DISTRIBUTION

AND
SUPPLY CHAIN
STRATEGY
Partick Nygel Guidaven
Ann Bethany Balucanag
John Derek Perez
CJ Almario
Jett Gallegos
Jibong Ligad
OBJECTIVES

1 Demonstrate the concept of a distribution channel;

2 Illustrate the elements of a distribution channel;

3 Support the advantage of a distribution channel in a company;

4 Critique the disadvantages of a distribution channel in a company;

5 Decide on the types of distribution intermediaries;

6 Apprise the different levels of distribution channels;

OBJECTIVES

7 Evaluate the different levels of distribution coverage;

8 Critique the various issues involved in establishing distribution channels;

9 Internalize the factors in the selection of channels of distribution;

10 Teach the importance and functions of a supply chain management;

11 Illustrate the process of a supply chain management; and

12 Critique the various models of supply chain management;

WHAT IS A DISTRIBUTION CHANNEL?
Distribution is the process of bringing the products produced or service
rendered by a company to the ultimate consumer. Distribution channels
are the set of interdependent marketing institutions involved in the
direction by which goods and services flow, or move from primary
producers to ultimate consumers.

Channels of distribution
A channel of distribution is a route traced in the direct or indirect shift of
possession of a product as it travels from producers to consumers.
Physical Distribution

is the cluster of activities connected with the supply of completed product

from the production area to the end consumers.

Order Processing
Order processing is regarded as the input to customer service and
satisfaction.
In addition, the physical distribution has to be costumer-oriented. it begins
with customer order. Order processing actually affects customer service in
two ways which are:

Reodering time - this is the gap between two order.

Consistency of
- This is delivering products within the preset time.
Delivery Time
Customer satisfaction is the good result of a dependable order
fulfillment process. Order processing mainly includes:

Order Preparation - This is the phase where a demand for a product

turns into an indicator for a buyer to place an order.

Order Transmittal - when the order is firmed up, the customer

conveys the order information to the supplier either
manually, sent through email, or clicking a
confirmation key when making online order, or
using Electronic Data Interchange (EDI) systems.
Order Entry - this is the step where the seller validates the information
prior to serving the ordered items.

Order Filling - Once the order is cleared, the preparation process

starts and may entail product repossession, production
or purchase.

Order Delivery - At this point, shipping records and the timetable of

delivery are set.

Order Status Reporting - It is very important to make available to

the customer the condition of the order after
this has been sent for delivery.
PACKAGING
Packaging also has an essential
function to do in supply chain
management.
PROTECTION - During the distribution journey, welldesigned
packaging guarantees a sufficient shield for the product
from a lot of mechanical, manual, and environmental
exposures it will come across.

CONTAINMENT - In-transit damages need to be reduced.

COMMUNICATION - Packaging provides a type of direct and indirect

marketing.
WAREHOUSING
Warehousing is a much broader
concept that includes storage and
other functions like assembling,
breaking the volume, shipping
based on the need of middlemen,
sorting and classification, supplying
market intelligence, arranging
product for reshipping, and so on.
Warehouse may be categorized on the basis of commodity and of
ownership. On the basis of commodity stored, there can be:

Special Commodity Warehouse

- these offers facility for storing up special types of commodities, such
as cotton, potato, grain, tanks for liquid products, explosive products
warehouses, anf other similar types.

Cold Storage Warehouse

- these provide facility for storing fresh and consumable products, like
fish, flowers, vegetables, fruits, and so on.
Based on ownership, there may be different types of warehouse,
namely:
Private Warehouses
- these are owned by private individual, or companies.
Cooperative Warehouses
- these are owned by two or more private parties on cooperative
basis to use storage facility together.
Public Warehouses
- there are owned by local authorities like municipality, or by the city
and national governments.
Household Warehouses
- these are provisional in nature owned by household / family to store
and shelter furniture, paintings, fur, tapestry, and the likes.
Bonded Warehouses
- these are used to store product until fee in completed or documents
are furnished.
TRANSPORTATION

Transportation involves two parties which are the carries and

shippers. Carriers are those companies that offers transportation
facilities to others. These carriers make available transportation
services by road, rail, water, air, and underground pipes. On the
other hand, shippers are those companies and individuals like
manufacturers, middlemen, customers, and others to whom the
carriers supply transportation services.
Transportation creates the place utility particularly in today's global
marketing. Marketer must consider transportation decision
cautiously. The key issues which a marketer needs to consider are
the following:
Mode of Transportation
- this decision is connected in the choice of a fitting mode of
transportation.

Costs and Availability

- A company must choose a mode of transportation that is that most
appropriate and lower in cost.
Suitability and Credibility
- the mode of transportation must be appropriate to the products and
company's internal situation in general.

Relations
- In the age of relationship marketing, the marketer must continue the
longterm profitable relations with different transport agencies.
Legal Provisions and Restriction
- A company has to take transportation decisions within boundary of
current legal provisions.
Ownership
- This subject deals with whether a company should possess, contract,
or employ transportation means.
INVENTORY
CONTROL

Inventory is the stock of goods intended for the future sales. it can also be
described as pool of goods held in stock in expectation of sales.

Raw Materials Inventory

Maintenance, Repair, and Operating
(MRO) inventory
Work-In-Progress Inventory
Retail inventory
Finished goods inventory

Inventory Management is the management of non-capitalized and

stock items.
There are three types of cost that are connected with
inventory, which are:

Holding Costs (or Carrying Costs)

Cost of Stock Out or Shortage

Ordering Costs
CUSTOMER
SERVICE
Customer service is purposely
designed for satisfying consumers. It
is standardized and intnded to provide
the needs of customers well.
Elements of a
Distribution Channel
Path way
Flow
Composition
Objectives
Leader
Functions
ADVANTAGES OF A DISTRIBUTION CHANNEL
Cost saving

Time saving
Customer Convenience

Customers can buy in small quantities

Reseller's help in boost sales

Customers obtain financial support

Reseller's supply helpful information

DISADVANTAGES OF A DISTRIBUTION
CHANNEL

Revenue Loss

Loss of Communication and Contorl

Loss of Product Significance

TYPES OF DISTRIBUTION INTERMEDIARIES
Intermediaries, also well-known as middlemen, are a very essential component of a
company's distribution channel.

Four broad groups of intermediaries

Agents / Brokers
Wholesalers
Distributors
Retailers
Agents / Brokers
Agent and brokers are individuals or companies
that act as representative for manufacturers.

Wholesalers
wholesaling is the selling of commodities to
everyone either to a person or an organization but
not to the final consumers of those goods.
 there are two broad types of wholesalers namely:
1. FULL-SERVICE WHOLESALER
- Full-service wholesaler perform all the functions of a wholesaler.

Full service merchandise wholesalers can be divided in three classes as follows:

General wholesalers
General wholesalers usually buy large quantities of products from one or more
suppliers
Limited-line wholesalers
This wholesaler deals in the trade of goods of only certain product line.
Specialty wholesaler
This type of wholesaler carried a very narrow variety of products and resell
them in a perticular industry or product category, but may have products from
several suppliers.
 2. LIMITED SERVICE WHOLESALER
- Limited service wholesaler is such amerchant wholesaler who takes rights and
ownership of goods.
Limited service wholesaler can be divided in four classes as follows:

Cash-and-carry wholesaler
These wholesalers neither sell goods on credit to costumers, nor provide transport facility.

Truck wholesaler
Truck wholesalers give transportation facility for moving goods to the customers for
inspection and selection.

Drop ship wholesalers

these wholesalers complete the sale of a product but will have it transported from thier
suppliers directly to thier customers without essentially handling the goods.
Mail-order wholesaler
Mail-order wholesalers sell goods to retailers, industrial buyers and institutional
customers using catalogs which they send them via mails.
Distributors
just like wholesalers, distributors take title of
the products, stock it, and trade it off at a
profit to retailers or other intermediairies.
There are several types of distributors, which are:
Exclusive Distributors
Exclusive distribution is a contract between a supplier and a retailer awarding
the retailer exclusive rights in a definite geographical area to sell the supplier's
product.

Intensive Distributors
This type of distributor is normally employed when the manufacturer wants to
sell thier products as fast as possible using the widest feasible channel.

Selective Distrubutors
This type of wholesaler carried a very narrow variety of products and resell
them in a perticular industry or product category, but may have products from
several suppliers.
Direct Distributors

Direct store distributors sell products directly to the store rather than
delivering them to the retailers distribution center.

Indirect Distributors

This type of distributors uses a network of wholesalers, retailers and

resellers to distribute thier products to consumers, and is the most
common type of distributor.
RETAILERS
Retailers come in a variety of shapes and
sizes such as corner grocery store in the
neighborhood, or large chains like Save More,
Puregold and Shopwise.
Various types of retailers:

1. Retailers without fixed shops

- These are retailers who do not have fixed place to do business so they consider
moving around to sell their products.

a. Street hawkers
- These are those vendors who hold their products in cycle, tricycle or handcrafts.

b. Cheap jacks
- These vendors typically sell in a specific place.

c. Street vendors
- They are the sellers who do business in busy streets or on walkways.
2. Fixed-shop Retailers
- These are retailers who have set a shop and have a permanent place for
business.
a. Street stall holders
- Street satll holders construct their stalls where there is heavy pedestrian traffic.
b. General stores
- General shops sell goods that are necessary for everyday use.
c. Specialty shops
- Specialty shops sell a specific range of products.
d. Second-hand dealers
- These retailers trade only second-hand goods.
e. Automated selling
- Automated selling is a new sales channel for retailers and brands to reach
customers in an innovative, exciting and non-traditional way.
LEVELS OF
DISTRIBUTION CHANNELS

- Distribution channels can be

exemplified by the number of
intermediary levels that separate the
manufacturer from the end consumer.

Zero-Level Channel
One-Level Channel

Two-Level Channel
Three-Level Channel
Levels of Distribution Coverage
A market has to bring to mind the various factors before he settles on the exact
level of distribution coverage.

Mass Coverage
- is also known as intensive distribution.

Selective Coverage
- the product distribution is limited to certain selectef locations.

Exclusive Coverage
- is ideal for products that have target relatively smaller market.
Issues in Establishing Distribution Channels
A marketer must of think various factors when setting up an applicalbe distribution system in
order to meet his objectives.

Marketing Decision
Distribution strategy can be produced by how decisions are created in other
marketing aspects.
Product issues
- it is the nature of the product to be distributed that speaks about the distribution
choices necessary.

Promotion issues
- distribution decisions are influenced by the nature of promotional activities required to
sell the product to customers.
Pricing issues
- distribution strategy can also be influenced by the preffered price of them companies
to sell their products

Target market issues

- a distribution system could be considered effective when target customers can access
and obtain the product easily.
INFRASTRUCTURE
Implementing the distribution plan
has been thoroughly examined,
sometimes problems still happen.
Channel relationship
The quality to relationship that is present between distribution channel members
must also be considered.

Channel Power
Refers to the influence one party within a channel has over other channel members.

1. Backend or Product Power

- Usually lies in the hand of manufacturers whose products have high level of customer
demand.
2. Middle or Wholesale Power
- Here the power is in the hands of the wholesaler who is in the strong position in the
distribution chain.
3. Front or Retail Power
- As the name suggests stays in the hands of the retailers who can command major
concessions from their supplies.
Channel Conflict
In an attempt to boost product sales, marketers are frequently fascinated by the idea
that sales can increase if the marketer spreads out distribution by means of adding
more resellers.
1. Horizontal Channel Conflict
- It is a conflict between two players at the same level in the distribution channel.
2. Vertical Channel Conflict
- Happens at different levels of the distribution channel.
3. Multiple Channel Conflict
- When small retailers and businessmen were successful in business, modern retail
came in the picture.

Need For Long-Term Commitments

- For marketers, channel decisions have continuing effects.
Deciding for the Distribution Channels
Selecting the best distribution is a pivotal decision because it can suggest the
success or failure of a product.

Product
The type of product being sold will affect the distribution channel choices.
1. Perishability
- Perishable goods need speedy movement and shorter and direct distribution channels
compared with products having longer shelf lives so that goods could be delivered to
the consumer.

2. Size and Weight of Product

- Bulky and heavy products such as coal and food grains and other similar goods are
directly distributed to the users that involve heavy transportation costs.
3. Unit Value of a Product
- Products with lesser monetary unit value and high turnover are distributed by using
longer channels of distribution.

4. Standardization
- Products of typical size and quality generally take longer time by using longer channel
of distribution.

5. Technical Nature of Products

- Industrial products which are highly technical in nature are typically distributed straight
to the industrial users and take lesser time and adopt a shorter channel of distribution.
Market
marketers usually choose a
distribution channel based on what
customer wants, how, where and
under what situations.
1. Consumer or Business Market
- If the market is consumers, retailers are necessary distribution channel whereas
business markets may require another method.

2. Number of Prospective Buyers

- If there are more number of buyers, it is likely that the distribution channel will be long.

3. Size and Average Frequency of the Order

- Many channels are required for big market size; direct selling may be advantageous.

4. Geographic Concentration of Market

- Direct selling is favored for very a market where customers are concentrated at one
particular place.
5. Buying Habit of Customers
- Tastes, preference, likes and dislikes are part of the buying habits of customer.
Middleman
plays the role of an intermediary in a distribution
or transaction chain who facilitates interaction
between the involved parties.
Middlemen specialize in performing crucial
activities involved in the purchase and sales of
goods in their flow from producers to the ultimate
buyers.
Important factors on the choice of a particular
middleman:

Cost of distribution of goods Service supplied by middleman

Availability of preferred Making certain greater volume of

middleman sales

Inappropriate marketing policies Reputation and financial strength

for middleman
Marketing Environment

Competitors

The Manufacturing Company

Various considerations of Manufacturing Company

Reputation and Financial Industrial Rules

Stability

Ability and Experience Service Provided

Need for Control of Channel

 Government Regulations and Policies

Distribution Channel Strategy

Factors Affecting The Distribution channel

Cost Coverage

Capital requirements Character

Control Continuity
Supply Chain Management

Importance of Supply Chain Management

Boost Customer Service

Reduce Operating Costs

Improve Financial Position

 FUNCTIONS OF SUPPLY CHAIN
MANAGEMENT
PURCHASING INFORMATION WORKFLOW

OPERATIONS INGEGRATING FUNCTIONS

LOGISTICS COORDINATION PROCESSES

RESOURCE MANAGEMENT DESIGNING COMPLEX SYSTEMS

DESIGNING COMPLEX
SYSTEMS
Supply chain management is a process emplyed by
majority of companies to make certain that their supply
chain is well-organized and efficient.

A supply chain is the collection of steps that a company

takes to transform raw materials into final product.
THE FIVE BASIC COMPONENTS OF
SUPPLY CHAIN MANAGEMENT ARE :
PLAN

DEVELOPING OR SOURCING

MAKE

DELIVER

RETURN
SUPPLY CHAIN MODELS
Once a company understands the forces driving its business, then it can determine
which among the six common supply chain models.

SUPPY CHAIN ORIENTED TO EFFICIENCY

1. THE EFFICIENT SUPPLY CHAIN MODEL
- The efficient supply chain is best fitted to industries that are characterized by intense
market competition, relies on offering the best price and an ideal order fulfillment.

2. THE FAST SUPPLY CHAIN MODEL

- The fast supply chain is best for companies that produce fashionable products with a
short lifecycle.

3. THE CONTINUOUS-FLOW SUPPLY CHAIN MODEL

- This model usually is for a very mature supply chain with a customer demand profile that
has little variation.
SUPPLY CHAIN ORIENTED TO RESPONSIVENESS
1. THE AGILE SUPPLY CHAIN MODEL
- The agile type of supply chain is helpful for companies that produce products with unique
specification for each customer is seen typically in industries having unpredictable
demand.

2. THE CUSTOM-CONFIGURED SUPPLY CHAIN MODEL

- The competitive positioning of custom-configured supply chain model is founded on
offering a unique configuration of the finished product based on the final consumer's
needs.

3. THE FLEXIBLE SUPPLY CHAIN MODEL

- This model is best fitted for companies that need to meet unexpected demand. This
supply chain model is suited when faced with high demand peaks and long periods of low
workload, thus require adaptability.
SIMULTANEOUS CAPABILITIES/MULTIPLE
SUPPLY CHAINS
Manufacturing companies tend to want their supply
chain to have simultaneous capabilities which are
efficient , fast , agile , custom-configured and flexible
among others. Yet each of these capabilities requires
different skills, and in the majority of cases, these skill
sets are incompatible within the same supply chain.
Pepsi was first invented in 1893
as "Brad's Drink" by Caleb
Bradham, who sold the drink at
his drugstore in New Bern, North
Carolina. It was renamed Pepsi-
Cola in 1898, "Pepsi" because it
was advertised to relieve
dyspepsia (indigestion) and "Cola"
referring to the cola flavor.
 CASE STUDY ON DISTRIBUTION AND SUPPLY STRATEGY
OF PEPSI COLA INTERNATIONAL
I. Statement of the Problem
The statement of the problem for the case study of the distribution and supply
chain strategy of Pepsi Cola International is:
Pepsi Cola International (PepsiCo) is a global food and beverage company that
operates in over 200 countries, and its distribution and supply chain strategy has
been instrumental in its success. However, the company has faced challenges in
implementing an effective distribution and supply chain strategy that minimizes
channel conflict between its direct and indirect channels. The problem statement is
to identify the key challenges PepsiCo faces in its distribution and supply chain
strategy, particularly in mitigating channel conflict, and to recommend strategies that
can improve the company's distribution and supply chain efficiency while
maintaining strong relationships with its indirect channel partners.
II. Objective
The objectives for the case study of the distribution and supply chain strategy of PepsiCo are:

1. To analyze PepsiCo's current distribution and supply chain strategy, including its strengths
and weaknesses.

2. To identify the key challenges PepsiCo faces in its distribution and supply chain strategy,
particularly in mitigating channel conflict.

3. To evaluate the impact of channel conflict on PepsiCo's distribution and supply chain
efficiency and its relationships with indirect channel partners.

4. To recommend strategies that can improve PepsiCo's distribution and supply chain
efficiency while minimizing channel conflict and maintaining strong relationships with
indirect channel partners.

5. To assess the effectiveness of the recommended strategies and provide insights for
other companies in the food and beverage industry to improve their distribution and
supply chain strategies.
III. AREAS OF CONSIDERATION
The areas of consideration for the case study of the distribution and supply chain strategy of
PepsiCo are:

1. Distribution channels: PepsiCo uses a mix of direct and indirect channels to

distribute its products. The case study will consider the effectiveness of these
channels, including the benefits and drawbacks of each channel.

2. Channel conflict: The case study will examine the issue of channel conflict
between PepsiCo's direct and indirect channels. This will include an analysis of
the impact of channel conflict on PepsiCo's relationships with its indirect channel
partners and the company's overall distribution and supply chain efficiency.

3. Supply chain management: The case study will analyze PepsiCo's supply chain
management strategies, including sourcing of raw materials, manufacturing, and
delivery of finished products.
4. Sustainability: PepsiCo has set ambitious goals to reduce its carbon footprint,
water usage, and waste generation. The case study will assess the effectiveness
of these sustainability initiatives in the company's distribution and supply chain
strategies.

5. Technology: The case study will consider the role of technology, such as
blockchain, in PepsiCo's supply chain management, and distribution strategies.

6. Global market: PepsiCo operates in over 200 countries worldwide. The case
study will examine the challenges and opportunities the company faces in
managing its distribution and supply chain strategies across different regions and
cultures.

7. Competitive landscape: The case study will analyze PepsiCo's competitors in the
food and beverage industry, including their distribution and supply chain
strategies, and identify potential areas for improvement.
IV. ALTERNATIVE COURSES OF ACTION
The alternative courses of action for the case study of the distribution and supply chain strategy
of PepsiCo are:

1. Direct channel focus: PepsiCo could focus on its direct channel distribution
strategy by building more warehouses and delivery fleets. This would enable the
company to have greater control over its distribution and supply chain while
reducing the risk of channel conflict.

2. Indirect channel focus: Alternatively, PepsiCo could focus on strengthening its

indirect channel strategy by building better relationships with its distributors and
retailers. This could involve offering more incentives for retailers to carry PepsiCo
products and providing training and support to distributors to improve their
capabilities.
3. Hybrid channel focus: PepsiCo could also pursue a hybrid channel strategy that
combines both direct and indirect channels. This would involve identifying which
products are best suited for each channel and designing a distribution strategy
that minimizes channel conflict and maximizes efficiency.

4. Sustainability focus: PepsiCo could prioritize sustainability in its distribution and

supply chain strategy by implementing initiatives to reduce its carbon footprint,
water usage, and waste generation. This could include sourcing raw materials
from sustainable suppliers, using renewable energy in its manufacturing facilities,
and optimizing delivery routes to reduce fuel consumption.

5. Technology focus: PepsiCo could leverage technology to improve its distribution

and supply chain strategy. For example, the company could use blockchain to
increase transparency and traceability in its supply chain, or use automation and
machine learning to optimize delivery routes and reduce costs.
6. Regional focus: PepsiCo could focus on optimizing its distribution and supply
chain strategy in specific regions where it operates, such as Asia or Europe. This
could involve identifying the unique challenges and opportunities in each region
and tailoring its distribution strategy accordingly.

7. Competitive focus: PepsiCo could focus on identifying and analyzing its

competitors' distribution and supply chain strategies to identify areas for
improvement and gain a competitive advantage in the market. This could involve
benchmarking against industry best practices and implementing innovative
solutions to improve efficiency and reduce costs.
V. Recommendations
Based on the areas of consideration and alternative courses of action, the following are the
recommendations for the case study of the distribution and supply chain strategy of PepsiCo:

1. Develop a hybrid channel strategy: PepsiCo should develop a hybrid channel

strategy that combines both direct and indirect channels. The company should
identify which products are best suited for each channel and design a distribution
strategy that minimizes channel conflict and maximizes efficiency.

2. Strengthen relationships with indirect channel partners: PepsiCo should focus on

building better relationships with its distributors and retailers. The company should
offer more incentives for retailers to carry PepsiCo products and provide training
and support to distributors to improve their capabilities.
3. Focus on sustainability: PepsiCo should prioritize sustainability in its distribution
and supply chain strategy by implementing initiatives to reduce its carbon
footprint, water usage, and waste generation. The company should source raw
materials from sustainable suppliers, use renewable energy in its manufacturing
facilities, and optimize delivery routes to reduce fuel consumption.

4. Leverage technology: PepsiCo should leverage technology to improve its

distribution and supply chain strategy. The company should use blockchain to
increase transparency and traceability in its supply chain, or use automation and
machine learning to optimize delivery routes and reduce costs.

5. Optimize regional strategy: PepsiCo should optimize its distribution and supply chain
strategy in specific regions where it operates. The company should identify the
unique challenges and opportunities in each region and tailor its distribution strategy
accordingly.
6. Monitor and measure performance: PepsiCo should establish performance
metrics and monitor its distribution and supply chain strategy regularly. The
company should measure its performance against industry benchmarks and
continuously seek ways to improve its strategy.

7. Foster a culture of collaboration: PepsiCo should foster a culture of collaboration

between its direct and indirect channel partners. The company should encourage
open communication and collaboration to minimize channel conflict and improve
the overall efficiency of its distribution and supply chain strategy.
VI. Conclusion
In conclusion, the distribution and supply chain strategy of PepsiCo is critical to the
company's success in the highly competitive beverage industry. PepsiCo's
distribution channels and supply chain are complex and involve multiple partners,
including bottlers, distributors, and retailers. However, this complexity also creates
the potential for channel conflict, which can negatively impact the company's
performance.
To address the challenges in its distribution and supply chain, PepsiCo should
develop a hybrid channel strategy that combines both direct and indirect channels.
The company should also strengthen its relationships with its channel partners,
prioritize sustainability, leverage technology, optimize its regional strategy, and
monitor and measure its performance regularly. Additionally, PepsiCo should foster
a culture of collaboration between its direct and indirect channel partners to
minimize channel conflict and improve the overall efficiency of its distribution and
supply chain strategy.
Overall, PepsiCo's distribution and supply chain strategy requires ongoing
evaluation and improvement to remain competitive in the market. By implementing
the recommended actions, PepsiCo can optimize its distribution and supply chain
strategy, reduce channel conflict, and enhance its performance in the beverage
industry.