CHAPTER - 1 : INTRODUCTION

1. Concept :
The management of the efficient transfer of goods from the place of manufacture
to the point of sale or consumption is known as distribution management . It
encompasses such activities as warehousing, materials handling, packaging, stock
control, order processing, and transportation. Distribution management can be
defined as that arm or wind of management which serves as a link between procurement,
manufacturing, marketing/sales, and Finance, proper functioning of which synergies the effects
of all the activities, and absence of which cannot only reduce efficiencies but can
lead to chaos in the organization.

2. Objectives :
The main objectives can be stated as under:

1. To Ensure Consumer Convenience: It is the primary objective of physical distribution. The

right kind of distribution can increase consumer convenience. They can buy the product as per
their needs at any time from the convenient place, even at reasonable price. Similarly,
middlemen involved in physical distribution, who sell products of various companies, can offer
consumers a chance to select the most suitable products. Smooth and continuous flow of goods
can add to total consumer satisfaction.
2. To Facilitate Continuous Production: Distribution is directly beneficial to producers.
Continuous production contributes a lot to distributors, consumers, and society at large. An
efficient distribution network facilitates continuous production because of sophisticated storing
facility, rapid means of transportation and communication, access to global market, advance
ordering, buying incentives to sell in off-seasons, rapid ordering and executing, etc.
3. To Achieve Economy: To economize distribution is one of the objectives of physical
distribution. A suitable distribution system results into lowering overall costs in a number of
ways. Speedy order processing, availability of the latest transportation and communication,
benefits of scale of economy, rapid sales turnover, insuring the products, and many other similar
benefits lead to low costs, and ultimately low selling price.
4. To Reduced Degree of Damage/Wastage: A company can reduce product damage that takes
place during storage, transportation, and handling. Also, availability of insurance at a lower
premium can reduce considerable risk during storage and transportation. Use of cold storage,
rapid and safe means of transportation, and other facilities relating to distribution can reduce
damage or wastage of product. Reduced damage and better quality significantly contribute to
success of product.
5. To Increase Competitiveness: Today’s market is characterized by cut-throat competition. All
sellers are fighting for better offers to their consumers. A company can increase its competitive
strengths by a systematic distribution network. Many companies can distinguish their offers by
availing products differently than competitors. Effective distribution affects positively to
services, availability, timing, price, and similar benefits. Undoubtedly, if all the components of
distribution work effectively, physical distribution can be a powerful means to fight with
competitors.
6. To Lower Idle Stocks: This objective relates with inventory control. Producers and
distributors can minimize reordering size or safety margin by effective distribution system. Due
to speed and precision in placing and executing orders, and advanced ordering by distributors,
they are not required to maintain more stock of the finished products. This facility can reduce
overall inventory costs and need of working capital.
7. To Ensure Continuous Availability: This objective concerns with offering direct benefit to
consumers. Due to wide availability of products, consumers are not required store the essential
commodities. They can buy the right quantity as and when they need. It leads to several benefits
to consumers.
8. To Achieve Rapid Turnover of Stock: Physical distribution is also targeted to speed up
turnover of stocks. From investment of cash in raw materials to realization of cash through the
sales of finished can be speeded up. Stocks can be speedily converted into cash. So, the duration
of working capital cycle can be reduced, and need of working can be minimized.

3. Distribution Coverage :-
 The marketer must take into consideration many factors when choosing the right level of
distribution coverage. However, all marketers should understand that distribution creates costs to
the organization. Some of these expenses can be passed along to customers (e.g., shipping costs)
but others cannot (e.g., need for additional salespeople to handle more distributors). Thus, the
process for determining the right level of distribution coverage often comes down to an analysis
of the benefits (e.g., more sales) versus the cost associated with gain the benefits.
Additionally, it is worth noting that for the most part distribution coverage decisions are of most
concern to consumer products companies, though there are many industrial products that also
must decide how much coverage to give their products.
There are three main levels of distribution coverage - mass coverage, selective and exclusive.
  Mass Coverage - The mass coverage (also known as intensive distribution) strategy
attempts to distribute products widely in nearly all locations in which that type of product is
sold. This level of distribution is only feasible for relatively low priced products that appeal
to very large target markets (e.g., see consumer convenience products). A product such as
Coca-Cola is a classic example since it is available in a wide variety of locations including
grocery stores, convenience stores, vending machines, hotels and many, many more. With
such a large number of locations selling the product the cost of distribution is extremely
high and must be offset with very high sales volume.
 Selective Coverage - Under selective coverage the marketer deliberately seeks to limit
the locations in which this type of product is sold. To the non-marketer it may seem strange
for a marketer to not want to distribute their product in every possible location. However,
the logic of this strategy is tied to the size and nature of the product’s target market.
Products with selective coverage appeal to smaller, more focused target markets (e.g., see
consumer shopping products) compared to the size of target markets for mass marketed
products. Consequently, because the market size is smaller, the number of locations needed
to support the distribution of the product is fewer.
 Exclusive Coverage - Some high-end products target very narrow markets that have a
relatively small number of customers. These customers are often characterized as
“discriminating” in their taste for products and seek to satisfy some of their needs with high-
quality, though expensive products. Additionally, many buyers of high-end products require
a high level of customer service from the channel member from whom they purchase. These
characteristics of the target market may lead the marketer to sell their products through a
very select or exclusive group of resellers. Another type of exclusive distribution may not
involve high-end products but rather products only available in selected locations such as
company-owned stores. While these products may or may not be higher priced compared to
competitive products, the fact these are only available in company outlets give exclusivity to
the distribution.

4. Aspects of Distribution Management :-

Two aspects involve in distribution function, they are marketing channel and physical
distribution.

1. Marketing channels
The relation network among persons, business firms, organizations etc involved in the process of
ownership transfer of any product is called marketing (distribution) channel. Under this include
producers, different level intermediaries(distributors, agents, dealers, wholesalers, retailers etc.)
and consumers. In the process of making flow of products from producer to final customers,
different legal and financial activities need to be performed. So, banks, financial institutions,
insurance companies also include in marketing channel. As different promotional activities are
done to motivate all the persons and institutions involved in distribution process, this aspect of
distribution is also called ' channel motivation'.

2. Physical distribution or marketing logistics

The activity related with physical inflow of goods is called physical distribution or marketing
logistics, Transport, warehouse management, inventory management, order processing, material
handling etc. are the main activities involved in physical distribution. This is very important
aspect of distribution function.

5. Channel Management :-

In simple words, channel management is the process by which the producer or supplier directs
the marketing activities by involving and motivating the parties comprising its parties of channel
of distribution.
In broad sense, Channel management is the process by which manufacturers or suppliers create
formalized relationships and programs to get their products to end customers. It is a term we use
to describe how companies gain control of multi-step, complex distribution channels to
maximize revenues and reduce costs and cycle times. Optimizing distribution channels helps you
build stronger and more profitable relationships while ensuring that revenue leaks are plugged. It
fundamentally transforms the way companies manage their channels and interact with their
partners.

6. Physical Distribution Management :-

Physical distribution is the group of activities associated with the supply of finished product from
the production line to the consumers. The physical distribution considers many sales distribution
channels, such as wholesale and retail, and includes critical decision areas like customer service,
inventory, materials, packaging, order processing, and transportation and logistics. You often
will hear these processes be referred to as distribution, which is used to describe the marketing
and movement of products.
Accounting for nearly half of the entire marketing budget of products, the physical distribution
process typically garnishes a lot of attention from business managers and owners. As a result,
these activities are often the focus of process improvement and cost-saving initiatives in many
companies.
Physical distribution is managed with a systems approach and considers key interrelated
functions to provide efficient movement of products. The functions are interrelated because any
time a decision is made in one area it has an effect on the others. For example, a business that is
providing custom handbags would consider shipping finished products via air freight versus rail
or truck in order to expedite shipment time. The importance of this decision would offset the cost
of inventory control, which could be much more costly. Managing physical distribution from a
systems approach can provide benefit in controlling costs and meeting customer service
demands.