Distribution refers to the act of transferring resources from A to B. It may refer to the actual transfer of the resources, goods or services, or it may refer to the process of collection of resources. Distribution of commodities is an integral part of modern business. The word itself, distributed, indicates to transmit or to transport goods from A to B. There are many forms of distribution, such as wholesale distribution, retail distribution and direct distribution among others.
Wholesale distribution management refers to the management of materials in bulk. This form of distribution involves warehouse operations, including warehousing, palletization and heavy equipment leasing or hire-and-load facilities. Retail distribution management involves the movement of products from the point of sale to the point of consumption by customers. Direct distribution involves the movement of goods directly from the manufacturer to the end user.
Distribution planning involves preparing for changes in the distribution of specific commodities by identifying the supply, price and location of potential sources. Distribution planning is a major part of companies’ long-range planning. Distribution of agricultural and base metal commodities requires long-term contracts between producers and distributors. Distribution of utilities involves long-term contracts between utility companies and producers of the service charges. Age and volume both have important meaning for distribution management.
Distribution management is an integrated whole that considers physical, technological and information aspects. The three main components of distribution management are physical warehousing, distribution and logistics. Physical warehousing involves the transportation of goods from A to B. It includes storage of finished goods, raw goods and inventories at the destination.
Distribution planning includes analyzing and evaluating market trends, demand, competition and other conditions. It considers factors affecting capacity, efficiency and costs. For example, where to store finished goods, the average number of products per year sold, prices and discounts. Distribution costs include salary to workers, material costs and transportation services. On the market side, distribution management considers market shares of the whole value chain. This means that it evaluates the market strength and weakness of all the processes in the supply chain.
There are many distribution strategies. These include direct to market, intensive distribution and indirect distribution. Direct to market distribution strategies involve contacting the customer directly and ensuring that goods are delivered in a timely manner. Intensive distribution involves large quantities of goods that have to be distributed in a short time period. Indirect distribution involves distributing goods on the basis of a contract, group or region.
Strategic level distribution involves the process of adding value to the distribution channel by developing strategic alliances with strategic customers and distributors. Strategic partners can be selected by examining the distribution channel’s weaknesses, opportunities and needs. The distribution channel can develop relationships with the suppliers of raw materials, equipment and components that can add value. On the other hand, strategic customers include buyers of the products and services that the distributor serves. Thus, it provides an opportunity to build customer loyalty and brand awareness.
The ultimate aim of distribution management is to increase the efficiency and profitability of the distribution system. It requires the involvement of all stakeholders including consumers, suppliers, retailers, trade partners and the government. Distribution management facilitates improved productivity by improving inventory control, quality control, financial management, distribution system performance and the organization’s response to the changing market conditions. Moreover, distribution management aids in making the operations of an organization more efficient and improves the overall management effectiveness of the distribution system. Hence, distribution management has a significant impact on the overall profits of a company.
Distribution channels play a major role in determining the success of any organization. Thus, the success of an organization largely depends on its distribution channels. Distribution channels help consumers access products and services. For example, distribution channels through retailing represent one of the most important distribution channels for distributing goods and services. Distribution channels also provide consumers a choice of getting the product and service that they want. While direct distribution involves the provision of products and services directly to the consumer, indirect distribution refers to the distribution of goods and services indirectly to the consumer such that the consumers may not even know about the existence of the distribution channel.
There are various distribution strategies that an organization can adopt. These distribution strategies help an organization to choose the distribution channels that can provide the most profitable services and products to the consumers. Some of the distribution strategies include intensive distribution, strategic level distribution, flexible distribution, online distribution and off line distribution. Intensive distribution involves using sophisticated tools to distribute the goods and services to the consumer. Strategic level distribution involves taking initiatives that can change the course of action of the consumers. On the other hand, flexible distribution can be used to improve the profit margin of the consumers.
Logistics play a critical role in the smooth functioning of any organization. Thus, efficient logistics play a pivotal role in the successful management of any distribution process. Apart from efficient distribution management, good logistics also helps in improving customer satisfaction, reduce cost, enhance productivity, increase return, improve customer retention and boost growth.