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Distribution

Distribution. Chapter 13. What is distribution?. Determining the best methods and procedures so that prospective customers can locate, obtain, and use a business’s products and services. Free Enterprise. Is based on the matching of production and consumption decisions.

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Distribution

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  1. Distribution Chapter 13

  2. What is distribution? • Determining the best methods and procedures so that prospective customers can locate, obtain, and use a business’s products and services

  3. Free Enterprise • Is based on the matching of production and consumption decisions. • Is based on matching supply and demand between consumer and producer.

  4. Utilities affected by Distribution • Economic utility – amount of satisfaction a consumer receives from using a product or service • Time utility: makes sure that the product is available when needed • Place utility: makes sure that the product is available at the right place to be sold to customer

  5. Channel of distribution • All the organizations and individuals who participate in the movement of goods from producer to consumer

  6. Distribution adjusts the following differences • Differences in quantity • Differences in assortment (products from many different manufacturers • Differences in location (customers typically do not live next to the producer) • Differences in timing of production and consumption by consumer

  7. How does distribution save time and $$$$ • Consumers do not have to spend time locating products • Cost to have products shipped to you • Through marketing distribution there are experts getting the best prices to keep costs down

  8. Types of distribution channels • Direct – the producer sells the product directly to the customer Example: Farmer to customer Used when: 1. Small number of consumers 2. Consumers in a small geographic area 3. Product is complex – meet specific needs

  9. Indirect distribution • There are other businesses (intermediaries) between the producer and the customer Example: Levis Manufacturing to Warehouse to Retailer to Customer

  10. Wholesalers • Are companies who assist with distribution activities between businesses. • Used to help producers with marketing tasks to keep costs down • Main activities are: • Buying • Selling • Transporting • Storing

  11. Rack Jobbers and Drop Shippers • Rack jobbers manage inventory and merchandising for retailers by counting stock, filling it when needed, and maintaining store displays • Example: Pepsi, Frito Lay • Drop shippers own the goods they sell but do not physically handle them • Example: Coal, lumber, chemicals

  12. Retailers • Sell typically to the consumer directly for profit • Buy their goods from manufacturer or wholesaler • Display their products so customers can evaluate them • Do promotions for their products/services

  13. Types of retailers • Brick and Mortar retailers – sell goods to the customers from their own physical stores • Examples:

  14. Types of retailers • Automatic retailers – Vending machines • Direct mail and catalog retailers

  15. Retailers (Cont.) • TV home shopping – • Online Retailing –

  16. How is retailing changing? • More retail stores offering on-line shopping • Many retail stores have catalogs to order from • Speed and convenience in retail stores is important • Customer service is very important

  17. Agents • Do not own the goods they sell • Act as intermediaries by bringing buyer and seller together • Real Estate Agents • Food Brokers

  18. Factors that affect distribution decisions. • Multiple channels – Selling to both industrial and consumer users • Selling cookies at Kroger (consumer) and to airlines (industrial) for customers on plane • Control vs. cost – Determining the control they want to keep over the distribution process and the costs and profitablity

  19. Exclusive Distribution • Protected territories for distribution of products in a given geographic location Automobile dealers Franchises (McDonalds)

  20. Selective Distribution • A limited number of outlets in a geographic area are used to sell the product • Maintain the image of the product • Ralph Lauren – Top department stores (Macy’s) • Liz Claiborne – Top department stores

  21. Intensive Distribution • The use of all suitable outlets to sell a product - Wal-Mart, Kroger, drugstores, etc. • Hanes socks • Household products • Types of foods

  22. Distribution factors (continued) • E-Commerce – using the Internet to sell products to customers and industrial buyers • Foreign Markets – Look at cultural distributions in other countries to sell how are different • GM sells automobiles through franchised retail outlets in US • In Taiwan, they own their own retail outlets.

  23. Physical Distribution • Includes transporting, storing and stock handling of products. • Trucking is the most frequently used transportation • Advantages: Convenient, can deliver to door, reduces packaging cost, rapid delivery of goods • Disadvantages: Traffic jams, equipment breakdowns, traffic accidents, size and weight restrictions

  24. Rail transportation Move heavy and bulky freight such as coal, steel, and lumber Fishyback – shipping loaded truck trailers on a ship Piggyback – shipping loaded truck trailers on railroad flatcars

  25. Railroads • Advantages – relatively low cost, can ship large quantities, seldom stopped by bad weather • Disadvantages – Lack of flexibility, cannot reach as many places

  26. Water transportation • Oldest method of travel • Advantages: Lowest cost • Disadvantages: slowest, hard to get to port location

  27. Pipelines • Used to transport oil and natural gas (200,000 miles of pipeline in U.S.) • Advantages: operation costs are small, products move slowly and continuously, not affected by weather • Disadvantages: High initial expense to build

  28. Air Transportation • The fastest mode of transportation Advantages: Speed of delivery, reduces inventory and storage costs Disadvantages: Very expensive, mechanical breakdowns, delays caused by bad weather

  29. Transportation service companies • U.S. Postal Service – run by government, small packages by parcel post or fourth-class mail

  30. Express Carriers • Deliver small, lightweight packages up to 150 pounds, offer overnight and regular delivery. Faster the delivery time = more expensive • UPS • FED Ex

  31. Inventory Storage • Private warehouses – designed to meet the specific needs of the customer (TTAI having a warehouse to store their parts) • Public Warehouse – offer storage and handling to individuals and companies (boat storage, residential, commercial) Example: A to Z Self Storage

  32. Distribution center • Speeds delivery of goods and minimizes storage costs. • Example: Wal-Mart Distribution Center in London

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