Southern Business School (SBS)

Institute of Southern Punjab Multan

Assignment No:
Five
Due Date: 25 May 2020

Class: BBA-8th

Section: B

Subject: Supply Chain Management

Student Name: Hamza Javed

Complete Registration No: BBA-023R16-79

Submitted To: Ma’am Ayesha Tanveer

Question: What types of distribution networks are typically best suited for

commodity items.?

Answer

Commodity items are non-differentiated products with wider availability from multiple sources. The
most important thing for the distribution network of commodity items is to deliver them quickly as
they are mostly basic needs satisfying products. If there is lack of responsiveness in the delivery, the
customer will switch to another source. Based on the above stated facts, the distribution network
suited for commodity items is the retail storage with customer accessing it easily or the storage
distribution with last-mile delivery

Commodity items means providing a product and service which other suppliers could offer also. This
also means you maybe pricing your service/sales based on your cost of products plus cost of your
time (contra to pricing based on your value you give to your customers, not your time).
So, in view of the above, there is no point going for distribution network that is 1-to-1, consultation
or direct sales-meeting with your customers, because it's too time-consuming for such channel, and
other competitors will sell at lower prices. By classifying Non-commodity items or commodity items,
I do not mean here they are profitable or not. Either can be profitable, or a loss. Depends.
Next issue, is your commodity items, very valuable, or they are low-cost items? For e.g. light-weight
umbrella can cost US$100-150 each and they are valuable, whereas another light-weight umbrella
can cost only US$7 and they are low-cost.

For valuable commodity (e.g. gem stones, jewelry, limited edition umbrellas, etc.), most likely you
like to display them, and while displaying them, you like to place them apart, instead of packing
them together when displaying.

For low-cost commodity (e.g. cakes, computer gadgets like mouse, usb-ports, etc.), perhaps you
have to take note of the costs of distribution, because when dealing with a computer mouse (for
e.g.), you have to sell bulk, and getting distributors may be good, but employing salesmen for direct-
sales may be difficult.