distribution

Raw materials

Components

SuppliesMaterial storage

Manufacturing

Finished Goodsstorage

Industrial customers

IndustrialDistributors/Dealers

TASKS OF PHYSICAL


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TASKS OF PHYSICALDISTRIBUTION

Sl No Tasks Brief Description

1 TRANSPORTATION It is the means of moving goods from production unit to

customer. It is the most important cost area in physical

distribution.

2 WAREHOUSING It provides storage space for products which are made

available to customer when needed. It can improve customerservice & transportation cost.

3 INVENTORY

CONTROL

Inventory is used to insure the products are available to

customers in the right product mix, at the right location, &

at the right time.

4 PACKAGING It provides protection to products & maintains productidentity when products arrive at the market place.

5 MATERIAL

HANDLING

It increases speed & minimizes costs of order- picking,

moving products between storage & transport carriers,

loading & unloading operations.

TASKS OF PHYSICAL


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TASKS OF PHYSICALDISTRIBUTION

Sl

No

Tasks Brief Description

6 ORDER

PROCESSING

It starts the physical distribution process & directs

various activities which are necessary to deliver the

products to customers. Speed & accuracy of order

processing affect customer service & costs.

7 COMMUNICATION Information is exchanged between the countries

physical distribution or marketing logistic department

& its customer. It assist in performing various tasks.

8 FACTORY AND

WAREHOUSELOCATIONS

Right locations of manufacturing plants & warehouse

(or godowns) increase customer service & reducetransportation (or freight) costs.

9 CUSTOMER

SERVICE

The result of physical distribution activities is

customer service, it create customer value (or benefits)

that has impact companies market shares, total cost &

profitability.


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Total Cost Approach

Focuses on balancing two importantelements:

1. Total Distribution Costs = Freight +

Warehouse Cost + Inventory Cost + Costof Lost Sales due to delayed delivery

2. The level of service provided to

customers(a) customers service need.

(b) competitors service level.

(c) companys profitable objective.


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Determining customer servicelevels

Set the goals of customer services levels foreach of the important service elements.

Measure the actual performance for eachservice element.

Analyse the variance between actual service

performance and the goal.

Take corrective actions to minimise thevariances.

El t f C t S i


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Elements of Customer ServiceCustomer service

Presale service

Advising ServiceTechnical ServiceOrdering easePatronage Awards

During- Sale service

Keeping Adequate stocksSpeed and accuracy ofdeliveryProduct substitution

Post-sale service

Product warrantyMaintenance contractRepair serviceInstallation serviceCustomer training


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Role of Marketing Logistics

Should be considered as a long termstrategic issue.

Considered as a source of creating a uniquecompetitive advantage.

Important role in future due to globalcompetition, world wide sourcing, JIT systemand TQM.


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Documents

Industrial Distribution Channels