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Module 1 Introduction to Distribution Management 2

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Module 1 Introduction to Distribution Management 2

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Uploaded by

kentsalanpdiapen
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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MODULE 1: INTRODUCTION TO DISTRIBUTION MANAGEMENT

DISTRIBUTION MANAGEMENT

WHAT IS DISTRIBUTION MANAGEMENT?


Distribution management refers to planning and transporting the products from the place of
manufacturing to where they are sold. It involves transporting raw materials from suppliers to
manufacturers, finished products from manufacturers to wholesalers or retailers, and lastly to
customers.
It is an important step in supply chain and inventory management to ensure that manufacturer
products reach their destinations in a timely and good condition to meet customer demands.
Therefore, effective distribution management is necessary to maintain a competitive position in
the market, minimize costs, improve profit margins and inventory turnover rate, and maximize
customer satisfaction.
Channels of Distribution Management

A distribution channel is a medium through which manufacturers distribute products or services


to customers

1.) Wholesaler
Wholesalers purchase bulk quantities of finished products from the manufacturer at a low
price. They then send it to distributors or retailers. Some wholesalers also provide raw
materials to manufacturers to make finished goods.

2.) Retailer
Retailers purchase products from wholesalers, suppliers, or directly from manufacturers.
Retailers then sell those products to consumers through various sales vendors.

3.) Distributor
A distributor is an intermediate between a manufacturer and wholesalers/retailers. When
manufacturers increase their product sales, they hire licensed distributors.

4.) E-commerce
The digital era has replaced traditional digital channels with e-commerce platforms and
direct-to-customer (DTC) models. Here, the online e-commerce website displays the
products, and once the customer places an order, items are picked from the inventory or
warehouse and distributed directly to the consumer.
The process of distribution management is as follows:
Step 1: Forecast Demand
Manufacturers predict customer demand for products using sales patterns and market trends.
They forecast the required quantity of products and plan distribution channels, inventory levels,
and logistical strategies accordingly.

Step 2: Sourcing and Production


Manufacturers then buy raw materials and manufacture products and ensure they meet quality
standards before distribution.

Step 3: Inventory Management


Now, finished products get stored in warehouses of manufacturing facilities or distribution
centers. Here, inventory levels are managed for efficient distribution, maintaining supply and
demand to prevent overstocking or shortages.

Step 4: Delivery
Once orders are received, manufacturers transport products from warehouses to distributors,
retailers, or directly to consumers.

Step 5: Technology Integration


Technology like inventory management systems, logistics software, and tracking tools will help
track products, streamline operations, improve efficiency, and simplify the supply chain.

Step 6: Continuous Improvement


Thus, distribution management requires continuous evaluation and implementation of new
strategies to adapt to changing market conditions and optimize the distribution process.

Strategies of Distribution Management


Distribution management strategies are plans and approaches businesses use to move products to
consumers efficiently. Some common distribution management strategies include:

1. Direct Distribution (DTC)


The direct distribution strategy involves selling products directly from manufacturers to
consumers without intermediaries through company-owned stores, websites, or catalogs.

2. Indirect Distribution
The indirect distribution strategy involves using intermediaries like wholesalers, retailers,
or distributors to sell products to consumers. This strategy helps to reach the target
market and reduces the burden of sales efforts on the company.
3. Mass
The mass strategy helps distribute the products to a large number of customers.
Manufacturers distribute their products through numerous channels and vendors to reach
every market.

4. Selective
The selective strategy involves companies selling their products through only a limited
number of suppliers. This strategy aims to distribute products to a selective or specific
group of people and target markets to ensure better sales control.

5. Exclusive
The exclusive strategy is applied by companies who want to distribute their products to a
highly limited group. It’s for premium and exclusive goods to control brand image and
integrity. For example, Apple carefully sells its products to selected authorized retailers or
carriers within specific regions or markets.

Challenges of Distribution Management


The following are some distribution management challenges companies face while managing
product distribution.

1. Natural disruptions
Climate change or unpredictable weather conditions like floods and earthquakes can
damage crops, leading to a shortage of raw materials. It affects inventory, leading to
shortages in warehouses and disturbing supply chains.

2. Transportation Issues
Sometimes, natural disasters like earthquakes can damage transportation routes and cause
delays in delivery services. Other challenges include traffic, lack of vehicles, accidents
that cause an increase in maintenance cost, delays in flight carrying products, and
disruption in the transportation system and overall delivery timeline.

3. Pandemics
Pandemics can severely disrupt global supply chains. For instance, the COVID-19
pandemic led to a shortage of raw materials and products, closures of many small-scale
industries, shortages in labor or workers, and more.

4. Lack of Skilled Workers


It is challenging for companies to find and retain skilled workers for distribution
operations. A lack of trained workers and specialized professionals can pressure
companies to spend more on training and recruiting processes. A lack of skilled workers
may lead to errors in handling goods or inventory management.
5. Economic Issues
Fluctuating currency exchange, market volatility, inflation, recessions, and trade policy
changes can impact expenses, demand, pricing, and supply chains. Companies must
adopt proper strategies to adapt to changing economic conditions in distribution
management.

6. Inaccurate inventory management


Inaccuracies in inventory tracking and management can result in overstocking or
stockouts. If goods are there in the warehouse for a longer time, they will get damaged,
causing a loss to the company. It will increase storage costs and cause product delays,
causing customer dissatisfaction and indirectly damaging the brand’s reputation.

7. Shipment issues or delays


Issues with shipments, such as damaged goods, customs clearance delays, or
documentation errors, can disrupt the flow of products. Other challenges include issues in
packaging, quality control problems, changes in shipment address, and returning
damaged goods, which also cause a loss to the company.

8. Supply chain shortages


Disruptions in the supply chain due to raw material shortages, production delays, or
supplier issues can lead to insufficient inventory levels and hinder timely deliveries.

9. Customer Expectations
Customer demands for faster deliveries, flexible shipping options, and real-time tracking
can cause the implementation of new technologies, which leads to expenses and creates
pressure on the distribution systems.

10. Globalization Challenges


Companies operating in global markets deal with diverse regulations, cultural differences,
longer periods of supply chains, and varying consumer preferences, making it difficult to
distribute products across borders.

Advantages and disadvantages of Distribution Management


Here are the advantages and disadvantages of distribution management.
Distribution vs. Logistics
The following is the difference between distribution and logistics in the supply chain.

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