Distribution Management

REVIEWED BY WILL KENTON

What Is Distribution Management?

Distribution management refers to the process of overseeing the movement of
goods from supplier or manufacturer to point of sale. It is an overarching term
that refers to numerous activities and processes such as packaging,
inventory, warehousing, supply chain, and logistics.

Distribution management is an important part of the business cycle for

distributors and wholesalers. The profit margins of businesses depend on how
quickly they can turn over their goods. The more they sell, the more they earn,
which means a better future for the business. Having a successful distribution
management system is also important for businesses to remain competitive and
to keep customers satisfied.

Understanding Distribution Management

Distribution management is critical to a company's financial success and
corporate longevity. Executing it successfully requires effective management
of the entire distribution process. The larger a corporation, or the greater the
number of supply points a company has, the more it will need to rely on
automation to effectively manage the distribution process.

Modern distribution management encompasses more than just moving products

from point A to point B. It also involves gathering and sharing relevant
information that can be used to identify key opportunities for growth and
competitiveness in the market. Most progressive companies now use their
distribution forces to obtain market intelligence which is vital in assessing their
competitive position.

There are basically two types of distribution:1. commercial distribution—

commonly known as sales distribution—and 2. physical distribution—
better known as logistics. Distribution involves diverse functions such as
customer service, shipping, warehousing, inventory control, private trucking-fleet
operations, packaging, receiving, materials handling, along with plant,
warehouse, store location planning, and the integration of information.

The goal is to achieve ultimate efficiency in delivering raw materials and parts,
both partially and completely finished products to the right place and time in the
proper condition. Physical distribution planning should align with overall channel
strategy.
Advantages of a Distribution Management Strategy
Aside from keeping profits up, there are many reasons a company may want to
use a distribution management strategy. First, it keeps things organized. If there
was no proper management system in place, retailers would be forced to hold
stock in their own locations—a bad idea, especially if the seller lacks proper
storage space.

A distribution management system also makes things easier for the consumer. It
allows them to visit one location for a variety of different products. If the system
didn't exist, consumers would have to visit multiple locations just to get what they
need.

Putting a proper distribution management system in place also alleviates any

potential for errors in delivery, as well as the times products need to be delivered.

Businesses can adopt distribution management strategies through electronic

platforms, which can help simplify the process and boost product sales.

KEY TAKEAWAYS

 Distribution management is the process of overseeing the movement of

goods from supplier or manufacturer to point of sale.
 It refers to activities and processes such as packaging, inventory,
warehousing, supply chain, and logistics.
 Adopting a distribution management strategy is important for a company's
financial success and corporate longevity.
 Distribution management helps keep things organized and keeps
customers satisfied.

Distribution Management as a Marketing Function

The fundamental idea of distribution management as a marketing function is
that the management of distribution happens in an ecosystem that also involves
the consideration of:

 Product: Not always a tangible object, product can also refer to an idea,
music, or information.
 Price: This refers to the value of a good or service for both the seller and
the buyer, which can involve both tangible and intangible factors, such as
list price, discounts, financing, and likely response of customers and
competitors.
  Promotion: This is any communication used by a seller to inform,
persuade, and/or remind buyers and potential buyers about the seller’s
goods, services, image, ideas, and the impact it has to society.
 Placement: This refers to the process that ensures the availability,
accessibility, and visibility of products to ultimate consumers or business
users in the target channels or customers where they prefer to buy.

Effective distribution management involves selling your product while

assuring sufficient stocks in channels while managing promotions in those
channels and their varying requirements. It also involves making sure a supply
chain is efficient enough that distribution costs are low enough to allow a product
to be sold at the right price, thus supporting your marketing strategy and
maximizing profit.

Distribution (or place) is one of the four elements of the marketing mix. Distribution is the process
of making a product or service available for the consumer or business user who needs it. This can
be done directly by the producer or service provider, or using indirect channels with distributors
or intermediaries. The other three elements of the marketing mix are product, pricing, and promotion.
Decisions about distribution need to be taken in line with a company's overall
strategic vision and mission. Developing a coherent distribution plan is a central component
of strategic planning. At the strategic level, there are three broad approaches to distribution, namely
mass, selective or exclusive distribution. The number and type of intermediaries selected largely
depends on the strategic approach. The overall distribution channel should add value to the
consumer.
WHAT IS DISTRIBUTION MANAGEMENT?
WHAT IS DISTRIBUTION MANAGEMENT?
By : Emilio ‘Bong’ Macasaet III | Date Posted : July 11, 2012

(This is an excerpt from a book I am currently writing entitled Fundamentals of Distribution Management in the
Philippine Setting.)

A study on the basic tenets of distribution management is better anchored on a comprehensive appreciation of
distribution as a function of the marketing strategy. A quick review on the concepts of marketing mix, the market
and customer segmentation is therefore important as a segue to the discussion of the fundamentals of distribution
management.

Placement in the Marketing Mix

In the light of sound marketing framework, a firm needs to formulate, implement and evaluate a plan that focuses
on the elements of the marketing mix that marketing practitioners must find creative ways to control in order to
best satisfy target consumer segments. We define consumers here as those who will finally consume or use the
product or service.

There are the classical four Ps, or elements of the marketing mix to be managed by the marketing organization,
namely:
o Product: A product is not always necessarily tangible like an anti-dandruff shampoo. A product could be
intangible like an idea, music or information. Your cellphone load or credit is an intangible product. It
could also be a service (e.g. spa, hotels, resorts), or any combination of the three;
o Price: This refers to the value of a good or service for both the seller and the buyer, which can involve both
tangible and intangible factors, such as list price, discounts, financing, and likely response of customers and
competitors;
o Promotion: This is any communication used by a seller to inform, persuade, and/or remind buyers and
potential buyers about the seller’s goods, services, image, ideas, and the impact it has to society, to influence
buyers to make purchasing decisions. Promotions are effective tools to increase demand and differentiate a
product or service;
o Placement or distribution: This refers to the process that ensures the availability, accessibility, and visibility
of products to ultimate consumers or business users in the target channels or customers where they prefer to
buy. Distribution decisions include market coverage, channel member selection, channel coordination and
conflict management, logistics, and service levels.
In addition to the abovementioned four Ps, four other elements are suggested by various authors to form a more
comprehensive mix of marketing strategy:
o Packaging:a product’s physical container, label, and inserts;
o People: fittingly enabled to drive marketing strategies through excellent execution;
o Public:the company’s corporate social responsibility (CSR) practices affecting the community where the
firm operates;
o Profit: the primary goal of a business.

In this new era, distribution is not just about moving the products from the point of producers to the point of
consumers. It involves such functions as gathering and sharing of relevant information that can be used to
identify key opportunities for growth and competitiveness in the market. Most progressive companies utilize
their distribution forces to obtain market intelligence that are vital in assessing their competitive position.

There are basically two types of distribution: Commercial Distribution or commonly known as sales distribution
(the book will delve only on this type of distribution); and Physical Distribution - also known as logistics. It
involves such diverse functions as customer service, shipping, warehousing, inventory control, private trucking-
fleet operations, packaging, receiving, materials handling, and plant, warehouse, store location planning, and the
integration of information. Its intent is to efficiently deliver raw materials, parts, partially and completely
finished products to the right place and time in proper condition. Physical distribution planning should be aligned
to an overall channel strategy.

Distribution Management as a Marketing Function

The fundamental idea is that as a marketing function, you now manage your distribution while considering all
of the marketing “Ps”. It is not just selling your product, but it is selling your product while ensuring sufficient
stocks in channels, carefully considering your promotions in those channels and their varying requirements. It is
ensuring that your supply chain is efficient enough that your costs to distribute are low enough and your product
can be sold at the right price, thus supporting your marketing strategy and maximizing profit. Even before
considering commercial or physical distribution, you would have to start at the product itself, reviewing its
specifications and making sure that it sufficiently tackles a consumer’s needs. In considering distribution
management as a marketing function, we step away from “supply-side thinking” and start with a view of the
whole picture, the consumer now in the center.
Emilio “Bong” Macasaet III is Partner and Chief Distribution Strategist of Mansmith and Fielders, Inc.
(www.mansmith.net).