Industrial Distribution Channels & Marketing Logistics

8/7/2019 Industrial Distribution Channels & Marketing Logistics

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Presented by:

Swati gupta

Swati khurana

Sunil



Learning objectives1. Underst nd lternative c annel str ct res.

2. Know t es of industrial intermediaries.

3. Understand steps involved in desi ning a c annel.

4. Learn ow to manage c annel mem ers.

5. Understand concepts of suppl c ain

management, Logistics, and usinesslogistics s stem.

6. Learn t e tas s of physical distri ution and total distri ution cost.



� Industrial channel structures include both direct and indirect channels.

Direct Channels.

� Examples are direct selling through company sales force and directmarketing through on-line marketing, telemarketing and direct mail.

Direct channels are used typically when (i) Transaction value is large,(ii) Technical & commercial negotiations are held at various levels(iii) Buying process takes a long time (iv) Buyers want to buy directlyfrom manufacturers.

Indirect Channels.

� Consists of intermediaries like distributors / dealers, manufacturer·sreps / agents, value-added resellers (VARs), brokers and commissionmerchants.

� Indirect channels are generally used when (i) Value of transaction /sales is low, (ii) The manufacturer·s resources are limited,(iii) Customers are geographically dispersed, (iv) Buyers purchase manyitems in one transaction.



1. Industrial Distributors / Dealers.� They perform many functions li e uying, storing,

promoting, financing, selling, transporting and servicing certain geographic mar et, & are given discounts.

� Major categories are (i) General ² line distri utors, (ii)

Specialized distri utors, and (iii) Com ination house.

2. Manufactures· Representatives / Agents.� They perform functions li e promoting manufacturers·

products / services, getting orders, and colleting mar et

information. They are independent usiness firms,representing various manufacturers whose productscomplement one another ut are not competitive.

� They are paid commission on the value of sales or ordersooked. They do not uy, store or finance transactions.



. Value-added Resellers (VARs)They are new type of intermediaries from computer

industry. They deal with computer hardware and software

companies, customize the same to solve specific problemsof buying firms. They are paid discounts.

4. BrokersThey bring together buyers and sellers, when information

is not available completely. They represent either a buyeror a seller, and their relationship is short term. They do not buy products & services and are paid on commission basis.

5. Commission Merchants.They represent sellers / manufactures, mostly with bulk commodities like raw materials, to perform functions like arranging inspection, transporting, negotiating and selling. They are paid commission on the value of sales.



CHANNEL DESIGN

It includes developing new channels and modifying the existing

channels.

T he procedure / steps are as follows;(i) Developing channel objectives;(ii) Analyzing channel constraints;(iii) Analyzing channel tasks;

(iv) Identifying channel alternatives. These include the followingissues :(a) Types of intermediaries.(b) Number of intermediaries.(c) Number of channels.

(v) Evaluating the channel alternatives. The criteria used are:(a) Economic factor(b) Control factor(c) Adaptive factor

(vi) Selection of the channel (s).



It includes :1. Selecting Intermediaries.

2. Motivating Intermediaries.

(a) Partnering relationships.

(b) Reasonable discounts and commission.

(c) Distributor councils.(d) Other motivational tools.

3. Controlling Channel Conflicts

(a) Sources of channel conflicts.

(b) Controlling conflicts by

(i) Effective communication network;

(ii) Joint goal ² setting;

(iii) Diplomacy; Mediation; Arbitration.

(iv) Vertical marketing system (VMS).

4. Evaluating Channel Members



SCM includes activities of moving goods from raw material through operations to

final consumers, as shown in ´SCM Frameworkµ below.



�Main aims of SCM are (i) Reduce cost perunit, (ii) Reduce waste & duplication, (iii)

Minimize order to delivery cycle, and (iv)Ensure superior delivery service. Firmsadopting SCM gain competitive advantage.

�The aims are achieved by a network ofinterdependent firms working together with

partnering relationships to manage and controlvarious activities, in order to improve flow ofmaterials and information from suppliers toend users.

�Firms involved in SCM are suppliers of rawmaterials & components, transporters,distributors, material handling & informationprocessing firms.



Logistics Management (LM)LM plans and coordinates activities to achieve

superior customer service levels at lowest costs.

LM optimizes material flow within the firm, but

SCM extends integration of material flow to

suppliers· suppliers and customers· customers.For better understanding, see figure on ´

business logistics systemµ, which has two

product movement; physical supply and physicaldistribution.



Ph y s ic al Su p p ly In d us tr ia l M an u fac tu er Ph y sic al D is tr ib u tio n

(o r M a r k e ti n g L o g i s t ic s )

Marketing Logistics (or Physical distribution) consists ofdelivering finished products to intermediaries and customers.



TASKS OF PHYSICAL DISTRIBUTION (PD)PD tasks are :

(i) Transportation, (ii) Warehousing, (iii) InventoryControl, (iv) Customer Service, (v) Packaging, (vi)Material Handling, (vii) Order Processing, (viii)Communication, (ix) Locations of factory &Warehouses.

� Total Distribution cost and customer service arebalanced by(i) Minimizing total distribution cost, or (ii) Total

systems approach through maximizing profits.

� Total Distribution Cost = Transportation cost(Freight) + Warehouse cost + Inventory cost + Costof lost sales due to delayed delivery.



=Sales Revenue - Total Physical Distributor Cost

Capital Investment

A firm must minimize ´total distributioncostµ, instead of minimizing individualcost elements, to balance customerservice and total distribution cost.

Another approach, called ´total systems

approach or channel integrationµ focuseson ´return on investmentµ (ROI). Here, afirm·s channel members work togetherto improve ´customer serviceµ, in order

to get higher sales revenue.

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Industrial Distribution Channels & Marketing Logistics

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