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Distribution Management

The Difference
 Supply Chain Management
 Logistics Management
 Distribution Management

What is Supply Chain Management?

- SCM involves overseeing an often-vast network of sub-suppliers (like raw materials providers), suppliers, manufacturers, logistics partners,
wholesale distributors, retailers and end users. The relationships between these various stakeholders in the supply chain vary. They can be
vertical, such as between parts and materials suppliers, manufacturers and retailers, or horizontal, where a company merges with or acquires
a similar business that operates at the same stage of the supply chain.

- To illustrate how supply chain management works, let’s use a home cleaning products manufacturer as an example. As part of the SCM
function, the company sources the chemicals and containers it needs from suppliers, makes the end product and then distributes the finished
goods to convenience stores, drug stores and supermarkets. Supply chain management touches on every process involved in the movement
of those products.

- A company can only optimize and continuously refine SCM when it has visibility across its supply chain. This visibility enables companies to
track goods and services as they move through each stage of the supply chain, which makes it much easier to see if everything is running
as planned. It also gives decision-makers more time to respond to disruptions or other roadblocks.
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What is Logistics?
- Logistics includes planning and executing the storage and movement of goods between different points in the supply chain. Logistics
coordinates facilities, people, equipment and other resources to ensure products move when they’re supposed to and there is space for them
at the next stop.

- Demand planning, transportation (including fleet management), inventory management, material handling and order fulfillment are all
processes that fall under logistics. To learn more, read our article on logistics management.

Understanding Logistics
- Logistics generally refers to the planning of transportation, warehouse management, inventory management and handling of goods within a
warehouse before they are ready to be taken from one destination to another through the distribution channels.

- It’s the management of the flow of goods between the point of origin and the end destination, which involves the planning of transportation
of goods, such as inbound transportation, outbound transportation, handling, production, packaging and inventory management, which
checks the overall quantities and condition of each item held in a warehouse.

How Are Supply Chain Management and Logistics the Same?

- Both supply chain management and logistics focus on the flow of goods from the point of origin to the endpoint. Both disciplines require
careful coordination of supplies, labor and facilities to make sure items can move through the supply chain as required. Logistics is a key
component of supply chain management, but just one piece of the equation.

Similarities of Supply Chain Management and Logistics

- Supply chain management and logistics both work to move, store and deliver goods as efficiently as possible. Supply chain management
provides the strategic direction that guides inbound and outbound logistics.

Some common aspects of SCM and logistics are:

1. Both focus on goods, services or information.
2. Both have the ultimate aim of supporting the company’s success and distinguishing it from competitors.
3. Both seek to increase customer satisfaction.
4. Both revolve around the same flow of goods and services, from the supplier, to the manufacturer, to the wholesaler and finally to the retailer
or consumer.
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How Are Supply Chain Management and Logistics Different?

- Supply chain management outlines the strategy and activities that go into planning, sourcing, producing and delivering goods, as well as
handling returns. Logistics focuses on the right products being in the right place at the right time, and how to get them there.

Key Differences Between Supply Chain Management and Logistics

As should be clear at this point, supply chain management and logistics definitely intersect, but they differ when it comes to their scope and focus.

1. Logistics are activities in supply chain management. SCM covers a variety of activities, including production and inventory planning, labor
planning, materials and facilities management, manufacturing and delivering goods and services.

2. SCM works toward improving processes to create competitive advantages, while logistics emphasizes meeting customer needs and
expectations.

3. Logistics focus on the efficient and cost-effective delivery of goods to the customer. Supply chain management controls the development
of raw materials into finished goods that move from the supplier to producer to warehouse to retailers and/or consumers.

4. The term logistics originated with the military. Many historians credit Alexander the Great, born 356 B.C., as a logistics master. The modern
practice of supply chain management started in the 20th century. Many experts credit the logistician Keith Oliver as the person who coined
the term supply chain management in the early 1980s.

Role of Logistics in Supply Chain Management

- In supply chain management, logistics are responsible for the movement and storage of goods and services, along with the documents and
reports that record those movements throughout an item’s journey to the customer.

- Logistics include the numerous transportation methods that get inventory from one location to another. This component is responsible for
figuring out where goods can be kept at each stage until they’re needed at another location, which is essential to effective supply chain
management.

Why Logistics Are So Important to Supply Chains

- Logistics are a critical piece of supply chains because it manages and tracks the people and resources needed to store and transfer goods
and services. Logistics ensure that materials and products reliably move at the right time and on budget.
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Specific aspects of logistics that support supply chains include:

1. Delivering the right products at the right time.
2. Reducing costs and improving efficiency.
3. Helping retain customers and increasing loyalty.
4. Providing a unique value proposition for some businesses.
5. Providing a means to deliver goods from the most cost-effective location for production to the location of the customer.

Why Is Logistics Training So Important to Supply Chains?

- The field of logistics is constantly evolving as customer trends change. Logistics training helps employees and their companies stay current
with best practices. Training gives a company the tools it needs to analyze and improve customer demand, product design and distribution
strategies.

Diagram shows a typical physical flow of material from suppliers

through to customers, showing stationary functions and movement functions,
linked to a diagram that reflects the ‘value added’ nature of logistics

Why Use Logistics and Supply Chain

Management?
- Logistics and supply chain management help businesses stay
competitive. These practices track and coordinate the efficient and cost-
effective movement of goods and services, which is key to an organization’s
profitability.

Logistical Components of the Supply Chain

- Supply chain logistical components help to manage goods or services.
Each element helps move materials, finished goods and services through the
many steps in the supply chain.

The following are the logistical components of supply chains:

1. Information: Information helps track the status of items and all supply chain processes, informing business decisions at each step.

2. Storage: Storage is the practice of holding supplies in the right quantity and right location. Businesses must strike a balance between demand
and supply to prevent overstock and out-of-stock situations.
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3. Warehousing: This component controls the day-to-day warehouse operations, such as receiving, put-away, picking, packing, shipping and
receiving.

4. Material handling: Material handling can refer to the limited movement of items within a building or a delivery vehicle. Others extend the
definition to include the storage, security and transfer of goods throughout the manufacturing, distribution and delivery processes.

5. Packaging: Proper packaging ensures items arrive undamaged and ship for the lowest possible cost.

6. Unitization: Unitization makes items efficient to arrange, transport and store. Unitization methods also ensure that material handling
equipment can move items efficiently and without damaging them. The cube is one of the easiest units to store and shift, so it’s a popular
type of unitization.

7. Inventory control: Inventory control incorporates storage and warehousing techniques to optimize the types and amount of stock held and
where. Companies can use inventory management formulas to better calculate demand.

8. Transportation: This component is responsible for moving goods along the supply chain to the next node or directly to the customer.
Transportation modes include cars, trains, trucks, planes and ships.

How Both Supply Chain Management and Logistics Are Fundamental to Success
- Supply chain management and logistics both support customer needs and improve the buying experience. Logistics provides direct feedback
on customer demand. SCM uses this data to understand what consumers want and plan production and inventory levels.

- Reliable, cost-effective logistics pave the way to efficient supply chain management. A well-managed supply chain results in filling orders
accurately and on time, which over time will attract new clients and grow the bottom line.

- Many businesses have realized the benefits of using supply chain management software to help mitigate the complexities and challenges of
supply chains. This software can unify various aspects of the supply chain, from sourcing to production planning to inventory and order
management, to help organizations meet rising customer expectations while keeping costs stable. It can also provide in-depth reporting on
various aspects of your operations to highlight opportunities for process improvements or call attention to potential problems.

- One company transformed its business after adapting supply chain management software. Initially a candy company, Green Rabbit built a
heat-sensitive supply chain to help preserve its products during shipment. Other companies took notice, began to pay for the service, and
Green Rabbit became a leading cold-chain logistics provider for perishable goods. Green Rabbit implemented NetSuite to manage its growing
business, which includes three warehouses and an expanding list of customers. The solution automated many processes and it can now
ship orders to all customers in one day.
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What is distribution management?

- Distribution management refers to overseeing the movement of finished goods from a manufacture or supplier to the end user. Throughout
this process, there are several activities and processes that take place, including warehousing, inventory management, warehouse picking
and packing, and last-mile delivery.

What’s the Difference Between Logistics and Distribution?

- A key difference between logistics and distribution is that logistics relates to the overall planning and organisation around the movement,
storage and inventory control of goods, whereas distribution is more related to the actual physical placement of the goods.

Understanding Distribution
- Distribution is the process of making goods available for consumers or other businesses as and
when they are needed. This includes the storage, order fulfilment and packaging of goods, and sometimes the handling of
returned goods.

- A prime difference between logistics and distribution is that logistics relates more to the overall planning, whereas distribution is more related
to the physical movement of goods from the producer to the user.

- The objective of logistics is to improve the internal functions with thorough planning, whereas the objective of distribution is to find effective
ways for the goods to reach the consumer in the most cost-effective and efficient way possible.

- Distribution of goods involves retrieving goods from a storage location and preparing for transportation with sufficient packaging and correct
documentation, which is a critical step in supply chain management. It relates to overseeing the movement of goods from a manufacturer or
supplier to the point of sale, by moving the goods from its source to the destination.

Key Activities in Physical Distribution

1. Packaging and materials
2. Inventory control
3. Storage and Warehouse Management
4. Order processing and Retail Fulfillment
5. Transportation, shipping and logistics
6. Delivery of Goods
7. Invoicing
8. Customer service and Customer Relationship Management
9. Managing Returns
10. After Sales Support
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Distribution Channel
- is the path used to get a product from the manufacturer or creator to the end user. In other words, how the customer gets their product
after purchase, which often include intermediaries. Distribution channels can be long or short, direct or indirect.

What Is a Distribution Channel?

A distribution channel is the network of businesses or intermediaries through which a good or service passes until it reaches the final buyer or the end
consumer. Distribution channels can include wholesalers, retailers, distributors, and even the internet.
Distribution channels are part of the downstream process, answering the question "How do we get our product to the consumer?" This is in contrast
to the upstream process, also known as the supply chain, which answers the question "Who are our suppliers?"

https://www.investopedia.com/terms/d/distribution-channel.asp

5 Types of Distribution Channels

1. Direct Distribution
- is a direct sale between the manufacturer and the consumer , and allows products to be sold directly to customers.
- Examples
o On a micro scale, a jewelry maker selling small collections may choose to set up a website and sell directly to the public.
o a brewery that brews its own beer and sells it to customers at its own brick-and-mortar location employs a direct channel of
distribution. The seller delivers the product or service directly to customers.
o The Internet , Catalogs , Sales teams (direct)

Why is direct distribution important?

Direct distribution allows brands to build genuine relationships with the end users of their products. Companies can respond to customer
feedback and product performance reviews. Direct to consumer fulfillment services gives brands the opportunity to build customer loyalty
and trust by engaging with them.

How do you use direct distribution?

Once the consumer completes an order, the company then ships the item directly to them. Retail is another example of direct distribution.
For example, a customer walks into a store, chooses an item and then walks out with the item.

2. Indirect Distribution
- means selling wholesale to agents or retailers so that they can distribute the product for you. They store it, display it, and employ the
sales force to put it into the hands of customers.
- The consumer buys your product from a wholesaler, retailer, dealership or some other intermediary.
- What are the examples of indirect distribution?
o Through A wholesaler or distributor
o The value-added reseller (VAR)
o Consultants
o Dealers

3. Hybrid Distribution
- Hybrid distribution channels use both direct channels and indirect channels. A product or service manufacturer may use both a retailer
to distribute a product or service and may also make sales directly with the consumer.

4. Intensive Distribution
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- Intensive distribution is the highest level of product availability. This approach is usually driven by a focus on customer convenience.
For example, products like a bag of chips or a soda these are products that have to be really available for consumers to buy them.
- a method of marketing where a company sells a product in as many places as possible, so consumers see the product wherever they
go: Drinks manufacturers use intensive distribution to place their drinks in every supermarket, drugstore, and gas station.

5. Exclusive Distribution
- is an agreement between a supplier and a retailer granting the retailer exclusive rights within a specific geographical area to carry the
supplier's product. Often the supplier severely limits the number of products it supplies the retailer as well.
- A common example of exclusive distribution is automobiles. Automobiles are distributed through exclusive distributorship, meaning that
each distributor is the only one authorized to sell a particular make of car within a specified territory.
- In the case of exclusive distributors, the distributor responsible for the resale of the product is the only distributor who is given the right
to sell the goods in a particular territory, and the distributor is not allowed to engage in the distribution of other products which compete
with the products of the supplier.
- Exclusive distribution : In an exclusive distribution agreement, the supplier agrees to sell its products to only one distributor for resale
in a particular territory. At the same time, the distributor is usually limited in its active selling into other (exclusively allocated) territories.

6. Selective Distribution
- Selective distribution involves selling a product at select outlets in specific locations. Exclusive distribution involves selling a product
through one or very few outlets.
- making a product available in more than one outlet, but not in as many as are willing to stock it; also referred to as Selective Selling.
- is a marketing strategy focusing on selling certain types of products via a select network of retailers, resellers, or wholesalers.
Distributors take this approach as a middle road between intensive and exclusive forms of distribution.

Distribution Channel Levels

1. Level 0
- This is a direct-to-consumer model where the producer sells its product directly to the end consumer. Amazon, which uses its platform
to sell Kindles to its customers, is an example of a direct model. This is the shortest distribution channel possible, cutting out both the
wholesaler and the retailer.

2. Level 1
- A producer sells directly to a retailer who sells the product to the end consumer. This level includes only one intermediary. HP or Dell
are large enough to sell their computer products directly to reputable retailers such as Best Buy.

3. Level 2
- Including two intermediaries, this level is one of the longest because it includes the producer, wholesaler, retailer, and consumer. In the
wine and adult beverage industry, a winery cannot sell directly to a retailer. It operates in a multi-tiered system, meaning the law requires
the winery to first sell its product to a wholesaler who then sells to a retailer. The retailer then sells the product to the end consumer.

4. Level 3
- This level may add the jobber, this level adds the role of the individual who may assemble products from a variety of producers, stores
them, sells them to retailers, and acts as a middle-man for wholesalers and retailers.

Important
A distribution channel, also known as placement, can be part of a company's marketing strategy, which also includes the product, promotion, and
price.

Distribution Channels in the Digital Era

- Digital technology has transformed the way businesses, especially small businesses use direct channels of distribution. With increasing
consumer demand for online shopping and easy-to-use eCommerce tools, direct selling means more success for businesses.

- Rather than having to rely on relationships with retailers to sell their products, software and artificial intelligence (AI) sales technology
allows companies to manage sales, and automatically achieve high customer relationship management (CRM).
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- Online advertising through social networks and search engines targets specific areas or demographics and social media networks are
increasingly considered the industry standard and changing marketing strategies.

- If a company continues to use indirect channels of distribution, digital technology also allows them to manage relationships with
wholesale and retail partners more efficiently.

Choosing the Right Distribution Channel

- Not all distribution channels work for all products, so companies need to choose the right one. The channel should align with the firm's
overall mission and strategic vision including its sales goals.

- The method of distribution should add value to the consumer. Do consumers want to speak to a salesperson? Will they want to handle
the product before they make a purchase? Or do they want to purchase it online with no hassles? Answering these questions can help
companies determine which channel they choose.

- Secondly, the company should consider how quickly it wants its product(s) to reach the buyer. Certain products are best served by a
direct distribution channel such as meat or produce, while others may benefit from an indirect channel.

- If a company chooses multiple distribution channels, such as selling products online and through a retailer, the channels should not
conflict with one another. Companies should strategize so one channel doesn't overpower the other.

What Is a Distribution Channel and What Components Does It Have?

- The term “distribution channel” refers to the methods used by a company to deliver its products or services to the end consumer. It often
involves a network of intermediary businesses such as manufacturers, wholesalers, and retailers. Selecting and monitoring distribution
channels is a key component of managing supply chains.

What Is the Difference Between Direct and Indirect Distribution Channels?

- Direct distribution channels are those that allow the manufacturer or service provider to deal directly with its end customer. For example,
a company that manufactures clothes and sells them directly to its customers using an e-commerce platform would be utilizing a direct
distribution channel. By contrast, if that same company were to rely on a network of wholesalers and retailers to sell its products, then
it would be using an indirect distribution channel.

How Is Placement Important in a Distribution Channel?

- Placement is the way a company ensures its target market has access to its products or service in the location they would be most
likely to look for that product or service. An effective distribution system ensures that products are placed in the right location as needed.

The Bottom Line

- A distribution channel is the network of businesses or intermediaries through which a good or service passes until it reaches the end
consumer. Distribution channels can contain many levels or intermediaries, such as wholesalers or retailers, as products move from
manufacturer to consumer. The introduction of eCommerce platforms has streamlined distribution enabling producers to sell directly to
consumers.