Mod. 4

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According to Cundiff & Still, Physical Distribution involves the

actual movement and storage of goods after they are


produced and before they are consumed.

Facilitates an efficient and smooth flow of goods from the place


of origin to the place of consumption.

Includes various middlemen involved in the marketing of goods


and covers areas like customer service, inventory, materials,
packaging, order processing, transportation and logistics.

Physical distribution is an umbrella term which includes


 Logistics
 Supply Chain Management
Refers to the management of flow of raw materials from the suppliers to the
producers and the flow of finished goods to the consumers

It is concerned with planning, implementing and controlling of flow of goods


from the supplier of raw materials to the ultimate consumer

Ensures a cost effective and efficient movement of goods from the place of
origin to the place of consumption.

Flow of materials and goods


Raw
Suppliers Production Distribution Retailers Consumers
Materials

Flow of Information
Definition:
Philip Kotler defines Logistics as: “Planning, implementing and controlling the
physical flow of materials and finished goods from the point of origin to the point
of use to meet the customer’s need at a profit”.

Elements:
1. Information Logistics
2. Inventory Logistics
3. Warehousing Logistics
4. Packaging Logistics
5. Transportation

Process:
1. Inbound Logistics
2. Process
3. Outbound
4. Reverse
SUPPLY CHAIN
Supply chain is a network of connected and interdependent organisations
working together to control, manage and improve the flow of products and
information from the point of origin to the point of consumption.

It is a system of organisations, people, technology, activities, information and


resources involved in moving a product/service from supplier to consumer.

It spans from acquisition of raw materials for production to retailing.

SUPPLY CHAIN MANAGEMENT


DEFINITION
According to the Council of Supply Chain Management Professionals, “Supply
Chain Management encompasses the planning and management of all
activities involved in sourcing and procurement, conversion and all logistics
management activities”.

SCM is the management of relationship among the various elements in a supply


chain network such as suppliers, producers, distributers, transportation
companies, warehousing companies, wholesalers, retailers and customers.
IMPORTANCE OF SCM

1. Coordinates the different organisations, processes, information, people and


resources in a supply chain to effectively satisfy the needs of the customers at
the lowest possible cost.

2. Ensures better information sharing among the supply chain members

3. Planning and decisions are made by mutual consultation

4. Designs and implements suitable logistics process

5. Selects competent suppliers to deliver raw materials

6. Ensures a systematic inventory control and management

7. Ensures a proper delivery of products to the consumers through adequate


transportation facilities

8. Creates an atmosphere of mutual trust and understanding

9. Attempts to offer better customer service


ELEMENTS
1. Plan
2. Source
3. Manufacture
4. Delivery

LOGISTICS AND SCM

LOGISTICS SCM
Concerned with planning, implementing, Process of planning, implementing, managing,
managing, controlling the flow of goods controlling the whole system of supply chain
network

Part of SCM Broader concept covering all aspects of supply


chain system

Deals with acquisition, storage, transportation and It is a network of organisations, people, technology,
delivery of goods along the Supply chain activities, information and resources involved in
moving a product or service from supplier to
customer

Focuses on optimising the flow of products and Focuses on increasing the overall effectiveness of
information supply chain

A channel of supply chain which adds the value of Integration of all the partners in the supply chain
time and place utility network
 Channel of distribution is the path or route through which goods flow from
producer to the consumer.

 Major constituents are


 producers,
 wholesalers,
 selling agents,
 retailers and
 consumers.

 Distribution Channel serves as a bridge to fill the gap between the point of
production to the point of consumption thereby creating time, place and
possession utilities.

 According to Stanton, “a Distribution Channel consists of the set of people


and firms involved in the transfer of title to a product, as the product moves
from producer to ultimate consumer to business user”.
TYPES OF CHANNELS

1. Zero Level Channel / Direct Distribution

Producer Customer

2. Retail Distribution

Producer Retailer Customer

3. Wholesale Distribution

Producer Wholesaler Retailer Customer

4. Agent Distribution

Producer Agent Wholesaler Retailer Customer


DISTRIBUTION CHANNEL STRATEGY

Describes the method that controls the flow of goods and services from the
manufactures to the end user. It is influenced by the following strategy:

1. Distribution Intensity –
decides the level of availability of a product and its market coverage

a) Intensive Distribution- max. possible coverage by supplying to all outlets

b) Selective Distribution- supplies products to limited number of outlets in the


target market

c) Exclusive Distribution- One wholesaler, retailer or distributer is appointed in a


specific area

2. Channel Configuration –
Design or number of levels/intermediaries within a channel
 Short
 Medium
 Long
3. Channel Arrangement
Defines the relationships and partnership among members of the channel.
Mutual trust and understanding among the members increase the efficiency of
the channel.

a) Independent Channel Arrangement- members prioritize their own objectives


and not concerned about the chain as a whole

a) Dependent Channel Arrangement / Vertical Marketing System (VMS)-


members feel united and work together towards similar goal. The system is
managed by a dominant member or ‘channel captain’.

b) Horizontal Marketing System (HMS)- members on the same channel level ( like
two suppliers or two retailers cooperate. They share their distribution expertise
and resources.
1. Market Factors
Number of Buyers
Geographical Distribution
Size of Order
Buyer of Products

2. Product Factors
Perishability
Unit Value
Weight
New Products

3. Company Factors
Financial Resources
Size of the Company
Policy of Distribution

4. Middlemen Factors
Attitude of Middlemen
Availability of Middlemen
Services
Sale Potential

5. Environmental Factors
Occurs when the intermediaries or middlemen in a distribution channel compete
each other by breaking the mutually agreed channel route for selling the
product.
Also known as Disintermediation.

Types of Channel Conflicts

1. Vertical Channel Conflict –


Conflict between members in higher and lower levels of a channel. Eg. Conflict
between manufacturer and wholesaler.

2. Horizontal Conflict –
Conflict between members in the same level of a channel. Eg. Conflict between
retailers in a distribution channel.

3. Multi Channel Conflict –


Conflict between two or more channels established by the same manufacturer
Common strategies adopted to minimise and manage conflicts are:

1. Communication
Companies maintain regular communication with its channel members to
understand their problems and settle their complaints.

2. Dealer Councils
A committee or body of the channel members are formed to act as a platform
to discuss and resolve conflicts and other problems in distribution.

3. Prioritising Customer Satisfaction


Establishes customer satisfaction as the common objective of the distribution
network.

4. Arbitration and Mediation


Parties involved in conflict appoint an arbitrator or mediator (a third party) to
settle the conflict. Sometimes, the Court or Govt. departments take part in
arbitration.
 It is a channel free distribution of products.
 There are no middlemen functioning in between the manufacturers and the
consumers.
 It uses different media such as brochures, internet and telephone to
communicate and persuade buyers to purchase a product.
 Significant features are one-to-one communication, open dialogue and
personal relationships are for repeated dealings.

 According to Drayton Bird, direct marketing is any advertising activity which


creates and exploits a direct relationship between the company and the
customer as an individual.

MERITS
1. Clear targeting
2. Personalisation
3. Immediate action
4. Invisible strategies
5. Measurability
DEMERITS
1. People see advertisement mails as nuisance
2. Companies are unable to get the benefits of mass marketing
3. The success depends on the accuracy of database kept by the company
and should be regularly updated.

TYPES OR TOOLS OF DIRECT MARKETING


1. Direct Mail Marketing – sending product communication and advertisement
materials to the home/business address of the consumers.

2. Email Direct Marketing – product communication and advertisement will be


sent to Email of the consumers.

3. Telemarketing – contacting people over telephone for marketing products.

4. Catalogues – it is a multipage direct marketing booklet published by a


company and issued to prospective customers to give complete
information regarding the product. It uses high quality design and
photography to create visual impact of the products.
Retail
Sale of goods in small quantities to the ultimate consumers. It is used to indicate
the nature of sale in a trade deal.

Retailing
According to Philip Kotler, “Retailing consists of all the activities related to the
sale of goods and services to the ultimate consumers for personal non-business
use”.

Retailing refers to sale of goods in small quantities or pieces.


It facilitates timely delivery of goods and services demanded by consumers at
prices that are competitive and affordable.
It is concerned with the selling of goods to the buyers for their personal, family or
household use.
Anyone selling goods directly to the end user is retailing.

Retailer
The party, trader or enterprise engaged in the sale of commodities to the end
users. He performs the role of an agent of the consumer who buys finished goods
from the manufacturer/wholesale dealer for the use of the consumers.
SCOPE AND IMPORTANCE OF RETAILING

1. Wide range of goods


2. Break – of – bulk
3. Merchandising
4. Dissemination of information
5. Holding inventory
6. Prominent role in the value chain
7. Economic development
8. Creation of employment opportunities

FUNCTIONS OF RETAILING/RETAILER

1. PRIMARY FUNCTIONS
a) searching
b) buying
c) transporting
d) storing
e) sorting
f) breaking bulk
g) packing
h) pricing
i) selling
2. SECONDARY FUNCTIONS
a) advertising
b) merchandising
c) financing
d) risk bearing
e) collecting tax

SERVICES OF RETAILERS
I. TO CUSTOMERS
1. Offer wide variety of goods
2. shopping experience
3. credit facility
4. home delivery
5. After sales service
6. information and guidance

II. TO MANUFACTURERS AND WHOLESALERS


1. means of sustainable production
2. intermediation service
3. information sharing service
4. product promotion service
5. product launching service
TYPES OF RETAILING

ON THE BASIS OF:

OWNERSHIP PRODUCT LINE PLACE/LOCATION VOLUME OF SALES STORE

•INDEPENDENT •MOM & POP •ITENERANT •SMALL SCALE •INSTORE


STORE STORE/KIRANA RETAILERS*
STORE •LARGE SCALE •NON-STORE*
•CHAIN •FIXED SHOP
STORE/MULTIPLE •GENERAL STORE
SHOPS
•DEPARTMENT
•FRANCHISE STORE

•CONSUMER •SUPERMARKET
COOPERATIVE
STORE •SHOPPING MALL

•CONVENIENCE
STORE

•SPECIALITY STORE*
SPECIALITY ITINERANT NONSTORE
STORE RETAILERS RETAILING

SINGLE LINE HAWKERS & DIRECT


STORE PEDDLARS SELLING

LIMITED LINE CHEAP MAIL


STORE JACKS ORDERS

SUPER
MARKET ELECTRONIC
SPECIALITY
TRADERS RETAILING
STORE

AUTOMATIC
STREET
VENDING
TRADERS
MACHINE

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