MEANING OF DISTRIBUTION

Distribution is the process of making a product or service available for use or consumption by a producer
or business provider. It is the movement of goods and services from the source through a distribution
channel, right up to the final customner.

13.3 TYPES OF DISTRIBUTION

Three types of distribution can be used to make product available to consumers:

1 Intensive distribution: In intensive distribution, the product is sold to as many appropriate retailers or

wholesalers as possible. Intensive distribution is appropriate for products such as chewing gum, candy
bars, soft drinks, bread, film, and cigarettes when the primary factor influencing the purchase decision is
convenience.

Industrial products that may require intensive distribution include pencils paperclips, transparent tape,
file folders typing paper, transparency masters screws, and nails.

2 Selective distribution: In selective distribution, the number of outlets that May carry a product is
limited, but not to the extent of exclusive dealing. By Carefully selecting wholesalers or Retailers, the
manufacturer can concentrate on potentially profitable accounts and develop solid working
relationships to ensure that the product Is properly merchandised. The producer Also may restrict the
number of retail

outlets if the product requires specialized Servicing or sales support. Selective distribution may be used
for product categories such as clothing, appliances, televisions, stereo equipment, home furnishings,
and sports equipment.

3 Exclusive distribution: When a single outlet is given an exclusive franchise to sell the product in a
geographic area, the arrangement is referred to as exclusive distribution. Products such as special
automobiles, some major appliances, certain brands of furniture, and lines of clothing that enjoy a high
degree of brand loyalty are likely to be distributed on an exclusive basis, this is particularly true If the
consumer is willing to overcome the inconvenience of travelling some distance to obtain the product,
Usually. Exclusive distribution is undertaken when the manufacturer desires more aggressive selling on
the part of the wholesaler or retailer, or when channel control is Important, exclusive distribution may
enhance the product’s image and enable the firm to charge higher retail prices.

CHANNELS OF DISTRIBUTION

A distribution channel is the method a company uses to get it’s products into the market place for
consumer use. A channel of distribution or trade channel is defined as the path or route along which
goods move from producers or manufacturers to ultimate consumers or industrial users. In other words,
it is a distribution network through which producer puts his products in the market and passes it to the
actual users.
These channels of distribution are broadly divided into four types:

1 Producer to Customer: This is the simplest and shortest channel in which no middlemen is involved
and producers directly sell their products to the consumers. It is a fast and economical channel of
distribution. Under it, the producer or entrepreneur performs all the marketing activities by himself and
has Full control over distribution. A producer May sell directly to consumers through door-to-door
salesmen, direct mail or through his own retail stores. Big firms Adopt this channel to cut distribution
costs and to sell industrial products of high value. Small producers and producers of perishable
commodities also sell directly to local consumers.

2 Producer to Retailer to Customer: This channel of distribution involves only one middlemen called
‘retailer’. Under It, the producer sells his product to big retailers (or retailers who buy goods in large
quantities) who in turn sell to the ultimate consumers. This channel relieves the manufacturer from the
burden of selling the goods himself and at the same time gives him control over the process of
distribution. This is often suited for distribution of consumer durables and products of high value.

Producer to Wholesaler to Retailer to Customer: This is the most common And traditional channel of
distributioń. Under it, two middlemen i.e. wholesalers And retailers are involved. Here, the Producer
sells his product to wholesalers, Who in turn sell it to retailers, arnd retailers Finally sell the product to
the ultimate Consumers. This channel is suitable for The producers having limited finance, Narrow
product line and who needed Expert services and promotional support Of wholesalers. This is mostly
used for Products with widely scattered market.

Producer to Agent to Wholesaler to Retailer to Customer: This is the Longest channel of distribution in
which Three middlemen are involved. This is Used when the producer wants to be fully relieved ofthe
problem ofdistribution and thus hands over his entire output to the selling agents. The agents distribute
the product among a few wholesalers. Each wholesaler distribute the product among anumber
ofretailers who finally sell it to the ultimate consumers. This channelis suitable for wider distribution of
various industrial products.

FACTORS THẤT INFLUENCE THE CHOICE OF DISTRIBUTION CHANNELS

The following factors must be considered before Selecting the distribution channels.

Nature of product: Nature of product Has influençe on the selection ofa channel Of distribution. In the
case of industrial Goods like machinery and equipment, the Manufacturer sells directly to industrial
User, but in the case oftools, sales take Place through middlemen. Nature of market: Choice of suitable
Channel of distribution also depends on The nature of market. Location of the Market and the buying
habits ofbuyers Are also analysed.

Distribution expenses: If the producer Makes direct selling, he will have to Spend on distribution. But,
ifthe product Gets good response from the dealers, a producer will prefer to sell through them to
reduce his distribution expenses. Mutual cooperation: Choice of channel of distribution depends on the
mutual cooperation between the manufacturer and the dealers.

Company considerations: The character of the company also influences the selection of channel. If the
10 management lacks marketing know how, it may prefer to depend on middleman.
 Prompt payment: A producer may not like to sell to retailers or big consumers because they insist to
make purchase on credit. He, there fore, prefers to sell to a wholesaler who purchases usually on ready
cash.

Popularity of goods: If the goods are popular among the consumers, the dealers themselves come
forward to buy. Then the producer may not like to open his own shops to sell the goods.

Price and profit: Where the price of the goods is low and the profit margin is small, the producer sells
through a middle man. It is profitable for the producer to sell through the dealers. Here, the producer
can maximize his profit by depending on quality production.

Structure of retailing: Selection of Channel also depends on the structure of Retail trade in a product.
The Manufacturer will consider the number Of stores selling the product, Convenience of shopping to
the buyers, Service provided by the retailers, Availability of retailers and sale volumne Before selecting a
channel ofdistribution.

Financial resources: A firm’s reputation Can affect its channels. A financially strong Company needs
middlemen more than One, who is financially buoyant. A Business with adequate finances can Establish
its own sales force and even Branch organization.

FUNCTIONS OFA DISTRIBUTION CHANNEL

The primary function ofa distribution Channel is to bridge the gap between Production and
consumption.

A close study of the market is extremely Essential. A sound marketing plan Depends upon thorough
market study.

1 The distribution channel is also Responsible for promoting the product, awareness regarding products
and other Offers should be created among the Consumers.

2 Creating contacts for prospective buyers And maintaining liaison with existing ones.

3 Understanding the customer’s needs and Adjusting the offer accordingly.

4 Negotiate price and other offers related To the product as per the customer Demand.

5 Storage and distribution of goods.

6 Catering to the financial requirements for The smooth working of the distribution Chain.

7 Risk taking, for example, by stock Holding.

TRANSPORTATION

MEANING OF TRANSPORTATION

Transportation has to do with the movement of Products from a source such as a plant, factory, Or
workshop to a destination such Warehouse, customer, or retail store. Transportation may take place via
air, water, rail, Road, pipeline, or cable routes, using planes, Boats, trains, trucks, and
telecommunications

Equipment as the means of transportation. The Goal for any business owner is to minimize
Transportation costs while also meeting the Demand for products. Transportation costs Generally
depend upon the distance between the Source and the destination, the means of Transportation
chosen, the size and quantity of The product to be convey. In many cases, there Are several sources and
different destinations for The same product, which adds a significant level Of complexity to the problem
of minimizing Transportation costs.

Importance of transportation may include.

Availability of raw materials: Transportation helps in conveying the raw Materials from one place to
another. Raw materials are generated at one place Before they are transported to another Place where
they are processed or used To manufacture goods.

Availability of goods to the customer: The goods are transported from one Place to another. These
goods which are Produced at one place are transported To other distant places for their usage.
Transportation make it easy to move the Goods from one place to another.

Transportation helps in mass Production: Whether it is to purchase And bring raw materials or to
distribute Finished goods, a means of transportation Is necessary. This expands old markets And creates
new ones. AS a result, the Demands for goods increases and Production should also be increased. The
contribution of transportation is very Important to move commodities to all the Nooks and crannies of
the world.

If the Development of transportation was not Made, market would be limited to local Areas and
Iproduction would be restricted To meeting local needs only. As a result The economy of each country
would Remain undeveloped.

The Physical Supply of Products: Transportation moves the necessary raw Materials to factories where
the Production of goods take place. And the Supply of finished goods to the Consumers. It easily moves
finished Goods to the final consumers. This Significantly increases aggregate sales of Goods. In fact,
transportation is such a Key integral part of marketing, which Helps in carrying goods to the various
Consumers in different places. This Narrows the gap between the producers And the consumers and
facilitates Distribution of the goods to the Consumners at a minimum cost and limited Time.
Specialization: Transportation Encourages division of labour and Specialization on geographical or
regional Basis. Transportation cost highly affects Localization of industries. Production of Goods may be
centered at such a place Where the environment is the best and Production cost is minimum. This
makes Maximum utilization of local resources Possible, which is both economically and Socially
necessary.

Mobility of Labor and Capital: Transportation facilities provide mobility Of labour and capital. If more
labour Force is available at any place, transport Helps to carry it to the necessary placc. This means of
transportation carries Labours from one place to another. This Encourages labour and capital to be used
And invested in more productive sectors.

Stabilization in Price: Transportation Helps to bring stability in the prices of Different products. It moves
goods from One place to another area. This Establishes coordination between Demand and supply, and
brings stability In prices. It helps to supply the necessary Goods regularly to the consumers. Besides this,
consumers get necessary Goods at lower prices, because it Encourages competition among Producers
and makes mass production At lower cost possible.

MAJOR MODES OF TRANSPORTATION

There are five basic means of transporting Products used by manufacturers and distributors. There are:
air, motor carrier, train, marine, Or Pipeline. Many distribution networks consist of A combination of
these means of transportation. For example, oil may be pumped through a

Pipeline to a waiting ship for onward movement To a refinery, and from there it is transferred to Trucks
that transport gasoline to retailers or to The final consumers. All of these transportation Choices have
advantages and disadvantages. Some of these modes of transportation are

Explained below:

1 Air transport: Air transportation offers The advantage of speed and can be used for long- Distance
transport. However, air is also the most Expensive means of transportation. It is generally Uised only for
smaller items ofrelatively high value Such as electronic equipment and items for which The speed of
arrival is important such As perishable goods. Another disadvantage Associated with air transportation is
its lack of Accessibility; since a plane cannot ordinarily be Pulled up to a loading dock, it is necessary to
Bring products to and fro the aiport by truck.

2 Rail transportation: This is typically Used for long distances. It is less expensive Compare to air
transportation, it offers about the Same delivery speed as trucks over long Distances and exceeds
transport speeds via Waterways. In fact, deregulation and the introduction of freight cars with larger
carrying Capacities has enabled rail carriers to make Inroads in several areas previously dominated By
motor carriers. But access to the network Remains a problem for many businesses.

3 Motor carriers: Accessible and ideally Suited for transporting goods over short Distances, trucks are
the dominant means of Moving around the world. In fact, motor carriers Account for approximately S1
20 billion about N190 billion in annual revenue, much of it due To local movement of goods (movement
to and Fro business enterprises in the same community Or local region).

4 Water transportation: Water transportation is the least expensive and slowest mode of freight
transport. It is generally used to transport heavy products over long distances when speed is not an
issue. Although accessibility is a problem with ships because they are necessarily limited to coastal areas
or major inland waterways, piggybacking that is, using trucks to support is possible using either trucks or
rail cars. However, industry observers note that port terminal accessibility to land-based modes of
transportations is lacking in many regions. The main advantage of water transportation is that it can
move products all over the world.

5. Pipeline: Pipelines are generally used to Transport oil, natural gas, and chemicals. Two-Thirds of
petroleum products are transported by Pipeline, including heatingoil, diesel, jet fuel, and kerosene.
Pipelines are costly to build, but once they are constructed, they can transport products cheaply

FACTORS AFFECTING THE CHOICE OFTRANSPORTATION

1 Nature of goods: If you are Transporting bulky goods, you will have To tailor your strategy accordingly.
It is Quite dificult to transport vehicles, heavy Plant or machinery by air. Therefore Consideration should
be given to Heaviness, bulkiness or lightness of Goods. It is also important to know that Quick delivery is
necessary for perishable Goods.

Speed: Some types of product, such as Perishable goods, need to reach the Customer quickly; in such
circumstances, A quick plane journey may be preferable To a long sea voyage. Think about the Type of
goods you are transporting Before you decide how to send them. Handling: Sometimes goods are rough

Handled while transporting them, for Example, products transported by ship May be hauled on board
the vessel in a Net or sling, stacked beneath dozens of Other goods, and subjected to moisture
Condensation. Before you select a Particular mode of transport, you need To be sure your product can
withstand It.

Cost: Cost is one of the most important Factor that determine the selling price of A product. As you
considered your Products, you need to considered your Profits as well. If you cannot afford to Transport
your goods by air, then don’t Bother doing it; try transporting them by Road or ship instead.

Local conditions: Take a look at the Country you are transporting the goods To and observe if there are
risks and Weaknesses in its transport infrastructure. Ifthe local ports have bad reputation, or The road
network is not up to date, you Will need to tailor your strategy Accordingly.

Availability: Some mode of transport Are not available in some areas.

MAIN DOCUMENTS USED IN TRANSPORTATION

1 Bill of lading: The bill of lading is the Most important export document whenever Goods are sent by
ship. It is issued by the shipping Company. The key information in a bill of lading

TRANSPORT

`1 The name of the shipping company.

2 The narne of the shipper (bencficiary) or His agent.

3 The name of the carrying vessel.

4 The names of the ports of shipment and Discharge.

5 The identification (shipping) marks and Numbers.

6 The number of containers, cases, Packages or individual items.

7 A description of the goods in general Terms consistent with the description of The goods in the letter
of credit.

8 Evidence that the goods have been Received for shipment or shipped (loaded) on board and its date.

9 The name of the consignee (if not made Out ‘to order’) and also the name and

10 Address of the ‘notify party’ wherever Applicable.

11 Whether freight has been prepaid or Payable at destination.

12 The number of originals issued (A bill of Lading is normally issued in a set of three Originals; anyone
of which may be used To take delivery and possession of Goods. It is important that the consignee Must
secure all the originals.)

12 The date of issuance and the signature Of the ship’s master or the carrier or his Agent.
Bills of lading are normally issued in a ‘set’ of Two or more transferable copies, all of which Must be
signed by the master of the ship who Makes a note on the bills of lading, of the number Of copies issued
and any damage to the goods Taken on board. He then kecps one copy for Reference. The other copies
are sent to the Foreign inmporter by separate mail or returned to The exporter (consignor), However, if
the exporter has arranged for the Importer to open a letter of credit in the exporter’s Favour in a local
bank, then the bills of lading Together with the other shipping documents such As the invoice, the
consular invoice, the marine Insurance policy and a certificate of origin must Be lodged by the exporter
at the local bank, Together with the bill of exchange.

Functions of a bill of lading.

1 It acts as an advisory note indicating the Quantity and description of goods sent By a named ship.

2 It is a receipt of goods in good condition On board, signed by the master of the Ship. Any damage to
goods is noted.

3 It is evidence of a contract of carriage Between the shipper and the ship owner.

4 It is a document of title to goods Described therein. This means that the Holder of the bill of lading can
claim the Goods when he hands it over to the Port

5 It informs the customs authorities of the Type of imports/exports and the country Of origin or
destination respectively.

6 Since it is a document of title it can be Used as a basis for negotiating for a letter Of credit from the
bank.

7 It allows the customs to see at a glance Whether the imports or exports are Taxable.

2 CONSIGNMENT NOTE / DELIVERY NOTE:

It is sometimes called a rail and road consignment Note or a delivery note. It is normally prepared

By the road/rail transport company or a freight Forwarder. It helps in the recording of statistics.

The key information in a consignment note/ Delivery note

1 It may be used as a document in support In the event of an insurance claim.

2 The name and address of the sender (consignor). The name and address of the recipient

(consignee).

3 The number of packages or cases.

4 The marks and numbers on the packages Or cases.

5 A brief description of the goods.

6 The place of departure and the date of Departure.

7 The time of collection and delivery,

8 The time of arrival.

9 The type of haulier and the vehicle Number.

10 The signature of the carrier, (if it’s a Rail Consignment Note, it is stamped by the

Station master)

11 The freight charged.

The functions of a delivery note are as Follows:

1 This is an advice note, indicating the Quantity and description of goods being Dispatched on a certain
date by the Named road or rail transport agency.

2 It is evidence of a contract of carriage But is not negotiable.

3 It is not a document of title but should Be dispatched with other documents for

4 It shows the date of dispatch of the

A delivery note is used whenever a consignor (trader) sends goods by a road haulier company. Goods
which are useful for exchange and Import control purposes.

3 AIRWAY BILL/AIR CONSIGNMENT NOTE

Airway bill is a very important document used Whenever goods are sent by air. An airway bill Is issued
by an airline company in a set of 12 Copies. However, only three copies are originals The first is for the
carrier, the second for the Consignee and thè third is for the shipper. The Balance 9 (nine) copies are
retained by the airline Company for administrative purposes. It Corresponds to a Bill of lading but it is
only used When goods are sent by air. It is also on a note of freight charges. It is a receipt for goods and
a document For delivery.

The key information in an airway bill

1 The name of the airline company or Carrier.

2 The name and address of the shipper (beneficiary).

3 The names of the airports of departure And destination, flight number and actual

Flight date.

4 A description of the goods in general (C Terms, its weight and the freight charged, Its declared value.

5 The number of pieces sent.

6 Evidence (by and authorized signature) That the goods have been received by ( The carrier or its agent,
and the date of iSsuance.

7 The name and address of the consignee

8 And also the name and city of the carrier Or its agent.

9 The status of the freight charges prepaid Or payable at destination.

It is normally prepared in triplicate by the Consignor The part marked for the Carrier’ has To be signed
by the consignor. The part marked For the ‘Consignee travels with the goods. The Third part is signed by
the carrier and returned To the consignor..

The consignee is usually the bank that issues the Letter of credit, and the party to be notified when The
goods arrive is the importer.

Functions of an airway bill

1 It is an advice note indicating all the key Information stated above.

2 It is evidence of contract of carriage but It is not negotiable.

3 It is not a document of title. The delivery Of goods is not dependent upon the Presentation of the
Airway Bill but rather The goods will be delivered to the named Consignee against proof of identification
At the airport of destination.

4 PACKING LIST AND WEIGHT NOTE:

These Two documents are normally combined. The Weight note shows the gross weight and net
Weights of the goods. These must agree with that Stated in other relevant documents such as the Bill of
lading. It should be dispatched with other Documents for it shows the date of Dispatch which is useful
for exchange and Import control purposes.

The key information in a packing list

1 The name and address of the shipper.

2 The name and address of the consignee.

3 The name of the ship.

4 The port of departure and port of Destination.

5 The marks and numbers on the packages Or cases.

6 The number of packages.

7 A general description of the goods.

8 The gross and net weight of the goods.

9 The date of issuance and the invoice Number.

10 The signature of the shipper or the agent As a verification of all the above Information.

Functions of a packing list

This may be one of the documents that Have to be submitted to the advising Bank, together with the
other relevant Shipping documents such as the Bill of Lading, etc. according to the terms of The letter of
credit before the shipper can Secure payment.

1 It serves as a verification of important Information of the goods shipped or Transported by road

haulage such as Gross and net weight of the goods, details Of the packaging, description of the Goods as
agreed upon in the contract of Sale between the importer and exporter.

2 It may be used as a receipt to be signed By the consignee on the delivery of the Goods.

3 It is also a note of freight charges

5 GOODS RECEIVED NOTE/CARGO RECEIPT:

The key information in a goods received note:

1 The name and address of the consignee Or his authorized agent who is claiming Delivery and
possession of the goods.

2 The description of the goods.

3 The number of packages of cases Claimed.

4 The unit price.

5 The total value of the cargo claimed.

6 The date of issuance.

7 The signature of the consignee or its Authorized agent.

8 The condition of the goods upon receipt.

9 The acknowledgement of receipt of Goods at the port of destination by the Consignee or its
authorized agent.

10 The undertaking by the consignee that The goods were received in good order And according to the
contract, thus Absolving the ship owner or the port Authorities from any liability to later claims For
damage or theft.