2/10/2021

Dynamics of Distribution & Logistics

UNIT 02

Logistics Channel
The network of intermediaries engaged in adjustment, transfer,
storage, handling, and communications functions that
contribute to the efficient flow of goods.

Network of all participants in a supply chain engaged in the

receiving, handling, storage, transportation, and
communications functions.

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Logistics Channel

Distribution Value Chain / Channels of Distribution

Alternative ways in which products can reach market

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The customer lifecycle –

distribution strategy considerations

The Nature of Distribution Channel

 What is distribution channel?

 Why are intermediaries used?
 The function of distribution channel
 Channel level

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What is Distribution Channel?

A set of interdependent organizations (intermediaries) involved
in the process of making a product or service available for use
or consumption by the consumer or business user.

Distribution Channel – comprised of various players in the flow of

products : Producer to Consumer

Channel Decisions
– Efficiency of distribution costs
– Affecting marketing decisions - Intermediaries are specialists
in selling, have the contacts, experience and scale of
operation which means greater sales can be achieved than if
the producing business tried to run a sales operation itself.
– Involve long-term commitments

Distribution Channel Design and Management

consumer products the end point - generally, a retail outlet
- the customer’s house,
because some channels bypass the shop and go direct to the consumer

industrial products the end point - likely to be a factory

Logistics has two dimensions. One involves the management of the

physical infrastructure involved in moving raw materials into the
production process and finished goods from the end of the production
line through to the end user.

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Distribution Channel Design and Management

consumer products the end point - generally, a retail outlet
- the customer’s house,
because some channels bypass the shop and go direct to the consumer

industrial products the end point - likely to be a factory

Logistics has two dimensions. One involves the management of the

physical infrastructure involved in moving raw materials into the
production process and finished goods from the end of the production
line through to the end user.

There is also another vital dimension which should be designed before any physical activity takes place, i.e. the development of the
commercial/transactional arrangements involved in accessing target markets. Distribution channels usually involve several parties -
intermediaries in a vertical sequence of transactions, all of which are required to 'add value' if they are to survive. In essence, the
'transactions channel' decision is a 'make or buy' decision: if the channel tasks can be performed cost-effectively by the producer then
the role of an intermediary becomes irrelevant and the intermediary is omitted from the channel structure.

Distribution Channel Design and Management

Channel design and management follows a structured approach,
using criteria which evaluates optional channel structures during
which alignment (compatibility), trade-offs and channel
relationships are considered.

Increasingly, the role of logistics service companies is included in

the decision process, particularly when they are a dominant
element within the supply chain.

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Thank you