CHANNELS OF DISTRIBUTION Flashcards
refers to the pathway
through which goods and services travel from the manufacturer or producer to the
end consumer. It encompasses the various intermediaries involved in the process of
getting products or services from the point of production to the point of consumption.
CHANNEL DISTRIBUTION
is the term used to describe the method and
means by which a product or a group of products are physically transferred, or
distributed, from their point of production to the point at which they are made
available to the final customer.
PHYSICAL DISTRIBUTION CHANNEL
is also concerned with the product, and with the fact that it is
being transferred from the point of production to the point of
consumption.
TRADING AND TRANSACTION CHANNEL
The manufacturer or supplier delivers direct from the production point
to the retail store, using its own vehicles. As a general rule, this channel is only used when full vehicle loads
are being delivered, thus it is quite unusual in today’s logistics environment.
Manufacturer direct to retail store.
Essentially describes the journey
of a product from its creation at the manufacturer’s facility, through the manufacturer’s distribution operation,
to its final destination at a retail store where it will be sold to consumers.
Manufacturer via manufacturer’s distribution operation to retail store.
This channel consists of manufacturers either
supplying their products to national distribution centres (NDCs) or RDCs for final delivery to stores, or
supplying them to consolidation centres, where goods from the various manufacturers and suppliers are
consolidated and then trans- ported to either an NDC or RDC for final delivery.
*Manufacturer via retailer distribution centre to retail store.
Describes the traditional supply chain process in which products
move from the manufacturer to wholesalers and then to retail shops before reaching the end consumer.
Manufacturer to wholesaler to retail shop.
Another important development in wholesaling
has been the introduction of cash-and-carry businesses. These are usually built around a wholesale
organization and consist of small independent shops collecting their orders from regional wholesalers, rather
than having them delivered. The increase in cash-and-carry facilities has arisen as many suppliers will not
deliver direct to small shops because the order quantities are very small.
Manufacturer to cash-and-carry wholesaler to retail shop.
Third-party distribution, or the distribution
service industry, has grown very rapidly indeed in recent years, mainly due to the extensive rise in distribution
costs and the constantly changing and more restrictive distribution legislation that has occurred. Thus, a number
of companies have developed a particular expertise in logistics operations. These companies can be general
distribution services but may also provide a ‘specialist’ service for one type of product or for one client
company.
Manufacturer via third-party distribution service to retail store.
This channel is very similar to the previous physical
distribution channel, as these companies provide a specialist distribution service where the product is any small
parcel. There was an explosion in the 1980s and 1990s of small parcels companies, specializing particularly in
next-day delivery. The competition generated by these companies has been quite fierce. Small parcels carriers
also undertake many home deliveries, as discussed below.
Manufacturer via small parcels carrier to retail shop.
This is a relatively rare type of channel, and may sometimes be a
trading channel and not a physical distribution channel. A broker is similar to a wholesaler in that it acts as
intermediary between manufacturer and retailer. Its role is different, however, because it is often more
concerned with the marketing of a series of products, and not necessarily with their physical distribution.
Manufacturer via broker to retail store.
Goods are ordered
by catalogue, and delivered to the home by post or parcels carrier.
Mail order.
The direct factory-to-home channel is a relatively rare alternative. It can occur
by direct selling methods, often as a result of newspaper or magazine advertising.
*Factory direct to home.
Shopping from home via the internet is now a very common means of
buying products. Initially, physical distribution channels were similar to those used by mail order operations
by post and parcels carrier.
Internet and shopping from home.
The importance of company size and financial strength in determining channel strategy
is highlighted. Small companies might use intermediaries due to limited resources, while larger
ones can set up their own distribution structure.
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