Unit 6: Channels of Distribution, Supply Chain, and Logistics
Channels of distribution determine how a firm intends to deliver the product to the consumer. It represents the "place" of the 4 Ps, the marketing mix. Supply chain represents the sourcing of materials and is also a channel of distribution for suppliers of the firm. Logistics concerns the physical distribution of products and services to the consumer.
Completing this unit should take you approximately 7 hours.
6.1: Types of Distribution Channels
Distribution channels vary according to the product or service offered, consumer preferences, and industry specific distribution practices. Often multichannel distribution of offerings is practiced, as there are numerous ways to deliver the product or service offering to the consumer; and consumers vary according to their individual purchasing behaviors.
6.2: The Firm's Supply Chain
A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps to get the product or service from its original state to the customer.
The supply chain is broader than a distribution channel because it includes purchase, acquisition, logistics, material management, product development, storage, warehouse, distribution, traffic management, inventory control, and all related things. The distribution channel is a part of supply chain management, mainly the movement of finished products from manufacturing facilities to end users.
6.3: The Function of Logistical Management
Logistics is the process of planning and executing the efficient transportation and storage of goods from the point of origin to the point of consumption. Logistics aims to meet customer requirements in a timely, cost-effective manner.
Logistics is a significant component of supply chain management, value chain analysis, and distribution channels, wherein the efficient physical handling and transport of goods adds value to the offering. Logistics is more of an operational term; it involves planning and executing the physical flow of goods from origin to destination.
6.3.1: Modes of Transport
As we know, products move as cargo through the following modes of transport: road, rail, water, air, and pipeline. Each mode has different characteristics, and cargo is often carried over more than one mode. Marketers must make distribution choices based on the following factors: cost, speed, flexibility, regularity, safety, and type of cargo. For example, low value commodity cargoes such as coal, or gypsum, are often shipped in high volume, low cost bulk shipments where the transportation can cost more than the commodity. High value or perishable goods are more considered with speed and safety. For example, fruits and vegetables must reach the market before ripening, where speed of transport is the key factor. High value goods, such as Rolex watches are subject to pilferage enroot to the retailer.
6.3.2: Warehousing and Distribution
Warehousing has existed for centuries to hold goods, either raw materials or finished goods, in inventory. It serves the purpose of having products available to consumers when they need them. It represents another cost factor in distribution, as storage costs and financing costs apply, and additional cargo handling can result in product damage and pilferage costs.
Distribution in modern business has changed for efficiency reasons, and distribution centers and fulfillment houses have largely replaced warehouses. These large and modern buildings can be owned and operated by the marketing organization or a third-party logistics provider, known in the shipping industry as "3PLs".
6.3.3: The Importance of Data Management
Data management and tracking of goods is now used commonly in domestic and international cargo movements. Perpetual inventories and order entry systems combined with GPS tracking allow marketers to know where their goods are and provide reliable information to their customers.
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Study Guide: Unit 6
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Unit 6 Assessment
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