Designing Distribution Network in a Supply Chain

Distribution Channel
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Distribution channel is the route by which a company distributes its goods. It

consist of a set of people and firms(Intermediaries) involved in the transfer of
ownership of the product from the producer to the ultimate consumer or industrial
users.
Role of distribution channel
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Time Utility –is created when marketing channel have product & services available
for sale, when the consumer wants to buy them. Place Utility-is created when
product and services are available where consumer want to buy them. Ownership or
Possession Utility –is created when the title to the goods passes from the
manufacturer or intermediary channel member to the buyer
Functions performed by Distribution Channels
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Physical distribution functions Breaking Bulk Accumulating Bulk Creation of

assortments Reducing transactions Transportation & Storage Communication functions
Facilitating functions Credit Services Risk taking
Designing Distribution Channels
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
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Specifying the role of distributions. Selecting the type of channel. Determining

intensity of distributions. Choosing specific channel members
Channel Design Process
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Establishing the channel objective Formulating a channel strategy Evaluating

alternative channel structure Selecting the appropriate structure Determining
alternative for individual channel members Evaluating & Selecting individual
channel members Measuring & evaluating channel performance Evaluating alternatives
when performance objectives are not met or attractive new
Consideration of Channel Design
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Market Coverage Objective Product Characteristics Objective Customer service

Objective Profitability Objective
Market Coverage Objective
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Customer buying behavior The type of distribution required Channel structure The
degree of control necessary for success
Product Characteristics Objective
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Product value Technicality of product Degree of market acceptance Degree of

substitutability Product Bulk Product Perish ability Degree of market concentration
Seasonality Width & Depth of Product line.
Customer Service Objective
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Availability Order Cycle Communication

Profitability Objective
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Corporate cost of money applied to accounts receivables Corporate opportunity cost

of money used as a charge for all other assets acquired by each channel
alternatives.
Design options for distribution network
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Manufacturer storage with direct shipping Manufacturer storage with direct shipping
and in-transit merge Distributor storage with package carrier delivery Distributor
storage with last mile delivery Manufacturer / distributor storage with costumer
pickup Retail storage with customer pickup
Manufacturer storage with direct shipping
Manufacturer storage with direct shipping and in-transit merge
Distributor storage with package carrier delivery
Distributor storage with last mile delivery
Manufacturer / distributor storage with costumer pickup
Retail storage with customer pick-up
End of Lecture