DISTRIBUTION
TalManuel Taro Arindam
Martin
Jung
Introduction
Product
Consumer
Partner
IT
Agenda
Imagine you become a Product Manager, and you have to decide upon your product strategy.
You are probably thinking, design, marketing, promotion operations, pricing
But have you ever thought about distribution?
Imagine …
The neglected “P”
For most people distribution is still a black box
Looking for distribution on the Value Chain
? ??
Porter’s value chain does not specifically define distribution
• Outbound logistics?
• Marketing and Sales?
• Services?
What really influence our distribution?
ProductChannel Partners
Consumer
Information Technology
Evolution of channel management
Producer Producer Producer Producer
Consumers Consumers Consumers Consumers
Retailers Retailers Retailers
Wholesalers Wholesalers
Agents orBrokers
WholesalerWholesalerChannelChannel
RetailerRetailerChannelChannel
DirectDirectChannelChannel
Agent/BrokerAgent/BrokerChannelChannel
Producer
Consumers
Retailers
Wholesalers
Agents orBrokers
Agent/BrokerAgent/BrokerChannelChannel
Conventional Marketing Channel
Vertical MarketingSystem (VMS)
What’s the value added from each
Intermediary?
Can we retain the value without
intermediary?
Factors to influence channel strategy decisions
Issues that InfluenceChannel Strategy
Issues that InfluenceChannel Strategy
Factors Factors Affecting Channel Affecting Channel
ChoiceChoice
Factors Factors Affecting Channel Affecting Channel
ChoiceChoice
Levels ofLevels ofDistributionDistribution
IntensityIntensity
Levels ofLevels ofDistributionDistribution
IntensityIntensity
ObjectiveObjectiveObjectiveObjectiveIntensity Intensity LevelLevel
Intensity Intensity LevelLevel
IntensiveIntensive
SelectiveSelective
ExclusiveExclusive
Achieve mass market selling.
Convenience goods.
Achieve mass market selling.
Convenience goods.
Work with selected intermediaries.
Shopping and some specialty goods.
Work with selected intermediaries.
Shopping and some specialty goods.
Work with singleintermediary.
Specialty goods and industrial
equipment.
Work with singleintermediary.
Specialty goods and industrial
equipment.
Number of Number of IntermediariesIntermediariesNumber of Number of
IntermediariesIntermediaries
ManyMany
SeveralSeveral
OneOne
Partner FactorsPartner Factors
Product FactorsProduct Factors
Customer FactorsCustomer Factors
Other FactorsOther Factors
Introduction
Product
Consumer
Partner
IT
Agenda
Traditional natural gas transport occurs via extensive pipeline networks.
Gas pipelines
West-African natural gas producer
Shipping
Regasification terminal
Pipeline delivery
Cooling gas to minus 162°C results in
the condensation of the gas, known as Liquefied Natural
Gas (LNG).
Liquefaction plant
Gas production
Benefits• LNG takes up about one six
hundredth of the volume of gaseous natural gas.
• LNG can be transported to distant customers via ships without expensive pipeline networks
Liquefying gas to LNG enables new distribution possibilities.
Market trends
• Major players: Shell, ENI, Gaz de France, Tractebel, Endesa, Iberdrola
• Main countries: Algeria, Lybia, Oman, Qatar, Nigeria, UEA, Trinidad, Egypt, Australia, Norway, Venezuela
LNG is a growing market especially for remotely located gas producers.
0
1
2
3
4
5
6
7
% Worldwide growth in gas
% Worldwide growth in LNG
3.8%
5.9%
Introduction
Product
Consumer
Partner
IT
Agenda
Coke versus milk – multi-channel distribution.
Coca-Cola accounts for less than 2 ounces of the 64
ounces of fluid that each of the world‘s 4.4 bn people
drink every day. The enemy is coffee, milk, water.
Super-markets, Kiosks
Airlines
Clubs, Bars
Restaur-ants, Hotels
Vending machines
Bot
tler
Consumers
Retailers
Mr. Goizueta CEO
70.4%
21.5%
100%
The Pepsi challenge or how to choose the right partner
• Venezuela was the only country in which Pepsi was bigger than Coca Cola
• In 1996 Cisneros Group switched from bottling Pepsi to Coke
• In the last quarter of 1996 Pepsi had only 15.5% market share
Introduction
Product
Consumer
Partner
IT
Agenda
In the Japanese office supply market customer needs changed over the years.
Although we are a small company... we want to buy office supplies in any number, at any time!
• Small order, frequent deliveries
• Quick delivery
• One Stop Shopping
New customer needs!
5%
95%
Number of companies in Japan based on number of employees
>30 employees
< 30 employees
< 10 employees
• Big firms: Daily replenishment by sales reps at discount price
• Small firms: Go to stationer’s shop and buy at a fixed price
Askul revolutionized the distribution of office supplies by introducing an agent-vendor system.
• Reduction of intermediaries
• Faster delivery
• Less inventory cost
• Growing customer base
• Wholesaler and retailer revert into agents. Profit sharing and little cannibalization among stakeholders possible.
New distribution
AgentBilling,
RegistrationBilling,
Registration
Order
Delivery
Customer
MakerPrimary
WholesalerSecondaryWholesaler
Retailer Customer
Inventory Inventory Inventory
Old distributionPromise: Next-day delivery on
all orders, from a single pencil to a truckload of office
supplies
Introduction
Product
Consumer
Partner
IT
Agenda
One of the largest distribution networks exist in India.
Do you know one of the largest distribution networks in the world?
Making over 200.000 transactions in one
hour?
Nutan Mumbai Tiffin Box Suppliers Charity Trust
or…Dabbawallahsor… Lunch deliverymen
Mumbai
Key facts• Started in 1890 with 25 clients –
Now over 200,000 clients• Boxes carried on heads, hand-
wagons & cycles• Each porter covers 70 - 80 km
in 2 ½ hrs
…
Transport/ Delivery
Customer at workplace
Packaging
Cooking at home
•Home-made lunch picked up 10 am
•Boxes taken to nearest railway station & sorted
•Boxes unloaded at destination and re-sorted
•Delivered at 12.30 p.m.
•At 1.30 p.m returned to houses
…
Each lunch-box-lid has a complex coding system:
• Symbols identify the house, the originating & destination stations
• Colors identify each suburb & individual sectors
• Dashes, crosses & dots identify the street, the building and the floor of delivery
IT-Free and certified!
6 Sigma performance rating by Forbes ~ 1 error in 16 million
transactions -- Treated on a par with
Motorola
Prof. C K Prahlad: “quintessential
master of supply chain management”
Distribution as strategic asset
Distribution as strategic asset
Thanks.
Any questions?
ProductChannel Partners
Consumer
Information Technology