UNIVERSITY SCHOOL OF MANAGEMENTKURUKSHETRA UNIVERSITY,KURUKSHETRA

PROJECT REPORTONDISTRIBUTION NETWORK PLANNING,CHANNEL MANAGEMENT DECISIONS ANDCHANNEL INTEGRATED SYSTEMS

SUBMITTED TO: SUBMITTED BY : MS Gurmeet kaur Tamanna Arora(17) Amandeep kaur(63) Manisha Kalra(10)

DISTRIBUTION :Distribution refers to the steps taken to move and store a product from the supplier stage to a customer stage in the supply chain.

DISTRIBUTION NETWORK: A distribution network is an institution through which goods and services are marketed. Network give place and time utilities to consumers. In order to provide these and other services, channels charge a margin. The longer the Network the more margins are added. a system where all distribution decisions, including the purchasing of raw materials and parts, as well as the movement of finished products, are taken globally Why Network Planning is necessary : Find the right balance between inventory, transportation and manufacturing costs, Match supply and demand under uncertainty by positioning and managing inventory effectively, Utilize resources effectively by sourcing products from the most appropriate manufacturing facility

STEPS IN DISTRIBUTION NETWORK PLANNING:Step 1: Analyzing Consumer Needs:- Cost and feasibility of meeting needs must be considered Step 2: Setting Channel Objectives:- Set channel objectives in terms of targeted level of customer service. Many factors influence channel objectives.Step 3: Identifying Major Alternatives.Step 4: Evaluating Major Alternatives:- Evaluate the major alternatives like Economic criteria, Sales, costs, profitability, Control issues, Adaptive criteria.key decisions when designing a distribution network: 1. Will product be delivered to the customer location or picked up from a preordained site? 2. Will product flow through an intermediary (or intermediate location)?

Distribution network designs : 1. Manufacturer storage with direct shipping 2. Manufacturer storage with direct shipping and in-transit merge 3. Distributor storage with package carrier delivery 4. Distributor storage with last mile delivery 5. Manufacturer / distributor storage with costumer pickup 6. Retail storage with customer pickup Manufacturer Storage with Direct ShippingIn this option, product is shipped directly from the manufacturer to the end customer, bypassing theretailer (who takes the order and initiates the delivery request). This option is also referred to as dropshipping. All inventories are stored at the manufacturer. Information flows from the customer, via theretailer, to the manufacturer, while product is shipped directly from the manufacturer to customers as

Manufacturer Storage With Direct Shipping and In-Transit MergeUnlike pure drop shipping where each product in the order is sent directly from each manufacturer tothe end customer, in-transit merge combines pieces of the order coming from different locations sothat the customer gets a single delivery

Distributor Storage with Carrier Delivery: Under this option, inventory is not held by manufacturers at the factories but is held by distributors /retailers in intermediate warehouses and package carriers are used to transport products from theintermediate location to the final customer. Amazon.com as well as industrial distributors like W.W.Grainger use this approach combined with drop shipping from a manufacturer. Information andproduct flows when using distributor storage with delivery by a package carrierDistributor Storage with Last Mile DeliveryLast mile delivery refers to the distributor / retailer delivering the product to the customer's homeinstead of using a package carrier. Webvan, Peapod, and Alberston's have used last mile delivery inthe grocery industry. Unlike package carrier delivery, last mile delivery requires the distributorwarehouse to be much closer to the customer, increasing the number of warehouses required. Thewarehouse storage with last mile delivery networkManufacturer or Distributor Storage with Consumer PickupIn this approach, inventory is stored at the manufacturer or distributor warehouse but customers placetheir orders online or on the phone and then come to designate pickup points to collect their orders.Orders are shipped from the storage site to the pickup points as needed

Retail Storage with Customer PickupIn this option, inventory is stored locally at retail stores. Customers either walk into the retail store orplace an order online or on the phone, and pick it up at the retail store. Examples of companies thatoffer multiple options of order placement include Albertsons.com.

Factors Influencing Distribution NetworkAt the highest level, performance of a distribution network should be evaluated along two dimensions: 1. Customer needs that are met 2. Cost of meeting customer needs The customer needs that are met influence the company's revenues, which along with cost decide the profitability of the delivery network. Following services should be provided to the customers by a good distribution network: Response time Product variety Product availability Customer experience Order visibility Returnability Response time is the time between when a customer places an order and receives delivery. Productvariety is the number of different products / configurations that a customer desires from thedistribution network. Availability is the probability of having a product in stock when a customerorder arrives. Customer experience includes the ease with which the customer can place and receivetheir order. Order visibility is the ability of the customer to track their order from placement todelivery. Returnability is the ease with which a customer can return unsatisfactory merchandise andthe ability of the network to handle such returns.It may seem at first that a customer always wants the highest level of performance along all thesedimensions. In practice, however, this is not always the case. Customers ordering a book atAmazon.com are willing to wait longer than those that drive to a nearby Borders store to get the same

book. On the other hand, customers can find a far larger variety of books at Amazon compared to theBorders store.4Firms that target customers who can tolerate a large response time require few locations that may befar from the customer and can focus on increasing the capacity of each location. On the other hand,firms that target customers who value short response times need to locate close to them. These firmsmust have many facilities, with each location having a low capacity.

DISTRIBUTION CHANNEL MANAGEMENT: CONTENTS in channel management: Definitions Characteristics of Channel of Distribution Functions of Channel of Distribution Classification / Types of Channel of Distribution Channel Systems Channel Design Decisions Channel Management Decisions Physical Distribution and Logistics Management Distribution Channel in Pharmaceutical industry

Channel of distribution have a broad impact on the Marketing program of any firm, because it is one of the most important component of Marketing-Mix. The other components of marketing mix are Product, Price and Promotion. Most manufacturers of products use marketing intermediaries to sell their products to the consumers. The marketing intermediaries make up a marketing channel (distribution channel or a trade channel). The marketing channel overcomes the time, place, and possession gaps that separate gods and services from those who need or want them. Definition The main objective of distribution strategy is getting the right goods to the right place at the right time at the least possible cost. In other words we can also define distribution channel as a way of moving goods from the point of production to the point of consumption. It can also be defined as an organized network of agencies and institutions, which in combination perform all the activities required to link producers with end users and users with the producers to accomplish the Marketing task. Characteristics of distribution channel cannot be over emphasized by any stretch of our imagination because without distribution channel marketing task would have remained incomplete. Following are few main characteristics of distribution channel: Characteristics It requires a minimum of buyer and a seller. Besides this it may include other middleman. A basic transaction in distribution channel is the exchange of ownership / title of goods. Middlemen play an very important role in transfer of ownership / title of goods. Distribution channel creates transactional efficiency. A distribution channel may be simple or complex. (Handshake agreement or large contracts) Distribution channel may be long or short depending on the companys marketing requirements as well as the product of the company. Classification of Channel of distribution: Own Retail shops Personal selling (door to door) Mail order selling Automatic vending Franchised shops Telephone selling (Telemarketing) Exclusive Stores/Specialty Stores E-marketing

Classification/Types of Channel of Distribution Indirect Channels Merchandise Agents and Brokers Works on Commission basis Merchandise Wholesalers or trade channels Manufacturer/ProducerConsumer/End User Manufacturer/ProducerWholesalerConsumer/End User Manufacturer/ProducerRetailerConsumer/End User Manufacturer/ProducerWholesaler/DistributorRetailerConsumer/End User Manufacturer/ProducerWholesaler/DistributorSemi-wholesalerRetailerConsumer/End User Manufacturer/ProducerAgent/BrokerRetailerConsumer/ End User Manufacturer/Producer Agent/Broker Wholesaler Retailer Consumer/End User Channel Levels: A zero level channel is direct marketing between producer and consumer.In one level channel a retailer is between producer and consumer.Two level channels have wholesaler and retailer.Still longer channels also exist in some industries. Channel Systems: Vertical Marketing SystemA distribution channel structure in which producers, wholesalers and retailers act as a unified system. One channel member owns the other, has contracts with them and the power that they all co-operate. The economies are achieved through size, bargaining power and elimination of duplicated services. Horizontal Marketing SystemA channel arrangement in which two or more companies at one level join together to follow a new marketing opportunities where they can combine there resources and use they optimally. Hybrid Marketing Systems:Multi-channel distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments.Factors affecting choice of Distribution channel Market Factors: Nature of MarketNumber of Potential CustomersGeographic ConcentrationOrder SizeProduct Factors:Unit valuePerishable GoodsTechnical Nature of ProductsCompany Factors: Financial ResourcesManagerial CapabilityDesire for Channel ControlService provided by the sellerMiddleman Factors:Product launchPromotional schemeMarket Information Environmental Factors: Economic conditionsTechnological inventionsSocio-cultural developmentsPolitical and Legal Ethical factors and Rival/Competitors channelIdentifying the major alternatives: Types of intermediaries Number of intermediaries (Intensive / Exclusive / Selective) Responsibilities of each channel member Evaluating the major alternatives: Economic criteria Control criteria Adaptive criteria Channel Management Decisions :Selecting the Channel MembersMotivating the Channel MembersEvaluating the Channel MembersThe channel management decisions include selection of channel members, motivating the channel members to promote and achieve sales, and evaluation and modification of arrangements.Modifications of distribution system are required when the current system is not working as planned and not delivering the desired results.Physical Distribution and Logistics Management: Marketing logistics involves planning, implementing and controlling the physical flow of materials, final goods and related information from the point of origin to the point of consumption to meet the customer requirements at the profit. Logistics goal is to provide customer satisfaction and customer service, speedy and flexible delivery system, presorting and pre-tagging of merchandise, order tracking information and willingness to take back or replace defective goods. Main objective of logistics system is to provide customer satisfaction at the least cost.Major Logistics Functions Order ProcessingIt includes checking customers credit, checking of stock, order to ship, bills to customers, update inventory records and send production order for new stocks WarehousingOwned / RentedTypes/ Number of WarehousesLocation of WarehousesInventory Inventory Management (Ordering cost and Carrying cost)Just in time inventoryTransportationRailTrucksShipsPipelineAir