Channels of distribution determine how a firm intends to deliver the product to the consumer. It represents the "place" of the 4 Ps, the marketing mix. Supply chain represents the sourcing of materials and is also a channel of distribution for suppliers of the firm. Logistics concerns the physical distribution of products and services to the consumer.
Completing this unit should take you approximately 7 hours.
Distribution channels vary according to the product or service offered, consumer preferences, and industry specific distribution practices. Often multichannel distribution of offerings is practiced, as there are numerous ways to deliver the product or service offering to the consumer; and consumers vary according to their individual purchasing behaviors.
Read all of Chapter 8, sections 8.1-8.6, of the Principles of Marketing text, being sure to click through to the next sections. Become familiar with the various types of distribution channels used by marketers, and the terminology used.
This video lecture discusses international channels of distribution. International distribution is more complex than domestic distribution, as it crosses international boundaries and includes cultural, legal, political and language differences.
There are several factors to consider when deciding upon the appropriate distribution channels of an offering. A primary concern is determining buyer preferences. In other words, providing a product or service to consumers when they want it and where they want it. Other considerations include distribution costs, the degree of control required by the supplier, etc.
A distribution video was presented in Unit 2, which discussed the factors to consider when deciding on a distribution strategy. This video reviews the strategic considerations a marketer must review to formulate a distribution strategy or plan best suited to the marketer and the consumer. Note the use of various distribution metrics in this video.
This video discusses the distribution strategy of Unidesk. Note the planning and strategy applied by this firm to satisfy consumer needs.
This video describes the strategy of designing distribution channels for the farmer consumers in a less developed market. Similarly, the consideration is focused on consumer preferences for accessing the product, however, in this example, consumers are considered "bottom of the pyramid" who earn close to US$2.00 per day.
This scholarly article addresses the question that several marketers now face in our new e-commerce, internet-based marketing. Omni channel marketing has become common among marketers in recent years because more consumers can be reached by offering different channels of distribution. Omni channel marketing, however, presents challenges to the firm, as the article describes.
A supply chain is a network between a company and its suppliers to produce and distribute a specific product to the final buyer. This network includes different activities, people, entities, information, and resources. The supply chain also represents the steps to get the product or service from its original state to the customer.
The supply chain is broader than a distribution channel because it includes purchase, acquisition, logistics, material management, product development, storage, warehouse, distribution, traffic management, inventory control, and all related things. The distribution channel is a part of supply chain management, mainly the movement of finished products from manufacturing facilities to end users.
Read Chapter 9, sections 9.1-9.5, of the Principles of Marketing text, being sure to click through to the next sections. This chapter provides a comprehensive explanation of supply chain management and its relevance to marketing management.
This video will support the above reading by showing the integrated efforts of several functional departments to create effective supply chain management of the firm.
A value chain is a business model that describes the full range of activities needed to create a product or service. For companies that produce goods, a value chain involves bringing a product from conception to distribution and everything in between, such as procuring raw materials, manufacturing functions, and marketing activities. Service companies also have value chains because the service delivered provides value to the customer.
The value chain of a firm relates to the supply chain. However, the word "value" changes the meaning to more than a supply chain. Often used in strategic management, the term value chain concerns how the firm creates value for the customer through its inbound supply chain, its outbound distribution channel, and the firm's operation and processes within the internal workings of the firm.
This video presentation concerns the analysis of a value chain of a New Zealand firm that exports high-quality beef to many countries. Note that an analysis of the targeted consumer and the producer is required, as this is a high-quality, differentiated product.
This video discusses sustainable value chains. Educated consumers are increasingly interested in doing business with firms that include sustainability throughout their value chains, as there is more concern today about climate change and a more efficient use of our planet's resources.
We discussed Professor Michael Porter in a previous unit. In this video, Dr. Porter discusses the concept of creating shared value. This is a forward-thinking approach for businesses, wherein Dr. Porter argues that the wealth created by capitalism can be shared as a social benefit by businesses that rethink their value chain.
Logistics is the process of planning and executing the efficient transportation and storage of goods from the point of origin to the point of consumption. Logistics aims to meet customer requirements in a timely, cost-effective manner.
Logistics is a significant component of supply chain management, value chain analysis, and distribution channels, wherein the efficient physical handling and transport of goods adds value to the offering. Logistics is more of an operational term; it involves planning and executing the physical flow of goods from origin to destination.
Logistical operations are largely determined by product type and industry specific practices. This video lecture reviews the overview of crude oil logistics in the United States. Note that pipeline distribution is the primary method of this commodity product, and other modes such as ships, barges, trucks, and railcars are part of the total logistical network.
This brief audio video provides an overview of the meaning of logistics. Note that the term is over 200 years old and originates from military operations.
As we know, products move as cargo through the following modes of transport: road, rail, water, air, and pipeline. Each mode has different characteristics, and cargo is often carried over more than one mode. Marketers must make distribution choices based on the following factors: cost, speed, flexibility, regularity, safety, and type of cargo. For example, low value commodity cargoes such as coal, or gypsum, are often shipped in high volume, low cost bulk shipments where the transportation can cost more than the commodity. High value or perishable goods are more considered with speed and safety. For example, fruits and vegetables must reach the market before ripening, where speed of transport is the key factor. High value goods, such as Rolex watches are subject to pilferage enroot to the retailer.
This video lecture discusses ocean transportation and the development of trade routes, enhancement of ship size, and increases in trade volumes. This pertains mainly to general cargo and containerized ships, although it points out that liquid and dry bulk cargoes constitute the major tonnage shipped throughout the world.
This video provides a simple example of the use of terms. Marketers must be careful with the common use of abbreviations and acronyms.
In particular, one of the frustrating aspects of shipping and transportation for marketers concerns the use of shipping terms. Shipping terms have evolved over several hundred years and are often misinterpreted or misunderstood. This problem often results in disputes between buyer and seller, particularly with international cargo movements. Abbreviations and acronyms are commonly used and can be misunderstood. When you doubt the meaning of a shipping term, look it up.
For more on current shipping terms, you can visit the International Chamber of Commerce (ICC) website and review "Incoterms". This provides the standard terminology used throughout the world for shipping terms. It is a good reference if you are planning to go on to do work in international marketing.
Warehousing has existed for centuries to hold goods, either raw materials or finished goods, in inventory. It serves the purpose of having products available to consumers when they need them. It represents another cost factor in distribution, as storage costs and financing costs apply, and additional cargo handling can result in product damage and pilferage costs.
Distribution in modern business has changed for efficiency reasons, and distribution centers and fulfillment houses have largely replaced warehouses. These large and modern buildings can be owned and operated by the marketing organization or a third-party logistics provider, known in the shipping industry as "3PLs".
Warehouses and distribution centers built today are designed for efficiency and enhanced with barcode or RFID technology for easy location of products. This video shows an example of a warehouse built for perishable goods for distribution in South Africa.
This video produced demonstrates a container distribution center and warehouse in the port of Singapore, a large and active transshipment port serving many of the countries in Southeast Asia. Though the video is promotional in nature, note the high degree of sophistication and efficiency gained through infrastructure and technology investments.
Data management and tracking of goods is now used commonly in domestic and international cargo movements. Perpetual inventories and order entry systems combined with GPS tracking allow marketers to know where their goods are and provide reliable information to their customers.
This video presentation shows an example of how artificial intelligence (AI) is used to model an inventory requirement for maintenance parts. Note that the modeling is designed to satisfy the delicate balance between storage costs of the marketer and the required service rate that the customer requires.
This review video is an excellent way to review what you've learned so far and is presented by one of the professors who created the course.
Watch this as you work through the unit and prepare to take the final exam.
We also recommend that you review this Study Guide before taking the Unit 6 Assessment.
Take this assessment to see how well you understood this unit.