Designing Distribution Network in a Supply Chain

Distribution Channel

Distribution channel is the route by which a company distributes its goods. It consist of a set of people and firms(Intermediaries) involved in the transfer of ownership of the product from the producer to the ultimate consumer or industrial users.

Role of distribution channel

Time Utility is created when marketing channel have product & services available for sale, when the consumer wants to buy them. Place Utility-is created when product and services are available where consumer want to buy them. Ownership or Possession Utility is created when the title to the goods passes from the manufacturer or intermediary channel member to the buyer

Functions performed by Distribution Channels

Physical distribution functions Breaking Bulk Accumulating Bulk Creation of assortments Reducing transactions Transportation & Storage Communication functions Facilitating functions Credit Services Risk taking

Designing Distribution Channels

Specifying the role of distributions. Selecting the type of channel. Determining intensity of distributions. Choosing specific channel members

Channel Design Process

Establishing the channel objective Formulating a channel strategy Evaluating alternative channel structure Selecting the appropriate structure Determining alternative for individual channel members Evaluating & Selecting individual channel members Measuring & evaluating channel performance Evaluating alternatives when performance objectives are not met or attractive new

Consideration of Channel Design

Market Coverage Objective Product Characteristics Objective Customer service Objective Profitability Objective

Market Coverage Objective

Customer buying behavior The type of distribution required Channel structure The degree of control necessary for success

Product Characteristics Objective

Product value Technicality of product Degree of market acceptance Degree of substitutability Product Bulk Product Perish ability Degree of market concentration Seasonality Width & Depth of Product line.

Customer Service Objective

Availability Order Cycle Communication

Profitability Objective

Corporate cost of money applied to accounts receivables Corporate opportunity cost of money used as a charge for all other assets acquired by each channel alternatives.

Design options for distribution network

Manufacturer storage with direct shipping Manufacturer storage with direct shipping and in-transit merge Distributor storage with package carrier delivery Distributor storage with last mile delivery Manufacturer / distributor storage with costumer pickup Retail storage with customer pickup

Manufacturer storage with direct shipping

Manufacturer storage with direct shipping and in-transit merge

Distributor storage with package carrier delivery

Distributor storage with last mile delivery

Manufacturer / distributor storage with costumer pickup

Retail storage with customer pick-up

End of Lecture