© Oxford University Press 2012. All rights reserved.

Sales and Distribution Sales and Distribution Management 2eManagement 2e

Tapan K. PandaTapan K. PandaSunil SahadevSunil Sahadev

© Oxford University Press 2012. All rights reserved.

Chapter 15Chapter 15Distribution Channel Distribution Channel

Management - An Management - An IntroductionIntroduction

© Oxford University Press 2012. All rights reserved.

Learning Objectives• Understand the reason why distribution channels exist

• Know the types of functions that distribution channels perform

• Explain the process of channel management

• Appreciate the need for channel strategy in an organization

© Oxford University Press 2012. All rights reserved.

Role of distribution channels• To adjust the discrepancy of assortment through the process of

sorting, accumulation, allocation, and assorting • To minimize the distribution costs through routinising and

standardizing transactions to make exchange more efficient and effective

• To facilitate the searching process of both buyers and sellers by structuring the information essential to both the parties

• To provide a place for both parties to meet each other and

reducing uncertainty

© Oxford University Press 2012. All rights reserved.

How do distribution channels contribute

• Intermediaries can improve the efficiency of the exchange process

• Channel intermediaries adjust the discrepancy of assortment

through the performance of the sorting process

• Marketing intermediaries hang together in channel arrangements

to provide for the routinisation of transactions

• Channels facilitate the searching process

• Time, place and possession utilities

© Oxford University Press 2012. All rights reserved.

Activities that a typical Distribution Channel performs

Spatial discrepancy

Temporal discrepancy

Need to break the bulk

Need to provide assortment

© Oxford University Press 2012. All rights reserved.

The cost and control aspects of intermediation

Direct distribution Indirect distribution

Control Cost efficiency

© Oxford University Press 2012. All rights reserved.

Distribution Channel Strategy• Setting distribution objectives in terms of the customer

requirements

• Finalizing the set of activities that are required to be performed

to achieve the channel objectives

• Organizing the activities so that the responsibility of performing

the activities is shared among the entities who are meant to

perform these activities

• Developing policy guidelines for the smooth functioning of the

channel on a day to day basis

© Oxford University Press 2012. All rights reserved.

Distribution Channel Strategy• Distribution channel management encompasses all activities

dealing with the distribution function of the firm

• The distribution strategy provides guidelines for decision making

• The distribution management function can be viewed as

happening in two phases: the ex ante phase and the ex poste

phase

© Oxford University Press 2012. All rights reserved.

Distribution Channel Strategy• The ex ante phase involves all the activities that are associated

with the design and establishment of the distribution channel.

These activities actually take place before the distribution

channel actually starts functioning.

• The exposte phase involves managing the day to day activities of

the channel wherein the behavior of the individual channel

members are coordinated

© Oxford University Press 2012. All rights reserved.

The Framework for Channel Management

Distribution Channel Strategy•Channel Objective Activity Finalization Organizing the activities Developing Policy Guidelines

Design of the channel structure

Establishing the channel

Motivating channel members

Resolving conflicts among channel members

Ex ante Phase

Ex poste Phase

Distribution Channel Strategy•Channel Objective Activity Finalization Organizing the activities Developing Policy Guidelines

Design of the channel structure

Establishing the channel

© Oxford University Press 2012. All rights reserved.

Pharmaceutical Distribution in India• Distribution channel structure

• Post-liberalization scenario

• Stockists

• Retail

• Distribution Margins in India

© Oxford University Press 2012. All rights reserved.

Pharmaceutical Distribution in India

Manufacturer

C&F/Depot/Super stockist

Stockist

Wholesaler

Retail/Chemist

Patient

Institution Hospital

© Oxford University Press 2012. All rights reserved.

Rural Distribution Channels• Public distribution system which operates ration shops

• ITC and Hindustan Unilever trying innovative methods at

expanding network and achieving penetration of the rural

hinterland

© Oxford University Press 2012. All rights reserved.

Rural Distribution ChannelsMajor Issues

•Economic issues

•Physical infrastructure

•Service output issues

•Diversity related issues