Distribution Management: Definition, Advantages & Strategies
- What Is Distribution Management?
- What Is a Distributor?
- Why Is Distribution Management Important?
- Advantages of Distribution Management
- Distribution Management Challenges
- 5 Factors That Influence Distribution Management
- 3 Distribution Management Strategies
- Choosing a Distribution Management System
- What Are the 4 Channels of Distribution?
Management of distribution has always been a problem for businesses. Raw materials may be delivered too soon and degrade before being used. A competitor may also capture the majority of the market share if finished goods arrive too late.
The need of effective distribution led to the integration of sub-discipline practises into the supply chain and inventory management. Overall, effective distribution requires a solid distribution management strategy supported by real-time information because it incorporates numerous moving components and methodologies.
What Is Distribution Management?
The process of managing the flow of products from supplier to manufacturer to wholesaler or retailer to final customer is known as distribution management. There are numerous procedures and activities involved, including as packaging, managing raw material vendors, warehousing, inventory, supply chain, logistics.
What Is a Distributor?
An organisation known as a distributor provides goods to shops and other companies who sell their goods directly to customers. Consider a wholesale vegetable supplier who sells vegetables to grocers and restaurants.
Distribution vs. Logistics
Logistics refers to the careful planning and procedures required for efficient supply and delivery of products. Supply management, bulk and shipping packaging, temperature control, security, fleet management, delivery routing, shipment monitoring, and warehousing are just a few examples of the activities and operations that fall under the category of logistics. The most straightforward way to think of logistics is as physical distribution.
In logistics, order fulfilment through all distribution channels is the main goal of the distribution management system. A product or service flows through a chain of agents and organisations called a distribution channel as it travels from its point of origin to a consumer. E-commerce sites, wholesalers, retailers, and third-party or independent distributors are a few examples of distribution channels. Activities and procedures such as consumer- or business-oriented distribution packaging, order fulfillment and order shipping.
Why Is Distribution Management Important?
Distribution management is primarily concerned with planning every step necessary to deliver items to the consumer on time and with the least amount of waste possible. As a result, it directly affects profitability.
Advantages of Distribution Management
Distribution management not only increases profitability but also reduces waste in a variety of ways, from less spoilage to lower warehousing expenses since items and supplies can be distributed as needed rather than stored in larger quantity.
Distribution control results in less shipping charges Additionally, it facilitates “one-stop shopping” and other conveniences and benefits like customer loyalty reward schemes, which makes things simpler for buyers.
Distribution Management Challenges
Diverse interruptions can cause distribution problems. Severe weather conditions, a lack of raw materials (such as poor crop years), pest damage, and epidemics or pandemics are examples of natural disruptions. Riots, protests, battles, and strikes are examples of human disturbances.
Flight delays, maintenance issues, accidents involving transport vehicles, and new or stringent transportation rules, such as those frequently observed in trucking, are all examples of disruptions in the transportation system.
Recessions, depressions, abrupt changes in consumer or market demand, additions to or changes in fees or compliance costs, fluctuating currency exchange rates, and payment problems are all examples of economic obstacles.
Product recalls, packaging problems, and quality control problems are examples of product disruptions. Order modifications, address changes for shipments, and product returns are all examples of customer disruptions.
5 Factors That Influence Distribution Management
Many things can influence distribution management. The five most common are:
- Unit perishability – if it’s a perishable item, then time is of the essence to prevent the loss,
- Buyer purchasing habits – peaks and troughs in purchasing habits can influence distribution patterns and therefore varying distribution needs that can be predicted,
- Buyer requirements — e.g. changes in a retailer’s or manufacturer’s just-in-time inventory demands,
- Product mix forecasting – optimal product mixes vary according to seasons and weather or other factors and
- Truckload optimization – relies on logistics and fleet management software to ensure every truck is full to capacity and routed according to the most efficient path.
3 Distribution Management Strategies
At the strategic level, there are three distribution management strategies:
The mass strategy aims to distribute to the mass market, e.g. to those who sell to general consumers anywhere.
The selective strategy aims to distribute to a select group of sellers, e.g. only to certain types of manufacturers or retail sectors such as pharmacies, hair salons, and high-end department stores.
The exclusive strategy aims to distribute to a highly limited group. For example, the manufacturers of Ford vehicles sell only to authorized Ford dealerships, and producers of Gucci-brand goods only sell to a narrow slice of luxury goods retailers.
Choosing a Distribution Management System
Your organization’s distribution goals, difficulties, and the distribution models and channels your business utilises all play a significant role in selecting the best distribution management system. But generally speaking, businesses should consider:
- Ease of integration and compatibility with legacy systems.
- Scalability and elasticity
- Data management and analytics, including real-time data streaming and ecosystem data-sharing
What Are the 4 Channels of Distribution?
There are four distribution channels:
Goods are distributed from manufacturers to wholesalers in this channel. For example, liquor distillers distribute their brands of liquors to wholesalers.
Goods are distributed from manufacturer or wholesaler to retailers. For example, big-name designer clothing and accessories are distributed to higher-end retail chains such as Neiman Marcus, Nordstrom and Macy’s.
This channel moves goods from the source or manufacturer to an authorized distributor. For example, a Ford factory distributes various Ford makes and models to authorized Ford dealerships for sale to consumers or company fleets.
This is the newest and most disruptive distribution channel wherein goods and services are represented virtually online and then distributed directly to the buyer. Ecommerce as a fourth channel has led to rapid changes and made distributors rethink their traditional strategies.
Supply chain, blockchain, logistics, systems for purchase orders and invoicing, vendor relationship management (VRM), customer relationship management (CRM), and an inventory management system are examples of the procedures involved in getting a product from the manufacturer to the final consumer (IMS), a warehouse management system(WMS) and a transportation management system (TMS).