SUPPLY CHAIN

MANAGEMENT
&
DISTRIBUTION MANAGEMENT
DISTRIBUTION MANAGEMENT
Distribution management “ that arm or wing
of management which serves as a link
between procurement, purchase,
manufacturing, marketing, sales, &
finance, proper functioning of which
synergizes the effects of all these activities
and the absence of which can not only
reduce efficiencies but can lead to chaos
in the organization”
 LOGISTICS MANAGEMENT
• International Council of Logistics
Management defined Logistics in 1991
“ the process of planning implementing
and controlling the efficient effective flow
and storage of goods services and related
information from the point of origin to the
point of consumption for the purpose of
conforming to customer requirements”
 A typical supply chain
Raw material supplier
packing material supplier
component supplier
Factory
warehouse
distributor
retailer
customer
 supply chain

C&fa
C&fa
RM fcty

CWH
C&fa
Db

fcty R
PM

Db St R
R R
3p c c
c c c c
c c c
 criticality of distribution &
logistics function
Profit = revenue less costs (cos + s&d,m)
revenue is a function of volume & net
realization (what is net realization)
volume dependent on promotional inputs
costs dependent on inputs
both difficult to reduce
often economies of scale are not possible
when procurement is concerned
so gap can be improved by optimizing
operational efficiencies / processes
 criticality of distribution &
logistics function
• Process optimization better capacity utilization
in manufacturing or better deals in procurement
• Optimization in transportation more bulk
movements better capacity utilization
• Proper location of distribution centers to reduce
overall inventory / transportation costs
• Reducing overall inventory requirements
• Improving customer service levels
concept of value chain

S COMPANY’S INFRASTRUCTURE
G
U ORGANIZATION PEOPLE & METHODS
R
P
SYSTEMS & TECHNOLOGIES O
P
PROCUREMENT S
O
S
R OPER- M
T IN ATIONS OUT
MKTG A
BOUND BOUND SER- R
&
LOGI- LOGI- VICE G
SALES
STICS STICS I
N
PRIMARY ACTIVITIES
 competitive advantage
competitive advantage derives from the value a
company creates for its customers which may be
selling an equivalent product at below
competitor’s price or
providing additional unique benefits to
customers to offset premium price being
charged
in the value chain diagram 2 out of 5 primary
activities are in the area of logistics
and herein lies the criticality of distribution
function in the value chain
 logistics as an interface
functional interest logistics interface business impact
s increased revenue thru h
mktg.of more variants
a rapid intrdctn of new
i customer
l prdcts/models l service
e more credits in market o
p costeffective prdctn thru h
r longer runs of same batch i production
d manufacturing suiting l constraints
c production schedules o
purchasing agnst cash
n h
f i costs
strong controls on
l investments
i costs & investments
n strict credit norms o
 logistics interface

LOGISTICS
PRDCTN/
SAMPLE
OPERTNS INTERFACE
ACTIVITIES INTERFACE MARKETING
SAMPLE ACTIVITIES
TRANSPORTATION ACTIVITIES SAMPLE
ACTIVITIES: PRDCT
INVENTORY CUSTOMER ACTIVITIES
QLTY CNTR SCHDLNG
ORDER SERVICE PROMOTION
PRDCTN PLANT
PROCESSING PRICING MARKET
SCHDLNG LOCATION
WAREHOUSE PACKAGING RESEARCH
EQPMNT PURCHASING
MAINTNCE PRODUCT MIX
SALES FORCE
MANAGEMENT
MARKETING/LOGISTICS
PRODUCTION/LOGISTICS INTERFACE
INTERFACE
 logistics as an interface
• Timely & accurate forecasts can reduce areas of
conflict allowing operations to better plan
productions
• Reducing performance cycle time
reducing transportation time
reducing response time across the supply chain
through strategic placements of mother / feeder
depots
faster order processing can in turn improve
customer service & reduce customer out
standings
 distribution planning

audit distribution define distribution

performance where mission
are we
now

how do we
know we where do
have we want
arrived to be

design distribution how do

we get develop distribution
controls
there strategy
 distribution mission
• While marketing missions can be like:
“we want to be the largest provider of pleasure
travel” “we wish to be world leaders in
information processing technology” “ours is a
company that will provide total dental care”
• Distribution missions can be a little different:
“our products will be available at all retail points
in the country” “none of our products on any
shop shelf will be more than 2 months old”
“all customer orders will be serviced within 24
hrs of receipt”
 distribution strategy
• The mission will have take stock of ground
realities
thus if current presence in market is @ 30%
level a mission statement “our products will be
available at all retail points in the country” may
sound a bit hollow
• Thus the mission statement will have to take into
account the present situation which is why some
rethinking at each stage may become necessary
 distribution strategy
Since strategies (means to achieve goals) will
normally flow from the missions (objectives or
goals to be achieved)
• evaluate customer service requirements
• estimate the costs for providing those services
• match the same with the corporate distribution
goals
Cost effectiveness being important distribution
strategy will have to factor in:
achieve targeted customer service at least cost
or within distribution budget maximise service
deciding distribution strategy

DISTRIBUTION STRATEGY WILL DEPEND UPON

Product viz. type / nature / stage of PLC

Channel viz. direct / indirect / mixture

Outlets viz. large / medium / very small

Customer service strategy

warehouse transport inventory communication

 distribution planning process
Starting from
a strategic plan based on markets, products,
distribution channels,
one gets into operational planning concerned
with manufacturing / distribution / customer
service goals / & budgets,
followed by actual management of the functions
of inventory control, traffic transportation,
manpower deployments, & finally
on to performance measurements which can
lead to mid course corrections
 distribution planning cycle

strategic planning
products / markets
& channels

performance measurement operational planning

actual vs plan manufacturing / customer
mid course corrections services / budgets

distribution management
inventory control
transport
 intermediaries
Stockists
Distributors
Wholesalers
Super stockists / sub stockists
Semi wholesalers
Dealers
Retailers
However upto C&FAs which are warehousing
operations outsourced ownership in products
remain with the organization
 intermediaries
situation of 3 suppliers & 3 procurers
THROUGH INTERMEDIARY
DIRECT
 intermediaries

DIRECT BY COMPANY

THROUGH
INTERMEDIARIES
 use of intermediaries
Advantages Disadvantages
increased outlet loss of direct cntrl
coverage at lower cost dilution of focus
of coverage per outlet on company’s
stock holdings shared product lines
by intermediaries (net market inf. can be
of credit extended) limited / selective
better market / biased
coverage custmr service
improved market can be at risk
information vulnrblty to
credit to retailers intrmdr’s pressure
tactics
 cost benefit analysis
Organization has to do a trade off between
ability to meet customer service requirement at
reasonable cost / reduction in amount of capital
employed / flexibility of capacity / increased
geographical coverage
vis a vis
loss of direct control / problems of establishing
accountability / inability to respond quickly to
demand changes / higher costs due to damages
& stock losses / communication problems with
end consumers
 source & sinks
Sources are facilities from which freight originate
such as company plants raw material sources
vendors ware houses
Sinks are facilities that receive freight such as
customer locations factories warehouses
One can observe that the same facility can serve
both as a source as well as a sink depending on
its relative location in the chain
 sources & sinks

source
source
sink

sink

source
sink sink source
 supply chain management
• Wal Mart pioneered CPFR (collaborative
planning forecasting & replenishment)
model through which Walmart provides
information on sales & inventory to all
10000 suppliers on 2700 stores via its
 movement across the chain
• Move as much & as far as possible in bulk
• Bulk break as much as possible near the end of
the chain
• This will ensure transportation in bulk
• Movement in bulk means lower per unit
transportation
• Create central mother depots to which materials
can be moved in bulk & from where materials
can be transported in smalls
 depots
• By spreading out the depots, besides
overall reductions in transportation costs
response time & vulnerability to individual
depot failures get reduced
• However overall inventory & warehousing
costs may move up due to multiplicity of
storage locations
• A balance between the 2 costs has to be
done
 acceleration (whip lash) effect
Factory C&FA Retailer Customer
8 weeks 12 weeks 2 weeks |
| | | Increase in
demand 10 %
| | Increase in period demand
of 10 % + 10 % of 2/52 = 10.4 %
| |
| Increase in period demand
| of 10.4 % + 10.4 % of 12/52 = 12.9 %
Increase in period demand
of 12.9 % + 12.9 % of 8/52= 14.84 %
 distribution budget
Budgeting is basically a tool for Planning and
Control.
Like any other Budget, a Distribution budget will
have to consider
# the activities required to be performed –
Objectives / Targets
# the costs / expenses required to perform those
activities
# the period of time to which the activities will
pertain
 distribution budget
• start from the sales plan at SKU level & at
all selling points
• aggregate to a point from where all the
sales points to be serviced can be a
central warehouse or mother depot
• further aggregate backward to factory from
where materials are to be supplied
Leads to Distribution Requirement Plan DRP
 distribution budget
• The DRP will set the quantity of Finished
goods that need to be produced
periodically for several storage locations
• This in turn will translate into movement
requirements viz. number of trucks
required for different source sink
combinations
• The DRP will also mean requirement of
materials at plant level
 distribution budget
• Once the finished goods requirements are blown
up into the bill of materials the same will give the
MRP which is the material requirement plan
which in turn will generate the master production
schedule
• Transportation / warehouse / inventory plans will
follow
• For each of the activity costs and investment ( of
long term & short term working capital nature)
details will be worked out
 distribution budget
• Ideally at the planning stage all transportation
has to be reckoned on full truck load (FTL) basis
• Hence if movement is made in LTLs (less than
truck load) the consequent underutilization of
truck capacity will reflect in higher costs
• Similarly holding more than planned inventory
will result in higher warehouse costs / higher
inventory carrying cost
• Cross movements will push up transportation
costs
 distribution cost analysis
• Distribution costs can be measured as a % ge of
sales / gross margin / production cots (“key
ratio”) whichever ratio chosen the same must be
followed period to period on same basis
• “key ratios” may be broken down to
“intermediate ratios” viz. transportation,
warehouse, inventory
• “intermediate ratios” can be broken down to
“grass roots ratios”
 distribution function audit
• use of standards
reviewing existing performance / cost
accounting techniques / zero based / using
own internal best performance as
benchmarks
competitors’ standards / industry
benchmarks
• using ROI concepts
 distribution function audit
• Organizations using 3rd party logistics can
reduce assets substantially however in
anxiety to reduce asset holdings one
should not sacrifice service efficiency
• Logistics audit should review both the
external and internal dimensions of the
organization’s operating environment
 distribution function audit
• External environmental factors would be:
• Source market – wherefrom inputs to the
manufacturing process are procured
• User market – where products will be sold
• Competition – in the source as well as user
market, competition is a very important & crucial
• Channel – an important constituent of the
external environment, it impacts strategy, costs,
and efficiency.
• Statutory & Governmental factors are also
important elements.
 distribution function audit
• The Internal environmental factors would
be:
• Product related:
• Seasonality , Special promotions
• New products , modifications
• Special Handlings, special packaging
• Special requirements
 distribution function audit (internal)
• Distribution Pattern related:
• Organization structure
• Product characteristics
• Shipment characteristics
• Purchasing characteristics
• Ware house utilization
• Transport utilization
• Stocking requirements both for raw materials as
well as finished goods
 distribution function audit (internal)
• Systems related:
• Purchasing system
• Production Scheduling
• Data processing facility
• Ware house facility
• Transport facility
• Material handling facility
 distribution function audit
distribution audit should cover:
• Customer service perception audit
• Competitor audit
• Channels audit
• Materials supply audit
• Finished goods distribution audit
 distribution function audit
• Evaluation of distribution function necessary
when :
• organization makes significant change in its
marketing strategy eg:
• going direct vis a vis selling through
intermediaries
• size of the organization changes significantly
• new products/businesses added to the system
• signs of maldistribution manifest
 distribution function audit
Typical signs of maldistribution:

• inventories turn very slowly

• poor customer service
• numerous inter ware house shipments
• premium freight charges
 distribution function audit
Audit observations must be
• discussed with responsible managers
• agreements obtained for commitments to
corrective actions
• time period for implementations specified
• compliance follow up meetings decided
 systems in distribution
Systems can be at 2 levels viz. supporting the
operations & supporting the decision process
Main aims of any system support can be:
. cost reduction through increase in productivity
. improved customer service through reductions in
time lags
. improved decisions through more accurate input
data
Another important aim of any system could be to
integrate various functions through a common
data base.
 systems in distribution
one stage application softwares

cross functional integrated softwares

softwares connecting several functions

& operations
ERP systems
 ERP implementation
To implement any standard ERP package,
organization prepares a brief incorporating:
# the existing processes and procedures,
# the information and material flow patterns,
# the workloads at various points,
# the organization structure,
# the availability and preparedness of the
organization’s manpower in terms of
# technical capabilities, the existing systems in
place, if there are any,
# the IT language platform in use,
 ERP implementation
# the size and capacities of hard ware in place,
particularly servers their functions, their work
stations, as well as their locations,
# points of the supply chain the ERP system
should map and connect, eg. will it be from the
factory to the C&FAs, or from the factory to the
Distributors, or extend backwards to raw
material suppliers, because it will have
implication in terms of costs as well as
complexity and implementation time,
# the number of persons who will be using the
package with independent log in identifications,
 ERP implementation
An ERP systems would enable the organization to
have all its activities within the ERP network,
# happening ON LINE, which in other words
mean, any task taking place any where will be in
the system, and
# the company will have REAL TIME DATA,
because each & every transactions taking place
on the system is being recorded as data.
Thus implementation of an ERP system will
mean access to REAL TIME ON LINE DATA.
 ERP
limitations
• ERP system is incapable to help decide which of
several alternatives would be the best, under
certain pre set conditions.
• This brings us to the next stage of systems, viz.
optimizers, which can help in selecting the best
alternative through a package.
for example If production has to be planned
based on sales estimates, keeping in view
production & transport limitations many
independent alternatives may present
themselves,
 optimizers
If the manager has to choose the ones that give
the most optimum result, not only from the
aspect of costs, but also operational efficiency
which will have a direct bearing on customer
service level and satisfaction, we come to the
area of Optimization system packages.
Standard system packages are available in the
market. These packages are costly,
Organization must be ready & capable to absorb
and internalize the system, significant data
storage is reqd. which means additional
investments in hardware & software.
 system linkages
Organizations, are adding on to their ERP
systems, initiatives to incorporate Supplier
Relationship Management, and / or Customer
Relationship Management tools, along with
intermediate softwares which enable them to
extend the boundary of the interconnection
beyond the confines of the internal area of
operations.
These in effect, mean:
# extending the ambit of real time, on line
transaction processing, backwards to supplrs
 system linkages
so that requirements can be available on the
system of the supplier as soon as production
draws a batch of raw material for production /
processing, or
# hooking up the sales / delivery / stock system of
the Distributor, or retailer,
so that as soon as a customer order supply is
executed from their point, the organization’s
system records the same and triggers a process
of requirement noting.
 ware house
For manufacturing location normally site selection
based on :
# existing facility of the organization
# availability of resources viz. skilled labour,
power, infrastructure
# government incentives, viz. tax concessions
# scope for further expansions, as and when
required
# does the location offer advantages in terms of
competition / offer scope for improved
coordination with suppliers
 ware house
# overall cost of set up in the location
# industrial climate in the area
# experience of existing industries in that location
# how lonely or crowded is the area

For location ware houses however the determining

factors would be:
# primarily how close it is to the area to be
serviced
# this allows larger movements in bulk up to the
warehouse
 ware house
# a depot nearer to the point of consumption helps
to reduce the response time substantially
# selling interstate attracts central sales tax, hence
organizations locate depots in each state, sale
effected in the state attracts only the local state
sales tax
locations chosen outside town limits, so that entry
tax or octroi is only paid on what is sold in the
town.
# availability of resources and infrastructures
 ware house
Term ware house combination of words “ware” and
“house”, that it is a place to house or store /
keep wares.
A functional ware house should ensure that the
wares stored therein are:
in the best of condition, easily available /
locatable, properly accounted for, rotated so
that the older ones are moved out first, secured /
protected from losses and damages, separately
and properly segregated between good and bad.
 ware house
Ware houses perform the following functions:
• Receipts of items,
• Storing the same properly,
• Dispatching products as per requirements,
• Preparing related documents,
• Maintaining records of transactions,
• Any associated tasks that the warehouse activity
may involve, like depositing customers’ cheques,
posting to them invoice copies etc.
 ware house
• Organizations can have own warehouse
• Organizations can outsource warehousing
functions to C&FAs
• 3P Logistics where a 3rd party takes over all the
logistics functions including transportation as
well as warehousing
• 4P Logistics – a term coined by Accenture they
are typically not asset based but system
software driven who use 3P logistics provider to
service
 ware house
• Important aspects in a warehouse
• Stock rotation FIFO OPFO
• Storage capacity utilization stacking
heights
• Safety requirements risk coverage
• Perpetual inventory Packed stock
reconciliation
• Pareto analysis for locating stocks as per
velocity of movement
 no.of distribution centers

TOTAL
2ND LEG COST
TRANSPORT
WARE HOUSE
COST

PRIMARY
TRANSPORT

NUMBER OF DISTRIBUTION CENTERS

 logistics network design
• SAILS ( strategic analysis for integrated logistics
systems) is a logistics network design model
which uses :
• Network rationalization issues
Customer service levels to be maintained
Assignment of customers to distribution centers
(DCs)
Number & locations of DCs
Mission of each DC – inventories & service
territories
Assignment of DCs to plants by product
 logistics network design
Number & location of plants
Mission of each plant – production to product,
inventories & service territory
What if questions
Environmental issues
- market shifts
- strikes natural disasters energy shortage
- global economic conditions
Logistics system decisions
- impact of changes in mode choice &/or carrier
selection
 logistics network design
- use of company operated versus contract
versus third party logistics operation
- incorporation of plant-direct to customer
shipments
Business decisions & policy issues
- plant capacity & expansion
- new product introduction
- shipment planning policy analysis
- DC capacity expansion or elimination
- multidivision distribution system merger
- merger / consolidation with other business
 logistics network design
• Cost & service sensitivity issues
- total production / logistics systems cost
- logistics cost vs customer service
- logistics cost as function of number of
DCs
- demand forecast
 ware house efficiency
Customer servicing is of critical importance
in respect of timeliness of order execution, order
fill rate, ie. what %ge of ordered items are sent,
quality of items sent, ie. proper stock rotation,
information back up, ie, sending them
information about order processing,
secondary transportation efficiency,
adherence to procedures such as cheque
deposits,
maintaining the approved credit period
 inventory
• Costs of Inventory
cost of capital cost of carrying cost of
obsolescence cost of stock outs
• Discrepancies in exchange due to “spatial”
ie. due to geographical distance between
buyer & seller “temporal” ie. due to gap
between production & consumption
• Geographical specialization in inventory
opening depots at several places
 inventory
• Decoupling inventory
stocking wip at certain stages of production eg.
Tomato paste
• Balancing supply & demand
manufacturing in quantities to build up for a
season eg mosquito repellant mats
• Buffering for uncertainties
• Selective control on basis of ABC classification
VED SAP scarce available plenty FSN fast
slow normal
 inventory
• Safety stock
• Reordering systems
• EOQ
 channels of distribution
Channel membership
• Intensive distribution - Where the majority of
resellers stock the `product' (with convenience
products, for example, and particularly the brand
leaders in consumer goods markets) price
competition may be evident.
• Selective distribution - This is the normal pattern
(in both consumer and industrial markets) where
`suitable' resellers stock the product.
• Exclusive distribution - Only specially selected
resellers (typically only one per geographical
area) are allowed to sell the `product'
 channels of distribution
• Marketing channels are sets of independent
organizations involved in the process of making
a product or service available for use or
consumption
• Thus they not only satisfy demands by supplying
goods / services at the right place, quantity,
quality, price but they also stimulate demand
• They generate form, possession, time and place
utility
 channels of distribution
• Intermediaries are typically distribution oriented
institutions serving as the link between
production and consumption
• They perform: “sorting” – breaking down
heterogeneous supply into separate stocks that
are relatively homogenous eg. grading
agricultural produce according to size
“accumulation” – bringing similar stocks from a
number of sources together into a larger
homogenous supply eg. wholesalers
accumulating variety of items for retailers &
retailers accumulating for customers
 channels of distribution
• “allocation” – breaking down a homogenous
supply into smaller lots eg. wholesaler doing
bulk breaking – it may also involve geographical
dispersal “assorting” – building up assortments
of products for resale in association with each
other
• ROUTINIZATION – a process in channel
management which seeks to eliminate the
process of individual transactions, involving
separate ordering of, valuation of, & payment for
goods & services at every point of transaction,
which in turn means a different set of bargaining
 channels of distribution
• with a concomitant loss of efficiency by
making the process routine eg. automatic
ordering like Apna Bazaar automatically
getting its supplies replenished from
manufacturers
• Marketing channels facilitate the process
of search as buyers and sellers are often
engaged simultaneously in search
 channels of distribution
• General retailing formats
• Department stores sell wide variety of
merchandise including apparel furnishings
appliances
• Specialty stores broad selection of restricted
class of goods / limited lines of soft (clothings
linen) or hard (kitchen utensils appliances)
• Chain stores systems central ownership or
control, similarity of stores, two or more units
• Super markets low margin high turnover retail
organizations typically large departmentalized
 channels of distribution
• retail establishment offering broad & complete
stock of dry groceries, perishable products along
with a host of convenience nonfood
merchandise operated on a self serve basis
• Planned shopping centers MALLS integrated
developments under single ownership with
coordinated and complete shopping facilities &
adequate parking space. Stores facilities in the
center are leased to various retailers
 channels of distribution
• Discount houses retail establishments that
generally feature a broad merchandise
assortment including both soft and hard goods
price as the main sales appeal relatively low
operating costs relatively inexpensive building
get up emphasis on self service very limited add
on customer services emphasis on rapid
turnover of merchandise large stores parking
areas carnival like atmosphere
• Combination stores large super market offering
extensive selection of non food items including
categories typically found in super stores
 channels of distribution
• Super stores similar to combination stores
• Convenience stores typically kirana stores
• Hyper markets enormous stores with numerous
check out lanes selling food & non food items on
self service & discount basis
• Franchising refers to a way of doing business &
ensuring a revenue stream once outlets are
established. Franchisee will pay royalty, fees,
initial charges. Sometimes a manufacturer may
simply franchise (authorise) a dealer to be part
of his system of selective or exclusive
distribution on a fee eg Bata McDonads
 channels of distribution
Quantitative measures of channel performance
1. total distribution cost per unit
2. transportation cost per unit
3. warehousing cost per unit
4. production cost per unit
5. costs associated with avoiding stock outs
6. percent of stock out units
7. percent of obsolete inventories
8. percent of bad debts
9. customer service level by product,mkt segmnt
 channels of distribution
10. accuracy of sales forecast
11. no. of errors in order filling/custmer complnts
12. number of new markets entered
13. % sales volume in new markets entered
14. % of markdown volumes
15. no & % of discontnd. channel intermediaries
16. number & % of new distributors
17. percent of damaged merchandise
18. percent of astray shipments
19. size of orders
 channels of distribution
Qualitative measures of channel performance
1. degree of channel coordination
2. degree of cooperation
3. degree of conflict
4. degree of domain concensus (role prescription
& variation)
5. recognition of super ordinate goals
6. degree of development of channel leadership
7. degree of functional duplication
8. degree of commitment to channel
 channels of distribution
9. degree of flexibility in functions
10. availability of information about:
a) physical inventory
b) product characteristics
c) pricing structures
d) promotional data (personal selling assistance,
advertising, pop displays, special promotions)
e) market conditions
f) services availability
g) organizational changes
 channels of distribution
11. assimilation of new technology
12. innovation in distribution generated
within the channel
13. extent of intrabrand competition
14. extent of use of optimal inventory
standards
15. relations with trade associations as well
as consumer groups
 channels of distribution
in international context
• 4 basic routes
• 1. “exportation” through foreign
distributors or agents or overseas
marketing subsidiaries
• advantages are minimal
investments and risk of failures do not
impact the organization very much but the
disadvantage is the organization has very
little control
 channels of distribution
in international context
• 2. “licensing” company forges a contractual
agreement with foreign organization to
manufacture &/or sell its products in the foreign
country
• Again while this form may afford low investment
but in terms real control the same may be low
• 3. “joint venture” it is a more involved route
whereby the participating organizations share
the investment & risks
 channels of distribution
in international context
• 4. “direct investment” establishment of
wholly owned subsidiary in the foreign
country while controls are assured risks
of expropriation & nationalization is always
present
 channels of distribution
in international context
• While designing international distribution
channels the marketer needs to focus on:
• Adequate market coverage
• Control over goods in the channel
• Reasonable distribution costs
• Continuity of channel relationships &
continuous presence in the market
• Desired volume market share margin
requirements & ROI
 channels of distribution
in international context
• Foreign based middlemen provide place & time
utility by holding goods at locations convenient
to consumers, provide credit service, brings the
manufacturer closer to market. However
disadvantage the wholesaler may select own
selling price may have less manufacturer loyalty
favoring high profit high turnover items. Hence
the issue boils down to one of control the extent
& quantum of control the manufacturer is able to
exert
 channels of distribution
in international context
• Status & role of wholesalers differ country to
country. One world wide trend in wholesaling is
the move toward more vertical integration ie.
from wholesaler / retailer to the manufacturer.
Thus an exporter may find his products blocked
by the wholesalers’ own custom –manufactured
products. Wholesalers often have voluntary
chains of retailers who give purchase
commitments in exchange for certain services
like credits stock take backs dealer cooperative
advertisements etc.
 channels of distribution
in international context
• Retailing formats country to country can be very
diverse in terms of size scale locations Retailing
being a localized activity can be deeply
influenced by prevailing social & cultural norms
as well as govt. controls With industrial progress
retailing normally assumes larger units eg.
Supermarkets are more common in developed
countries as compared with smaller grocers in
underdeveloped countries with whom an
international marketer will find it more difficult to
deal & hence require wholesaler
 channels of distribution
in international context
• International physical distribution has the
following complexities:
• Transportation involving multiple modes can
increase risks of damages, pilferage, delay
• Distance & duration of transport increases cost
of transport as well as cost of inventory in transit
• Exposure to varied climatic conditions often
necessitate different packaging & storage
arrangements
• More documentations may be necessary
• Tariffs & customs duties are another factor
 channels of distribution
for services
• Since by and large services are
predominantly intangible and cannot be
stored and transported they have to be
sold through multiple outlets where a
combination of simultaneous promotion
and production has to occur
• Service to service the format may change
• Eg. banking hotel tours and travel
hospital chain franchisee