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Place (Distribution) C H A N N E L S O F D I S T R I B U T I O N D I S T R I B U T I O N S T R A T E G Y S U P P L Y C H A I N M A N A G E M E N T / L O G I S T I C S What is a Place? The 4th component of 4 P’s Product Price Promotion Place Place refers to the distribution of a product – how it gets from producer to customer. The Objective of Place (Distribution) To make products available in the right place at the right time in the right quantities What are Channels of Distribution This refers to the chain of intermediaries* a product passes through from producer to final consumer * an intermediary is someone between the producer and consumer – e.g. wholesaler or retailer Types of Intermediaries Two-intermediaries channel Single-intermediary channel Direct selling to consumer Functions of Distribution Channels Provide a link between production and consumption Helps to gather market information Communicate promotional offers Find and communicate with perspective buyers Physical distribution – transporting /storing Financing – other parties finance the stock Recent trends in distribution channels Increased use of internet for direct selling of a product (internet banking, online insurance) Large supermarket chains acting as wholesalers as well as retailers, by holding large amounts of stock in their own warehouses Businesses using a variety of different channels (hotels might sell directly but also use travel agents) Increasing integration of services – packages are sold to consumers (flights, car hire, accommodation) Factors influencing the distribution decision Costs and Benefits Market (mass or niche) Time Distribution Decision Laws Type of product (perishable or fast moving) Channel Strategy When deciding on a appropriate channel strategy, a business must consider: Should the product be sold directly to consumers? Should the product be sold through retailers? How long should the channel be (that is, how many intermediaries)? Where should the product be made available? Should electronic methods of distribution be used? How much will it costs to keep the stock of products on store shelves and in channel warehouses? How much control does the business want over the marketing mix? How will the chosen distribution channel support the other components of the marketing mix? Channel Strategy The channel strategy must be integrated with the marketing objectives of the business. For example, if the aim is to secure a niche market with a high quality image product (e.g. branded cosmetics), then selling it through street vendors will not achieve this objective. If, however, the marketing aim is to achieve maximum sales and distribution coverage (e.g. candy), then selling through a few carefully and exclusive food retailers will not be successful. As with all components of the marketing mix, distribution channel strategy must be clearly linked to marketing objectives and to the other components of the mix for an effective and convincing overall marketing strategy to be developed. Supply Chain Management (HL) Supply chain management refers to managing the network of businesses that are involved in the provision of products to the final consumers Supply Chain Management The purpose of SCM is to ensure that products are consistently made available to consumers by integrating supply and demand management across all of the companies involved. This logistical process is complex and is now aided by specialised software. FUNCTIONS OF SMC Stock Control Coordination of Suppliers network SMC Functions Organize Transportations Monitor Quality Control Supply Chain Management Benefits This process involves many activities. SCM can increase the efficiency of a firm’s supply chain by: Ensuring all supply companies are kept well informed of the changing material needs of the business and prevent misakes Making appropriate transport arrangements for materials and for finished goods Reducing the total numbers of suppliers Planning production to meet consumer demand Ensuring adequate supplies are delivered, on time, to retailers or other intermediaries Tool for achieving lean production( mini input for max output), help to reduce wastage and inefficiencies. LIMITATIONS OF SMC Globalization results in more complex sourcing networks established – hard to deal with efficiently Time lags may lead to delays in product delivery to customers in a cost effective way Greater interdependence means that any problem in the supply chain can cause major disruptions. Increased need for partners to share information and collaborate – may lead to conflicts. Student Task http://www.bbc.co.uk/news/business-11161723 Watch this BBC video which illustrates the changing distribution patterns in fashion retailing from retailers to online retail. Answer the question below. Discuss the impacts of technology on the future of distribution channels. minimum half a page answer.