Distribution is certainly one of the most important components of the entire marketing mix. Distribution is simply the process of rendering a product or service to the consumer or company client who needs it in some form. This can either be done directly by the manufacturer or distributor or via various intermediaries or channels. The process also depends on the way in which the distribution service is to be provided, whether it will be done on a retail basis or on a wholesale basis.
There are many different types of distribution. These include direct selling, over the counter, online direct selling, franchising, and multi-level marketing. Direct selling encompasses the direct giving of merchandise to the consumer. OTC distributes merchandise directly to the retailer or direct selling outlet. Franchises entail a franchisee to sell products under the name of a parent company. Multi-level marketing (MLM) involves recruiting new representatives in order to build a large distributor base, usually from existing sales force.
The manufacturer establishes a manufacturing facility in which the manufacture of a product is carried out. This facility may be located on a leased lot or owned by the manufacturer. Once established, the manufacturer sets up a sales force that is called a sales force. These individuals are trained to be efficient in contacting the customer and retaining their interest in the product. The manufacturer then takes care of all the distribution channels required in selling the product.
In smaller companies, the manufacturer supplies the distribution channels directly and does not provide retailers with stock. Retailers are independent of the manufacturer and carry goods supplied by them. They set their own inventory policies, stocking options and purchasing procedures. A number of retailers specialize in particular product distribution including electronics and apparel.
Distribution can either be a direct or indirect channel. Direct distribution refers to selling goods directly to the final users. An example of this would be the sale of cars directly from a dealership. Indirect channels include wholesaling and leasing. Leasing refers to selling goods to retailers at a wholesale price, generally above market cost.
Distribution can take one of several forms. Cartons are distributed by wholesalers; plastics are distributed via packers and manufacturers; frozen foods are distributed by retailers; and computers and consumer goods are distributed via distributors. Distribution can also be in the form of a chain. A chain distribution channel is a series of suppliers which are connected in a specific sequence to provide consistent service to the end consumer. For example, a retailer could have chain distribution start with the manufacturer and end with a wholesaler.
Distribution management is an important part of any competitive business. Many companies employ a distribution strategy to improve sales by improving product quality, increasing customer satisfaction, reducing waste, and increasing profitability. Distribution requires comprehensive planning including budgeting, purchasing, inventory control, and sales and profit analysis. A strong distribution plan includes an intensive marketing strategy that takes into account current and future distribution needs as well as target markets.
The distribution process starts with the manufacturer. A manufacturer determines the process that will best suit their product and achieve the greatest cost savings along the way. A distribution process also includes many steps such as receiving, storing, inspecting, packaging, and transporting goods. Once transported, the distribution process continues through the various distribution stages such as receiving, loading, securing, unloading, and unpacking. To maximize revenue, companies should utilize a combination of distribution, packing, and storage processes to maximize throughput capacity and to reduce logistical error and distribution costs.
In addition to distribution, another essential element in a successful company is the quality of its distributors. Ideally, a distribution company should have knowledgeable and qualified staff members that are skilled at all levels of the distribution process. Different types of distribution include direct, indirect, and sole distribution. Each has different methods of reaching and managing customers. These different types of distribution strategies can be implemented through state-of-the-art computer systems and innovative warehouse solutions that can include climate control, real-time inventory, and lift systems.
Direct distribution involves manufacturers meeting directly with customers to carry out transactions. This is typically accomplished through manufacturers or importers who negotiate directly with the suppliers of the products. This form of distribution is ideal for smaller companies or distributors that face many hurdles in getting goods to the market. Smaller distributors can benefit greatly from the speed and efficiency of direct product distribution.
Indirect distribution strategies involve distributors taking orders for goods from a manufacturer or importer. This form of distribution strategy can take several forms, depending on the needs of the importer or the manufacturer. Many times, importers will form a partnership with a distribution company and setup a direct distribution partnership. Other indirect distribution strategies include an agreement between a distributor and a company that supplies goods to the customer directly.