Place mix

Module 8
HOW CAN A BUSINESS ENSURE THAT
ITS PRODUCTS REACH THE
TARGET MARKET?
HOW AND WHERE DO CUSTOMERS
PREFER TO BUY THE PRODUCT?
 HOW
IMPORTANT ARE
FACTORS SUCH
AS STOCK
AVAILABILITY,
PRICE AND
SPEED?
 LEARNING OUTCOMES
At the end of this module, the student shall be able to:

1. Define Place Mix

 Identify the objectives of Place Mix

2. Identify the different types of Pharmaceutical

Distribution Channels
 Discuss the functions of each type of
Pharmaceutical Distribution Channel
 Differentiate the different Channel Levels
 LEARNING OUTCOMES
At the end of this module, the student shall be able to:

 Discuss the role of Channel Members

 Identify guidelines in selecting channel
members
 Identify the checklist in the evaluation of
channel members
 LEARNING OUTCOMES
At the end of this module, the student shall be able to:

3. Identify the Physical Distribution System in the Drug

Industry
 Define Order Processing
 Discuss the Order processing flow
 Define Warehousing
 Identify the different types of warehouses
 Discuss the process flow in each type of
warehouse
 LEARNING OUTCOMES
At the end of this module, the student shall be able to:

 Define Inventory
 Discuss stock turnover calculation
 Discuss the Reorder Point calculation
 Define Transportation
 Discuss the transportation flow
 PLACE
It refers to the
distribution or the
methods and location
you use for your products
or services to be easily
accessible to the target
customers.
 PLACE
It ensures the adequate availability and
visibility of the right products,
in the right target markets,
at the right quantity,
at the right cost,
at the right condition,
at the right time,
any time and all the time.
PLACE
 DISTRIBUTION CHANNEL

It is a network of organizations that create time, place,

and possession utilities for consumers.
DISTRIBUTION CHANNEL

a.k.a.
MARKETING CHANNEL
 PHARMACEUTICAL
DISTRIBUTION CHANNELS

These are sets of

pharmaceutical firms &
individuals that take title
(or assist in transferring title)
to a drug product or
service as it moves from the:

DRUG END
MANUFACTURER USERS
 PHARMACEUTICAL
DISTRIBUTION CHANNELS

“We are in need

of 1000 bottles of
LVP fluids.”

“Sorry. No
available
LVPs…”
 PHARMACEUTICAL
DISTRIBUTION CHANNELS

“… but we will contact

the head office and
relay your orders.”
 PHARMACEUTICAL
DISTRIBUTION CHANNELS
 FUNCTIONS OF
DISTRIBUTION CHANNELS

Physical transport & storing

of drug products

Financing the cost of drug

distribution
 FUNCTIONS OF
DISTRIBUTION CHANNELS
20

Conducting sales and market

activities to clients

Building a data bank of

market information
 FUNCTIONS OF
DISTRIBUTION CHANNELS

The business has to decide on:

WHERE TO HOW TO
SELL THE BRING
PRODUCTS PRODUCTS TO
CONSUMERS
4 DISTRIBUTION CHANNELS
4 DISTRIBUTION CHANNELS
CHANNEL 1
-“Direct Channel”
-“Direct Selling”
- The manufacturers are selling directly
to the consumers.
4 DISTRIBUTION CHANNELS
CHANNEL 2
-“Retailer Channel”
- The manufacturers sells the product to
the retailer, then the retailer sells it to
the consumers.
4 DISTRIBUTION CHANNELS
CHANNEL 3
-“Wholesaler Channel”
- The manufacturers sells the product to
the wholesaler then the product goes to
the retailer. The retailer sells it to the
consumers.
4 DISTRIBUTION CHANNELS
CHANNEL 4
-“Agent/Broker Channel”
- The manufacturer sells the product to
the agent then the agent sells it to the
wholesaler. The product then goes to the
retailer. The latter shall sell it to the
consumers/end users.
4 DISTRIBUTION CHANNELS

MIDDLEMEN
 MIDDLEMEN
-“Intermediaries”

- They deliver products to the

consumers when and where
they want them

- dealers or agents or
company intermediates
between the producer of goods
and the retailer or consumer
 MIDDLEMEN
Strategies in deciding on the
Number of Middlemen to use:

INTENSIVE
DISTRIBUTION
Drug companies stock-
up their product lines in
as many sales outlets as
possible.
 MIDDLEMEN
Strategies in deciding on the
Number of Middlemen to use:

EXCLUSIVE
DISTRIBUTION
Drug companies require
their consumers not to
carry competing lines.
 MIDDLEMEN
31

Strategies in deciding on the

Number of Middlemen to use:

SELECTIVE
DISTRIBUTION
Drug companies does
not have to spread
effort over many sales
outlets to develop long-
lasting relationships fast.
 MIDDLEMEN
How to select Middlemen

PROFILE PRODUCT LINES

(in terms of years in business)
 MIDDLEMEN
33

How to select Middlemen

GROWTH POTENTIAL CUSTOMER &

LOCATION
 MIDDLEMEN
34

How to select Middlemen

REPUTATION TRACK RECORD

(& image in the industry)
 MIDDLEMEN
Checklist in evaluating the Middlemen

ACHIEVEMENT OF SUPPORT PROVIDED

SALES QUOTA TO PROGRAMS
 MIDDLEMEN
Checklist in evaluating the Middlemen

AFTER-SALES AVERAGE
CUSTOMER SERVICE INVENTORY LEVELS
 MIDDLEMEN
Checklist in evaluating the Middlemen

STOCK TRANSFER CUSTOMER

MOVEMENTS DELIVERY TIME
 MIDDLEMEN
Checklist in evaluating the Middlemen

DECISIONS MADE ON DAMAGED,

LOST AND EXPIRED PRODUCTS
PHYSICAL DISTRIBUTION SYSTEM
It encompasses the broad range of activities concerned
with planning, implementing, and controlling the
physical flow from raw materials until the distribution of
finished products.
PHYSICAL DISTRIBUTION SYSTEM

1 Order Processing

2 Warehousing
PHYSICAL DISTRIBUTION SYSTEM

3 Inventory

4 Transportation
1 ORDER PROCESSING
- sales orders are being processed on
schedule and are forwarded to the
Computer Data System for invoicing

- What happens in Order Processing?

 verification of accuracy of orders
 verification of customer’s ability to pay
 order picking
 order cycle begins
2 WAREHOUSING

- performance of administrative and

physical functions associated with
storage of goods and materials
- WAREHOUSES  they receive, identify and sort
merchandise; they store goods and dispatch sales
orders
2 WAREHOUSING

4 TYPES OF WAREHOUSES
PRIVATE
WAREHOUSES
They are owned and operated by channel suppliers
and resellers and are used in their own distribution
activities.
2 WAREHOUSING

4 TYPES OF WAREHOUSES
PUBLIC
WAREHOUSES

They provide storage to any interested individual or

firm on a rental basis.
2 WAREHOUSING

4 TYPES OF WAREHOUSES
BONDED
WAREHOUSES
They allow drug firms to postpone tax payments until
they are ready to make deliveries to target consumers.
2 WAREHOUSING

4 TYPES OF WAREHOUSES
FIELD
WAREHOUSES
Mortgage arrangement in which a lender secures its
loan with lien on items stored in a warehouse.
 3
48
INVENTORY

-It is a complete listing of

merchandise or stock on hand,
work in progress, raw materials, finished goods on
hand, etc made each at certain time intervals
3 INVENTORY

-It has involves 2 major concerns:

 when to order
 how much to order

- It requires entrepreneurial decisions

in order not to suffer out-of-stock
and over-the-stock situations
3 INVENTORY

3 ASPECTS OF INVENTORY
MANAGEMENT

STOCK
TURNOVERS
The balance between sales and
inventory on hand
3 INVENTORY

3 ASPECTS OF INVENTORY
MANAGEMENT

STOCK
TURNOVERS

Number of units sold during the period

Annual rate of stock =
turnover (in units) Average inventory on hand (in units)
3 INVENTORY

3 ASPECTS OF INVENTORY
MANAGEMENT

STOCK
TURNOVERS
Net Sales (yearly)
Annual rate of stock =
turnover (in pesos) Average inventory on hand (in pesos)
3 INVENTORY

3 ASPECTS OF INVENTORY
MANAGEMENT

STOCK
TURNOVERS

Inventory investments are productive

TURNOVER Merchandise is fresh

3 INVENTORY

3 ASPECTS OF INVENTORY
MANAGEMENT

STOCK
TURNOVERS

Reduced losses from changes in

packaging
TURNOVER Less cost of maintaining inventory
 3
55
INVENTORY

3 ASPECTS OF INVENTORY
MANAGEMENT

WHEN TO
REORDER

REORDER POINT
It establishes an inventory level at which
new sales orders must be placed.
 3
56
INVENTORY

3 ASPECTS OF INVENTORY
MANAGEMENT

REORDER
INVENTORY
Order lead time x Usage rate
Reorder Point =
x Safety stock
 3
57
INVENTORY

3 ASPECTS OF INVENTORY
MANAGEMENT

HOW MUCH TO
REORDER
FACTORS:
Availability of quantity discounts
 Inventory turnover
 Resources of the firm
 3
58
INVENTORY

3 ASPECTS OF INVENTORY
MANAGEMENT

HOW MUCH TO
REORDER
FACTORS:
 Cost of processing each order
 Costs of maintaining goods in inventory
4 TRANSPORTATION

-Drug companies are actually engaged in

transportation decisions, more specifically in the
choice of transportation carriers which could
affect the physical condition (as well as the
pricing) of the product.
4 TRANSPORTATION

RAIL ROADS
-They normally carry heavy
items that are low in value
over long distances.

 LVPs
 Veterinary products
 Galenicals
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4 TRANSPORTATION

MOTOR CARRIERS
-Dominate in transporting
small shipments over short
distances and are more
flexible that rail because
they can readily pick-up
packages and promptly
deliver them to the end
users.
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4 TRANSPORTATION

WATERWAYS
-They are used primarily
for the shipment of low-
value freight and involve
the movement of drug
products on barges. While
water transportation is the
slowest, the rates are
extremely low.
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4 TRANSPORTATION

AIRWAYS
-They are the fastest but
payments are much higher
that rail rates and motor
rates.

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