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Introduction to

Distribution Channel

ManagementPresented by: Group 10

Abhishek Jain 06

Vishal Gupta 28

Vivek Ganatra 39

Vishwak Bisen 36Vatsala Varun 59

Shrema Garg 23

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Objectives of the presentation

To explain why distribution is required.

The activities that it performs.

Is intermediation really needed? How it adds value.

What is distribution channel strategy?

What is Distribution Channelmanagement?

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Introduction

Effective Distribution A driver of

Manufacturing Sector

The existence of intermediaries is inevitablebetween producer and consumers

Improve the efficiency of the exchange process

Helps adjusts discrepancies of assortment

Help in routinization of transactions

Facilitates the searching process

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Activities performed by Distribution Channel

The source of all activities lies in the

rationale for having distribution.

In fact, the entire gamut of activities areperformed due to the existence of:

Spatial discrepancies

Temporal discrepancies

Need for breaking the bulk

Need for assortment

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Contd..

The activities are performed to reduce

these discrepancies.

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Contd..

Spatial discrepancy

Activities:

To connect dispersed user base with

manufacturer in a cost effective manner.

Distance

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Contd..

Temporal discrepancy

Activities:

Stocking at appropriate places in adequate

quantities to minimise waiting time.

Time

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Contd..

Need for breaking the bulk

Activities:

Division of bulk into phases

Routinisation of order and paymentprocessing

Bulk production -

Small individual

consumption

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Contd..

Need for assortment

Activities:

Distributors keep goods of various

manufacturers who produce only one orfew goods.

Single product

produced Multiple

products consumed

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Contd..

The intensity of these discrepancies

decides the complexity of the distribution

function.

Case in point:

A tea stall vs A toothpaste factory

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Intermediation: Is it really needed?

With adoption of Internet, now companies can

themselves perform distribution activities. For eg:

Dell Computers

Advantage: Manufacturer has full control overdistribution function as outsourced channel might

not be that committed

In cases other than technically complex or short life

cycle products, direct distribution cost is very high. If more & more activities are outsourced then firm

does not have control over the distribution function

So, most companies use the combination of direct

distribution & distribution through intermediaries.

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Contd..

A proper analysis of their strengths & weaknesses is

to be done by companies to know where to

outsource the distribution activity and where to

handle it by itself. For eg:

To expand sales rapidly- Outsourced is a good

option.

To expand gradually- Study the market dynamicsproperly & shoulder large part of distribution

activities itself.

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Distribution Channel Strategy

Distribution strategy involves the choices made by company to

achieve objectives set forth in the overall strategy of the

company.

The major domains across which distribution strategy is framed

includes:

Setting distribution objectives in terms of the consumer requirements

Finalizing the activities that are required to achieve the channel objective.

Organizing all the activities so that all are shared among the different entities ofthe channel to make distribution fast.

Developing policy guidelines for the smooth functioning of channel.

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Setting Distribution Objective

Distribution objectives are set in terms of

the service output demands of the target

customers.

Can achieve greater differentiation through

setting high levels of channel objectives

that would delight the customers.

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Finalizing Channel Activity

Identification of activities which are first

step in channel activity like zero waiting

time.

While finalizing the set of activities

infrastructural and market related

constraints have to be considered.

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Organizing the channel activities

Some critical activities such as payment

collection, dispatching from the factory,

etc. are always tightly controlled by the

company.

The more the company is willing to

outsource, the less the overheads, and

hence the lower the risk when the demand

fluctuates.

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DISTRIBUTION CHANNEL MANAGEMENT

Distribution channel management encopasses

all activities dealing with the distribution function

of a firm

It invovles implementing the distribution strategyof the firm

There are two phases

The ex ante phase The ex poste phase

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Distributionchannelstrategy

Channel objective

Activity finalization

Organizing theactivities

Developing policyguidelines

Ex ante phase

Designingchannel structure

Establishing thechannel

Ex poste phase

Motivatingchannel members

Resolvingconflicts among

channel members

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PHRAMACEUTICALS DISTRIBUTION

CHANNEL STRUCTURE

Distribution of pharmaceutical in India is mostly

decentralized and hence quite complex

Products in India move through a chain of

intermediaries unlike in west

Market is essentially volume driven rather than

value driven

Strict government regulations hinder the changein the distribution structure

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MANUFACTURERMANUFACTURER

C&F/DEPOT/SUPERSTOCKIST

C&F/DEPOT/SUPERSTOCKIST

STOCKISTSTOCKIST

WHOLESALERWHOLESALER

RETAI

LER/CH

EMISTR

ETAI

LER/CH

EMIST

PATIENTPATIENT

INSTITUTION HOSPITAL

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THANK YOU!!