Subject Code: BMDSTRIL

Subject Title: DISTRIBUTION MANAGEMENT

Subject Description: The course covers the principles and functions of distribution management, the roles
marketing channels and physical distribution in the marketing system, the cost implications of the management
decisions involving distribution. Topics include the discussion of channel member roles and relationships,
legal issues related to distribution, and techniques for optimizing the effectiveness of distribution channels.
The course aims to crystallize student’s understanding of distribution cost analysis through their involvement
in exercises and actual projects in the area of distribution management.
No. of Units: 3
Class Schedule: T/F, 9-11am / 11am-1pm

DISCLAIMER: The information content provided in this course material is designed to provide helpful
information on the subjects discussed. Some information are compiled from different materials and
summarized from different books. Some information are based from contributors' perspective and
understanding. References are provided for informational purposes only and do not constitute endorsement of
websites or other sources. Readers should be aware that the websites/electronic references listed in this course
material may change. Hence, the contributors do not claim any information presented in the materials and do
not reflect their own work.

Course Learning Outcomes:

At the end of this course, the student will be able to:
1. To apply core concepts and techniques important to analyzing business logistics problems.
2. To design a comprehensive Trip Planning procedure to ensure optimum customer service satisfaction
through on time distribution.
3. Develop policies for managing the channels on product, pricing, promotions, optimal stock policies,
including safety stocks computation to come up with a smooth distribution operation.
4. Develop a system for monitoring and evaluating the performance of each channel member.

About the Instructor:

Eduard S. Cruz
College Instructor- Department of Business Administration

Contact Information:
Mobile number: 09209595011
Email: edtianity@gmail.com/ edcruz@nu-baliwag.edu.ph
Social Media: Facebook/Messenger: Eduard Santos Cruz

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Topic: Week 1

MODULE 1: UNDERSTANDING DISTRIBUTION MANAGEMENT IN TODAY’S

MODERN SETTING

I. Pre-test / Activity:
One-Sentence Summary
On your OneNote, write a one-sentence summary (bullet points) of your key takeaways during the
Orientation on National University VMGs, Core Values, GAINs, and class policies.

II. Learning Outcomes

1. To distinguish Distribution Management from the old approaches in today’s modern setting.

III. Content:

Distribution management has long been a business challenge. Raw goods can arrive too early and go
bad before they are used. Or, finished products can arrive too late, allowing a competitor to seize the
lion’s portion of market share.

Effective distribution is so crucial that sub-discipline practices became an integral part of supply
chain and inventory management, such as just in time inventory. Overall, successful distribution
involves many moving parts and methods requiring a strong distribution management strategy fueled
by real-time information.

What Is Distribution Management?

Distribution management refers to the process of overseeing the movement of goods from supplier
or manufacturer to point of sale. It is an overarching term that refers to numerous activities and
processes such as packaging, inventory, warehousing, supply chain, and logistics.

Distribution management is the process used to oversee the movement of goods from supplier to
manufacturer to wholesaler or retailer and finally to the end consumer. Numerous activities and
processes are involved, including raw good vendor management, packaging, warehousing, inventory,
supply chain, logistics and sometimes even blockchain.

Distribution management is an important part of the business cycle for distributors and wholesalers.
The profit margins of businesses depend on how quickly they can turn over their goods. The more
they sell, the more they earn, which means a better future for the business. Having a successful
distribution management system is also important for businesses to remain competitive and to keep
customers happy.

Understanding Distribution Management

Distribution management is critical to a company's ability to successfully attract customers and
operate profitably. Executing it successfully requires effective management of the entire distribution

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process. The larger a corporation, or the greater the number of supplies points a company has, the
more it will need to rely on automation to effectively manage the distribution process.

Modern distribution management encompasses more than just moving products from point A to point
B. It also involves gathering and sharing relevant information that can be used to identify key
opportunities for growth and competitiveness in the market. Most progressive companies now use
their distribution forces to obtain market intelligence which is vital in assessing their competitive
position.

There are basically two types of distribution: commercial distribution (commonly known as sales
distribution) and physical distribution (better known as logistics). Distribution involves diverse
functions such as customer service, shipping, warehousing, inventory control, private trucking-fleet
operations, packaging, receiving, materials handling, along with plant, warehouse, store location
planning, and the integration of information.

The goal is to achieve ultimate efficiency in delivering raw materials and parts, both partially and
completely finished products to the right place and time in the proper condition. Physical distribution
planning should align with the overall channel strategy.

Advantages of a Distribution Management Strategy

Aside from keeping profits up, there are many reasons a company may want to use a distribution
management strategy. First, it keeps things organized. If there was no proper management system in
place, retailers would be forced to hold stock in their own locations—a bad idea, especially if the
seller lacks proper storage space.

A distribution management system also makes things easier for the consumer. It allows them to visit
one location for a variety of different products. If the system didn't exist, consumers would have to
visit multiple locations just to get what they need.

Putting a proper distribution management system in place also alleviates any potential for errors in
delivery, as well as the times products need to be delivered.

Businesses can adopt distribution management strategies through electronic platforms, which can
help simplify the process and boost product sales.

Besides delivering higher profits, distribution management eliminates waste in a number of ways,
ranging from reduced spoilage to reduced warehousing costs since products and goods can be
delivered as needed (“just in time” inventory), rather than stored in bigger bulk (“just in case”
inventory).

Distribution management leads to decreased shipping charges and faster delivery to customers, and
it also makes things easier for buyers as it enables “one stop shopping” and other conveniences and
rewards, such as customer loyalty rewards programs.

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Distribution Management as a Marketing Function
The fundamental idea of distribution management as a marketing function is that the management of
distribution happens in an ecosystem that also involves the consideration of the following:

• Product: Not always a tangible object, product can also refer to an idea, music, or
information.
• Price: This refers to the value of a good or service for both the seller and the buyer, which
can involve both tangible and intangible factors, such as list price, discounts, financing, and
likely response of customers and competitors.
• Promotion: This is any communication used by a seller to inform, persuade, and/or remind
buyers and potential buyers about the seller’s goods, services, image, ideas, and the impact it
has on society.
• Placement: This refers to the process that ensures the availability, accessibility, and visibility
of products to ultimate consumers or business users in the target channels or customers where
they prefer to buy.

Effective distribution management involves selling your product while assuring sufficient stocks in
channels while managing promotions in those channels and their varying requirements. It also
involves making sure a supply chain is efficient enough that distribution costs are low enough to
allow a product to be sold at the right price, thus supporting your marketing strategy, and maximizing
profit.

What Is a Distributor?
A distributor is an entity that supplies products to retailers and other businesses that sell directly to
consumers. Take, for example, a wholesale liquor distributor that supplies alcohol to restaurants,
grocery stores and liquor stores.

Other examples include a produce distributor that supplies lettuce, tomatoes and other produce to
restaurants; and a pharmaceutical distributor that supplies a variety of prescription-controlled drugs
to pharmacies.

Distribution vs. Logistics

Logistics refers to the detailed planning and processes involved with the effective supply and
transportation of goods. Logistics includes activities and processes such as supply management, bulk
and shipping packaging, temperature controls, security, fleet management, delivery routing, shipment
tracking and warehousing. It is perhaps easiest to think of logistics as physical distribution.

Distribution is a management system within logistics that is focused on order fulfillment throughout
distribution channels. A distribution channel is the chain of agents and entities that a product or
service moves through on its way from its point of origin to a consumer. Examples of distribution
channels include ecommerce websites, wholesalers, retailers and 3rd party or independent
distributors. Distribution includes activities and processes such as consumer or commercial
packaging, order fulfillment and order shipping. In short, distribution is most easily understood
as commercial or sales distribution.

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Why Is Distribution Management Important?
Distribution management is first and foremost about organizing everything involved in getting goods
to the buyer in a timely fashion and with the least amount of waste. Therefore, it has a direct impact
on profits.

What Is a Distribution Network and What Are the Benefits?

A distribution network is a connected group of storage facilities and transportation systems. It is
formed in accordance with a distribution strategy designed to move goods from manufacturer to
wholesalers, retailers or buyers.

Distribution Management Challenges

Distribution challenges can arise from a variety of disruptions. Natural disruptions include severe
weather events, raw material shortages (e.g., bad crop years), pest damages, and epidemics or
pandemics. Human disruptions include riots, protests, wars, and strikes.

Transportation disruptions include transport vehicle disrepair, maintenance downtimes and accidents,
as well as delayed flights and restrictive or new transportation regulations such as those regularly
seen in trucking.

Economic challenges include recessions, depressions, sudden drops or increases in consumer or

market demands, new or changes in fees or compliance costs, changes in currency exchange values
and payment issues.

Product disruptions include product recalls, packaging issues and quality control issues. Buyer
disruptions include order changes, shipment address changes and product returns.

5 Factors That Influence Distribution Management

Many things can influence distribution management. The five most common are:
• Unit perishability – if it’s a perishable item then time is of the essence to prevent loss,
• Buyer purchasing habits – peaks and troughs in purchasing habits can influence distribution
patterns and therefore varying distribution needs that can be predicted,
• Buyer requirements — e.g., changes in a retailer’s or manufacturer’s just in time inventory
demands,
• Product mix forecasting – optimal product mixes vary according to seasons and weather or
other factors and
• Truckload optimization – relies on logistics and fleet management software. To ensure every
truck is full to capacity and routed according to the most efficient path.

3 Distribution Management Strategies

At the strategic level, there are three distribution management strategies:
• Mass. The mass strategy aims to distribute to the mass market, e.g., to those who sell to
general consumers anywhere.
• Selective. The selective strategy aims to distribute to a select group of sellers, e.g., only to
certain types of manufacturers or retail sectors such as pharmacies, hair salons, and high-end
department stores

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 • Exclusive. The exclusive strategy aims to distribute to a highly limited group. For example,
the manufacturers of Ford vehicles sell only to authorized Ford dealerships, and producers of
Gucci-brand goods only sell to a narrow slice of luxury goods retailers.

What Are the 4 Channels of Distribution?

There were historically three distribution channels:
• Wholesaler. Goods are distributed from manufacturers to wholesalers in this channel. For
example, liquor distillers distribute their brands of liquors to wholesalers.
• Retailer. Goods are distributed from manufacturer or wholesaler to retailers. For example, big
name designer clothing and accessories are distributed to higher end retailing chains such as
Neiman Marcus, Nordstrom and Macy’s.
• Distributor. This channel moves goods from the source or manufacturer to an authorized
distributor. For example, a Ford factory distributes various Ford makes and models to
authorized Ford dealerships for sale to consumers or company fleets.
• Ecommerce. This is the newest and most disruptive distribution channel wherein goods and
services are represented virtually online and then distributed directly to the buyer. Ecommerce
as a fourth channel has led to rapid changes and makes distributors rethink their traditional
strategies.

What Are the Elements of Distribution Management?

The elements of distribution management systems are the steps involved in getting the product from
the manufacturer to the end customer and can include supply chain, blockchain, logistics, a purchase
order and invoicing system, vendor relationship management (VRM), customer relationship
management (CRM), an inventory management system (IMS), a warehouse management system
(WMS) and a transportation management system (TMS).

How Technology Affects Modern Product Distribution

Advancements in technology have had a profound effect on the efficiency and operations of product
distribution. By introducing technical systems and technology-based processes into product
distribution models, order fulfillment companies can benefit from significant improvements to
efficiency, workflow, and at the end of the day, the bottom line.

Technology has affected modern product distribution in the following keyways:

• Integrating flows of information between sales, marketing, distribution, and logistics.
• Improving flexibility and balance with product demand and inventory levels.
• Optimizing warehouse management.
• Maximizing distribution efficiency.

Information Flow Integration

The enhancements to communication that technology offers have impacted information flow in
amazing ways. From the moment an order is received and throughout the product distribution process
to shipment, information can be seamlessly integrated across all departments.

While improved team communication tools provide the opportunity for immediate contact anywhere
in the world (with a Wi-Fi connection), specialized programs can now convert sales into orders
automatically in real-time, moving them directly into the supply chain for fulfillment. With modern

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equipment and technology, the product distribution process essentially becomes a constantly moving
mechanism of almost fully automated operation supported by human labor and management.

Product Demand and Inventory Management

With technology automatically transforming sales into orders, and systematizing the order fulfillment
process, orders enter the supply chain and proceed toward fulfillment with minimal human
intervention. Information about inventory levels, product demand, and partner offerings can be
transmitted as needed to facilitate more efficient inventory management. These immediate
notifications allow for far more accurate projections about order volumes and more efficient inventory
management to reduce costs, mistakes, and delays in product distribution.

Additionally, supply chain partners and inventory distributors can have access to real-time
transmission of order volumes into the distribution network to facilitate better planning for production
quantities and delivery timelines. Technology and technical systems improve flexibility and
timeliness, while reducing waste in the product distribution process.

Warehouse Workflow Optimization

Before automated systems and modern equipment advances, warehouse workers wasted considerable
amounts of time traveling throughout the warehouse to move product. Today, most of the product
movement is facilitated by machines and warehouse management software to reduce lag time,
improve accuracy with order fulfillment, and optimize warehouse floor space.

Modern warehouses can be smaller with more efficient inventory management and movement, since
they are no longer limited by the access capabilities of forklifts or restricted by aisle widths that must
accommodate two forklifts operating at the same time. Contemporary equipment such as conveyors,
rails and elevators can be integrated with a centralized computer network to improve efficiency while
reducing errors. Pallets and units can be placed randomly and then called up when needed without
concern of misplacement because the centralized network is more accurate at records than a human
with a clipboard.

Distribution Process Efficiency

Since it’s far faster and more accurate than human analysis, technology helps attain the most cost-
effective and fast product distribution process. Today’s product distribution traffic managers can
optimize distribution by using software that analyzes the best route for the lowest cost and/or fastest
fulfillment. With warehouse workflow optimized for best use of floor space and movement of goods
from storage to loading bays for shipment, the product distribution process can be made far more
efficient.

The technological advantage continues from the warehouse to loading bays as well. Using
specialized shipment analysis software, shipment trucks can be loaded according to the most efficient
route if/when they are making multiple deliveries. Goods that are planned for the last delivery would
be loaded in first, so that products don’t have to be unloaded and re-loaded multiple times along the
route to their destination. This not only improves delivery speed, but also reduces risk of damage
during shipping.

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As you consider upgrading, migrating, or adding to your supply chain technology, you
should consider a few important things. This includes the learning curve, first and foremost training
your workforce on new technologies will take time, and you’ll need to plan for fulfillment delays or
downtime in some cases. Next, do a comprehensive (and unbiased) review of new technologies before
you purchase and implement them into the product distribution process, because you’ll want to step
beyond the sales representative to determine whether or not the technology impacts your business
positively, and in the ways, you want it to. Finally, be sure to measure the performance of a new
system once you’ve given it time to do its work. There should be tangible value and reporting to prove
its effectiveness.

Technology continues to advance with upgrades in accuracy, detail, capability, speed and more. As
upgrades to software and logistics technologies improve, distributors can continue to implement
effective systems in order to further reduce lead times and inventories as well as their associated costs.

IV. Activity
Identify the following:
1. Refers to the detailed planning and processes involved with the effective supply and
transportation of goods.
2. This refers to the process that ensures the availability, accessibility, and visibility of
products to ultimate consumers or business users in the target channels or customers where
they prefer to buy.
3. Refers to the process of overseeing the movement of goods from supplier or manufacturer to
point of sale.
4. This refers to the value of a good or service for both the seller and the buyer, which can
involve both tangible and intangible factors, such as list price, discounts, financing, and
likely response of customers and competitors.
5. An entity that supplies products to retailers and other businesses that sell directly to
consumers.
6. It is formed in accordance with a distribution strategy designed to move goods from
manufacturer to wholesalers, retailers, or buyers.
7. Aims to distribute to a select group of sellers, e.g., only to certain types of manufacturers or
retail sectors such as pharmacies, hair salons, and high-end department stores.
8. This is the newest and most disruptive distribution channel wherein goods and services are
represented virtually online and then distributed directly to the buyer.
9. The chain of agents and entities that a product or service moves through on its way from its
point of origin to a consumer.
10. Include severe weather events, raw material shortages (e.g., bad crop years), pest damages,
and epidemics or pandemics.

V. Evaluation / Assessment
Start looking for small medium enterprise as a chosen company for your distribution management
paper.

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VI. Other Reading Materials
Distribution Management: Definition, Advantages & Strategies, October 16, 2020
Lisa Schwarz | Senior Director of Global Product Marketing
https://www.netsuite.com/portal/resource/articles/erp/distribution-management.shtml

Distribution Management
By ADAM HAYES, Updated Nov 13, 2020
https://www.investopedia.com/terms/d/distribution-management.asp

How Technology Affects Modern Product Distribution, June 20, 2017 Robert Victor
https://www.hollingsworthllc.com/technology-affects-modern-product-distribution/

VII. References

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