PRINCIPLES OF MARKETING – GRADE 11/12

Name: ______________________________________ Date: ____________________

Grade: ______________________________________ Section: ___________________

Quarter: 4 Week: 3 SSLM No. 3 MELC(s): Discuss the structure of distribution

channels, its functions, and the nature of supply chain management (ABM_PM11-
IIae-18).
➢ Objectives: Discuss distribution channels, its structure and functions; and
Discuss the nature of supply chain management.
➢ Title of Textbook/LM to Study: Principles of Marketing
➢ Chapter: ___ Pages: ___ Topic: Distribution Channels and Supply Chain
Management

Let Us Discover

Good day, future Marketers! Today’s lesson deals about the structure of
distribution channels, its functions, and the nature of supply chain management.

What Is a Distribution Channel?

A distribution channel is a chain of businesses or intermediaries through which

a good or service passes until it reaches the final buyer or the end consumer.
Distribution channels can include wholesalers, retailers, distributors, and even
the internet.

Distribution channels are part of the downstream process, answering the

question "How do we get our product to the consumer?" This is in contrast to the
upstream process, also known as the supply chain, which answers the question
"Who are our suppliers?"

Understanding Distribution Channels

A distribution channel is a path by which all goods and services must travel to
arrive at the intended consumer. Conversely, it also describes the pathway
payments make from the end consumer to the original vendor. Distribution

GSC-CID-LRMS-ESSLM, v.r. 03.00, Effective June 9, 2021

channels can be short or long, and depend on the number of intermediaries
required to deliver a product or service.

Goods and services sometimes make their way to consumers through multiple
channels—a combination of short and long. Increasing the number of ways a
consumer is able to find a good can increase sales. But it can also create a
complex system that sometimes makes distribution management difficult.
Longer distribution channels can also mean less profit each intermediary
charges a manufacturer for its service.

Structure and Functions of Distribution Channel

Direct and Indirect Channels

Channels are broken into two different forms—direct and indirect.

A direct channel allows the consumer to make purchases from the manufacturer
while an indirect channel allows the consumer to buy the goods from a
wholesaler or retailer. Indirect channels are typical for goods that are sold in
traditional brick-and-mortar stores.

Generally, if there are more intermediaries involved in the distribution channel,

the price for a good may increase. Conversely, a direct or short channel may
mean lower costs for consumers because they are buying directly from the
manufacturer.

Types of Distribution Channels

While a distribution channel may seem endless at times, there are three main
types of channels, all of which include the combination of a producer, wholesaler,
retailer, and end consumer.

The first channel is the longest because it includes all four: producer, wholesaler,
retailer, and consumer. The wine and adult beverage industry is a perfect
example of this long distribution channel. In this industry—thanks to laws born
out of prohibition—a winery cannot sell directly to a retailer. It operates in the
three-tier system, meaning the law requires the winery to first sell its product to
a wholesaler who then sells to a retailer. The retailer then sells the product to
the end consumer.

The second channel cuts out the wholesaler—where the producer sells directly
to a retailer who sells the product to the end consumer. This means the second
channel contains only one intermediary. Dell, for example, is large enough to
sell its products directly to reputable retailers such as Best Buy.

The third and final channel is a direct-to-consumer model where the producer
sells its product directly to the end consumer. Amazon, which uses its own
platform to sell Kindles to its customers, is an example of a direct model. This is
the shortest distribution channel possible, cutting out both the wholesaler and
the retailer.

What Is Supply Chain Management (SCM)?

Supply chain management is the management of the flow of goods and services
and includes all processes that transform raw materials into final products. It
involves the active streamlining of a business's supply-side activities to
maximize customer value and gain a competitive advantage in the marketplace.

How Supply Chain Management (SCM) Works

Supply chain management (SCM) represents an effort by suppliers to develop

and implement supply chains that are as efficient and economical as
possible. Supply chains cover everything from production to product
development to the information systems needed to direct these undertakings.

Typically, SCM attempts to centrally control or link the production, shipment,

and distribution of a product. By managing the supply chain, companies can cut
excess costs and deliver products to the consumer faster. This is done by
keeping tighter control of internal inventories, internal production, distribution,
sales, and the inventories of company vendors.

SCM is based on the idea that nearly every product that comes to market results
from the efforts of various organizations that make up a supply chain. Although
supply chains have existed for ages, most companies have only recently paid
attention to them as a value-add to their operations.

5 Parts of SCM

In SCM, the supply chain manager coordinates the logistics of all aspects of the
supply chain which consists of five parts:

• The plan or strategy

• The source (of raw materials or services)
• Manufacturing (focused on productivity and efficiency)
• Delivery and logistics
• The return system (for defective or unwanted products)

The supply chain manager tries to minimize shortages and keep costs down.
The job is not only about logistics and purchasing inventory. According
to Salary.com, supply chain managers “oversee and manage overall supply
chain and logistic operations to maximize efficiency and minimize the cost of
organization's supply chain."
 Productivity and efficiency improvements can go straight to the bottom line of a
company. Good supply chain management keeps companies out of the
headlines and away from expensive recalls and lawsuits.

Let Us Try

Activity 1: Channeling!
Instruction: Consider yourself as a product manufacturer. Illustrate inside the box
your desired distribution channel until your product reached your target customers.

Let Us Do

Activity 2 – What is my Functions?

Instruction: Based on the distribution channels, discuss the function of each channel
by filling out the table below.

Distribution Channel Function/s

Producer

Wholesaler

Retailer
 Consumer

Let Us Apply

Activity 3: Supply All You Can!

Instruction: Consider that you are a supplier of a raw materials to a multi-national
manufacturing company. Discuss below how you will develop an effective supply
management chain. You can add illustration for further explanation of your answer
inside the box.
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

Rubrics

Excellent – 30 Ideas are very relevant to the topic. They are presented in a complete
and logical manner. Sentence structure is consistently correct.
Handwriting is very neat and readable
Very Good – 20 Ideas are very relevant to the topic. They are presented in an adequate
and logical manner. Sentence structure is generally correct.
Handwriting is neat and readable.
Good – 10 Some ideas are relevant to the topic but are not presented in a logical
manner. Handwriting is neat but not really readable
Needs Improvement – 5 Very little ideas are presented that is relevant to the topic. Ideas are not
presented in a logical manner and sentence structure is erroneous.
Handwriting is dirty and not readable.
 References

Fernando, J., (2022). Distribution Channel. Retrieved from https://www.investopedia.com.

Fernando, J., (2022). Supply Chain Management. Retrieved from

https://www.investopedia.com.

SSLM Development Team

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