Introduction to

Distribution Channel
Management
Presented by: Group 10
Abhishek Jain 06
Vishal Gupta 28
Vivek Ganatra 39
Vishwak Bisen 36
Vatsala Varun 59
Shrema Garg 23
 Objectives of the presentation

• To explain why distribution is required.

• The activities that it performs.
• Is intermediation really needed?
• How it adds value.
• What is distribution channel strategy?
• What is Distribution Channel
management?
 Introduction

• Effective Distribution – A driver of

Manufacturing Sector
• The existence of intermediaries is inevitable
between producer and consumers
– Improve the efficiency of the exchange process
– Helps adjusts discrepancies of assortment
– Help in routinization of transactions
– Facilitates the searching process
Activities performed by Distribution Channel

• The source of all activities lies in the

rationale for having distribution.
• In fact, the entire gamut of activities are
performed due to the existence of:
– Spatial discrepancies
– Temporal discrepancies
– Need for breaking the bulk
– Need for assortment
 Contd..

• The activities are performed to reduce

these discrepancies.
 Contd..

Spatial discrepancy –

Distance

Activities:
• To connect dispersed user base with
manufacturer in a cost effective manner.
 Contd..

Temporal discrepancy –
Time

Activities:
• Stocking at appropriate places in adequate
quantities to minimise waiting time.
 Contd..

Need for breaking the bulk –

Bulk production -
Small individual
consumption

Activities:
• Division of bulk into phases
• Routinisation of order and payment
processing
 Contd..

Need for assortment –

Single product
produced – Multiple
products consumed

Activities:
• Distributors keep goods of various
manufacturers who produce only one or
few goods.
 Contd..

• The intensity of these discrepancies

decides the complexity of the distribution
function.
• Case in point:
A tea stall vs A toothpaste factory
 Intermediation: Is it really needed?
• With adoption of Internet, now companies can
themselves perform distribution activities. For eg:
Dell Computers
• Advantage: Manufacturer has full control over
distribution function as outsourced channel might
not be that committed
• In cases other than technically complex or short life
cycle products, direct distribution cost is very high.
• If more & more activities are outsourced then firm
does not have control over the distribution function
• So, most companies use the combination of direct
distribution & distribution through intermediaries.
 Contd..

• A proper analysis of their strengths & weaknesses is

to be done by companies to know where to
outsource the distribution activity and where to
handle it by itself.
• For eg:
– To expand sales rapidly- Outsourced is a good
option.
– To expand gradually- Study the market dynamics
properly & shoulder large part of distribution
activities itself.
 Value enhancement

• Distribution function adds immense value

to the end product
• It complements the form utility by providing
the time and possession utility
• Complete the consumption function
• Example: Large network of Maruti Udyog
ltd.
 Distribution Channel Strategy
• Distribution strategy involves the choices made by company to
achieve objectives set forth in the overall strategy of the
company.
• The major domains across which distribution strategy is framed
includes:

– Setting distribution objectives in terms of the consumer requirements

– Finalizing the activities that are required to achieve the channel objective.

– Organizing all the activities so that all are shared among the different entities of
the channel to make distribution fast.

– Developing policy guidelines for the smooth functioning of channel.

 Setting Distribution Objective

• Distribution objectives are set in terms of

the service output demands of the target
customers.
• Can achieve greater differentiation through
setting high levels of channel objectives
that would delight the customers.
 Finalizing Channel Activity

• Identification of activities which are first

step in channel activity like ‘zero waiting
time’.

• While finalizing the set of activities

infrastructural and market related
constraints have to be considered.
 Organizing the channel activities

• Some critical activities such as payment

collection, dispatching from the factory,
etc. are always tightly controlled by the
company.

• The more the company is willing to

outsource, the less the overheads, and
hence the lower the risk when the demand
fluctuates.
DISTRIBUTION CHANNEL MANAGEMENT

• Distribution channel management encopasses

all activities dealing with the distribution function
of a firm
• It invovles implementing the distribution strategy
of the firm
• There are two phases
– The ex ante phase
– The ex poste phase
Ex ante Ex poste
phase phase
 PHRAMACEUTICALS DISTRIBUTION
CHANNEL STRUCTURE
• Distribution of pharmaceutical in India is mostly
decentralized and hence quite complex
• Products in India move through a chain of
intermediaries unlike in west
• Market is essentially volume driven rather than
value driven
• Strict government regulations hinder the change
in the distribution structure
 MANUFACTURER

C&F/DEPOT/SUPER STOCKIST

STOCKIST

INSTITUTION HOSPITAL
WHOLESALER

RETAILER/CHEMIST

PATIENT
THANK YOU!!