Distribution Planning and

Control

Dr. Hena. M
Assistant Professor
SAINTGITS Institute of Management
 Distribution Management

 Management of the efficient transfer of goods from the

place of manufacture to the point of sale or consumption.

 Encompasses activities like warehousing, materials

handling, packaging, stock control, order processing and
transportation.
 Results in enhanced value for products.

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 Distribution Planning

 Distribution planning: considers which method of distribution is

appropriate for the company,
 Distribution frequency: the interval of time between distributions.
While non-food items are generally one-off distributions. Distribution
frequencies may be weekly, bi-weekly or monthly.
Eg. Food commodities - distributed at regular intervals, Electronic items
– intervals fixed according to orders.

 Distribution plan: document provided to warehouse manager and

distribution staff with information about the quantity of inventory to be
dispatched, the time period of dispatch, and the destination to where it
has to be distributed.
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 Role and Function of Intermediaries

 Independent groups or individuals (external) that

provide the channel for a company's product to reach the
end user.
 Provide services that enable manufacturers to reach
different types of customers.
 Helps to reduce transactions for the manufacturers.

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 Intermediaries
1. They can improve the efficiency of the process of exchange,
2. Adjust the discrepancy of assortment through the performance of the
sorting process,
3. They hang together in channel arrangement to provide for routinization
of transactions,
4. Facilitate the searching process.
 Types of intermediary:
 Agents,
 Wholesalers,
 Distributors
 Retailers

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 Types of Intermediaries
Agents/Brokers:
 Individuals or companies, extension of the manufacturing company.
 Represents the producer to the final user in selling a product.
 Do not own the product directly, they take possession of the product in the
distribution process.
 Gets profits through fees or commissions.
Wholesalers
 Takes title of the goods that they are intermediaries for.
 Sell only the products they own, buy in bulk and store products in own
warehouse/storage place.
 Rarely sell to final user, sell the products to other intermediaries like retailers at a higher
price than they paid.
 Not operating on commission system.
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 Types of Intermediaries

Distributors:
 Function similar to wholesalers, takes ownership of the product, stores it, and sells it at a
profit, to retailers and other intermediaries.
 Ally themselves to complementary products. Eg: distributes DVD and DVD player.
 Do not distribute competitors products Eg: distributors of Coca Cola will not distribute Pepsi
products, and vice versa.
 Maintain a closer relationship with their suppliers than wholesalers.
Retailers
 Purchase products from intermediaries and sell them directly to the end user for a profit .
 Variety of shapes and sizes: from a corner grocery store to large chains like Wal-Mart
and Lulu Hyper Market /Reliance Fresh.
 Gets feedback to the manufacturers, as they have direct contact with end user.
 Retailers can be store retailers/ non- store retailers (vending machine, door-to-door sales,
online purchase).

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 Selection of Intermediaries
 It’s crucial to find the right intermediary,
 They should know the local market,
 Should keep the reputation of the manufacturer,
 Should get a good price for the product.
 Collect information from the intermediary
 About the knowledge of product and the market,
 About the local business situations,
 About the competitors and the potential growth of the product.

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 Selection of Intermediaries
 Stability of the intermediary,
 Check the resources of the intermediary,
 Whether their staff has technical and after sales skills,
 Collect details about financial situation of the intermediary.
 Skills and experiences of the intermediary,
 Plan of selling the product by the intermediary,
 How they have promoted similar products in the past?
 Reputation of intermediary in the market,
 Unprofessional intermediaries should not be selected,
 Selecting a wrong intermediary will affect growth of the manufacturer.

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 Motivation for intermediaries
 Producers must assess intermediaries performance at regular intervals:
Criteria for assessment
 1. Sales-quota attainment,
 2.Average inventory levels,
 3.Customer delivery time,
 4. Treatment of damaged and lost goods,
 Cooperation in promotion and training programmes.

Producer/manufacturer can provide functional discounts, extra training to

intermediaries,
Modify channel arrangements(dropping or adding) according to requirements.

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 Motivation for intermediaries
 Build preference for your products:
(By winning channel members mind share and make them
recommend your products),
 Add value to product offer (by giving trainings to intermediaries),
 Increase sales through the channel (by offering discounts on
purchases above an agreed level or rewarding sales above
target with bonuses)
 Improve performance with structured programmes
(with tier 3 members receiving basic benefits and tier 1 members
receiving a wide range of benefits that help them grow their
business).
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 Factors governing the choice of channel
of distribution

 Product Factors,
 Market Factors,
 Environmental Factors,
 Institutional Factors,
 Unit Factors.
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Product Factors
 Product nature,
 Technical nature: simple or complex,
 The length of product line,
 Market position of manufacture.

Market Factors
 Existing market structure nature,
 Nature of purchase deliberations
 Availability of channel
 Competitor's channel

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Unit Factors
 The company’s financial position,
 The extent of market control desired,
 The company’s reputation,
 The company’s marketing policies.

Institutional Factors
 Financial ability of channel members,
 Promotional ability of channel members
 Post-sale service ability

Environmental Factors
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 Micro marketing and Macro marketing

 Micro marketing : approach related to advertising, that tends to

target a specific group of people in a niche market, where the
products or services are marketed directly to a targeted group of
customers.

 Macro marketing as the study of 1)marketing systems, 2) the

impact and consequences of marketing systems on society, and
3) the impact and consequences of society on marketing
systems.

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 Marketing Systems

Marketing system: “a complex social mechanism for coordinating

production, distribution and consumptions decisions”.

 A network of individuals, groups, and/or entities linked directly or

indirectly through sequential or shared participation in economic
exchange that creates, assembles, transforms and makes available
assortments of products, both tangible and intangible, provided in
response to customer demand.

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 Distribution Channel
 Conventional Distribution Channel: A channel consisting of one or more
independent producers, wholesalers, and retailers, each a separate
business seeking to maximise its own profit.

Lacked leadership and power, often resulted in creating conflicts and

poor performance

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 Conventional Distribution Channel
Producer

 No assigned roles
 No way of resolving Wholesaler

channel conflict

Retailer

Consumer

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 Vertical MS and Horizontal MS
 Vertical Marketing System: A channel structure in which
producers, wholesalers, and retailers act as a unified system.
Channel members has contracts in between and has power that
they all cooperate.

 Horizontal Marketing System: A channel arrangement in which

two or more companies at one level join together to follow a new
marketing opportunity. By working together they can combine their
financial, production or marketing resources to accomplish more
than any one company could achieve alone. Eg. Star Alliance in
airlines industry.

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 Vertical Marketing System

Producer

Wholesaler Retailer

 Members at different level

works together in a unified way

Consumer

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 Types of VMS
 Corporate VMS: combines the successive stages of production and
distribution under single ownership (Eyewear brands Ray-Ban, Oakley)

 Contractual VMS: Independent firms at different levels of production and

distribution join together through contracts, to obtain more economies or sales
impact than each could achieve alone.

 Franchise Organisation: Channel member called franchisor, links several

stages in the production and distribution process.
 Manufacturer sponsored retailer franchise system, Eg: Ford and their dealers.
 Manufacturer sponsored wholesaler franchise system, Eg: Coca-Cola
Licenses Bottlers.
 Service firm sponsored retailer franchise system : Eg: Burger King.

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 Horizontal Marketing System

 A channel arrangement in which two or more companies at one

level join together to follow a new marketing opportunity.

 Companies might join together with competitors or non

competitors.

 Work together on temporary or permanent basis.

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 Multichannel Distribution

 A distribution system in which a single firm sets up two or

more marketing channels to reach one or more customer
segments.

 What is mean by segmentation?

(categorizing consumers on the basis of different criteria)

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 Multichannel Distribution

Retailers Distributors
Consumer
Segment 2

Dealers
Consumer Business
Segment 2 Segment 2

Business
Segment 1
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 Multichannel Distribution
Provides many advantages to companies
 Help to distribute products in large and complex markets
 With each new channel the company can expand its sales and
market coverage,
 Helps to gain opportunities in the market to offer products to
specific needs of the people in diverse consumer segments.

Disadvantages : Harder to control and can generate conflict

between channel members.

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 Changing Channel Intermediaries
 Disintermediation:

The cutting out of marketing channel intermediaries by product

or service producers or the displacement of traditional resellers
by radical new types of intermediaries.

Eg: Shifting from traditional intermediaries to online marketing

(online music download services almost replaced traditional
music-store retailers)

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 Changing Channel Intermediaries

Disintermediation

 Presents both opportunities and problems for both producers

and resellers
1.Channel innovators find new ways to add value in the channel,
2. Aims to displace traditional resellers and reap the rewards

3. Traditional intermediaries must continue to innovate to avoid

being swept aside.

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 Marketing Channel Design

 Designing effective marketing channels by

 analysing customer needs,
 setting channel objectives,
 identifying major channel alternatives, and
 evaluating those alternatives.

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 Identifying Major Channel Alternatives

 Determining the number of marketing intermediaries,

Intensive Distribution: Stocking the product in as many outlets as

possible,
Exclusive Distribution: Giving a limited number of dealers the
exclusive right to distribute the company’s products in their territories,
Selective Distribution: The use of more than one but fewer than all
of the intermediaries that are willing to carry the company’s products.

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 Channel Conflict and Management
 Channel conflict: as a situation where one channel member
perceives the behaviour of another channel member to be
impeding the attainment of its goals or its effective
functioning.
 Impossible situation where all the component members of
the channel think alike and act in complete unison so that
there is no conflict.
 However, it is important that disagreements and diversions
from expected behaviour does not lead to a reduction in the
performance of the channel.

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 Channel Conflict Process

Attitudinal
sources of Cognitive/
Manifest Conflict
conflict Affective
conflict outcomes
conflict

Structural Conflict
sources of resolution
conflict

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 Attitudinal Causes of Conflict

 Causes which are associated with disagreements about channel roles,

expectations, perceptions, and communications.

 Channel roles are defined as a set of prescriptions defining what the

behaviour of a member should be in a particular position.

 Eg: Distributor expects the retailer to display the products in an

attractive way, if the retailer ignores it the conflict arise.

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 Structural Causes of Conflict

 Tangible and well articulated causes.

 Main causes are:

1. Divergence in goals – introducing new product,
2. Drives for autonomy : in taking decisions,
3. Fights over scarce resources : presence of more dealers in
a same market segment.

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 Felt Conflict

 Once the seed of conflict are sown, conflict proceeds to

cognitive/affective conflict stage (stage known as felt
conflict)

 Members feel frustrations, disappointments or negative

feelings towards the business relationships.

 However, if the conflict not satisfactorily resolved at this

stage, the conflict develops into the manifest conflict stage.

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 Manifest Conflict

 Stage characterised by destructive actions such as boycott or total

breakdown of communication between the intermediaries.

 When the conflict manifest itself to external behaviour, its difficult to come
back to former relationship stage since the trust would have broken
between the two parties.

 At this stage, resolution methods are thought about and implemented, often
seen that the channel principals decide to discontinue their relationship with
certain dealers or retailers.
 If the resolution methods succeeds, the relationship will survive, but the
experiences will lead to attitudinal or structural causes for new conflict.
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 Conflict Resolution

Conflict can be resolved at two stages:

1. At the initial stage before the conflict degenerates into a

felt or manifest conflict, failing which,

2. Conflicts can be resolved after manifestation.

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 Conflict Outcome

 Discontinuation of business relationship with certain

dealers or retailers,

 Each partner will continue/stop business,

 Intermediaries may search for new partners for their
business

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 Conflict Resolution and Management
 Primary and most difficult task of the channel manager,

 Conflict management and conflict resolution are two different task,

 When conflict reach manifest stage, resolution methods are adopted

 Conflict management tries to prevent disagreements and other problems to

reach the stage of manifest conflict,

 Emphasis is to detect latent conflict in the initial stages, work out modalities
to reduce differences that might lead to destructive behaviour.

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 Conflict Management

 Process of limiting the negative aspects of conflict while increasing the

positive aspects to reduce conflict.

 Aims to enhance learning and group outcomes in the distribution

channel, to bring out the maximum performance from the
intermediaries.

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 Conflict Management

 Institutional mechanisms to deal with conflicts:

 Capable of detecting conflicts at the initial stage,
 Prevent it from escalating it to the manifest stage
 Third-party mechanisms
 Service of a third-party uninvolved or external to the organisation
is used before the conflict reaches a destructive stage.

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 Conflict Management Methods at Different Stages

Latent Conflict

Institutional Approaches
• Joint membership associations
• Exchange of executives
• Co-optation
• Dealer councils

Third-party mechanisms
• Mediation
• Arbitration

Felt Conflict

Manifest Conflict Negotiation

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 Negotiation
 When a conflict manifests itself the institution mechanism or third party
mechanisms become irrelevant, hence the conflict negotiation becomes very
important.

 Process where the parties to the dispute set down mutual rules of
engagement and work within these rules to achieve competitive advantage
over the other party.
 The two parties in the conflict should agree for the negotiation,
 Negotiations can be very formal with a detailed agenda and well laid code of
conduct.
 Negotiations can be informal with two sides : without any particular agenda.

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 Negotiation Strategies

1.Competing or Aggressive

2.Collaborative or problem solving

3. Compromising

4. Avoiding

5. Accommodating

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 CICD Analysis

 Customer Analysis
 Industry Analysis
 Competitors Analysis
 Distribution Analysis

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 Customer Analysis
 A critical section of a company's business plan or marketing plan. It identifies
target customers, ascertains the needs of identified customers, and then
specifies how the product offered helps to satisfies their needs.

Steps in Customer Analysis

Step 1: Understand what drives value for your customers,
Step 2: Understand your value proposition,
 Unique Selling/Value Proposition (USP/UVP) : the benefit of your offer, how
you solve your customer's needs and what distinguishes you from the
competition.
Step 3: Identify the customers and segments where are you can create
more value relative to competitors,
Step 4: Create a win-win price
Step 5: Focus investments on your most valuable customers
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 Industry analysis
 A market assessment tool used by businesses and analysts
to understand the competitive dynamics of an industry. It
helps them get a sense of what is happening in
an industry. 
 Analyze past trends, demand supply relation and future
prospects
 Includes three major elements:
1. the underlying forces at work in the industry;
2. the overall attractiveness of the industry;
3. the critical factors that determine a company's success
within the industry.
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 Competitor Analysis

 A strategy where you identify major competitors and

conduct research on their products, sales, and marketing
strategies.

 An assessment of the strengths and weaknesses of current

and potential competitors. This analysis provides both an
offensive and defensive strategic context to identify
opportunities and threats.

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 Distribution Analysis

 Map out the external environment of a business,

 Part of Situation analysis (External and Internal) and
marketing plan of a company,

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 Thank You

Dr. Hena. M
Assistant Professor
SAINTGITS Institute of Management