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Designing Distribution Network

in a Supply Chain

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Distribution Channel

Distribution channel is the route by which a

company distributes its goods.

It consist of a set of people and

firms(Intermediaries) involved in the transfer ofownership of the product from the producer to

the ultimate consumer or industrial users.

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Role of distribution channel

Time Utility is created when marketing

channel have product & services available for

sale,whenthe consumer wants to buy them.

Place Utility-is created when product andservices are available whereconsumer want

to buy them.

Ownership or Possession Utility

is createdwhen the title to the goods passes from the

manufacturer or intermediary channel member

to the buyer

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Functions performed by Distribution

Channels

Physical distribution functions

Breaking Bulk

Accumulating Bulk

Creation of assortments Reducing transactions

Transportation & Storage

Communication functions Facilitating functions

Credit Services

Risk taking

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Designing Distribution Channels

Specifying the role of distributions.

Selecting the type of channel.

Determining intensity of distributions.

Choosing specific channel members

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Channel Design Process

Establishing the channel objective Formulating a channel strategy

Evaluating alternative channel structure

Selecting the appropriate structure

Determining alternative for individual channel

members

Evaluating & Selecting individual channel

members

Measuring & evaluating channel performance

Evaluating alternatives when performance

objectives are not met or attractive new

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Consideration of Channel

Design

Market Coverage Objective

Product Characteristics Objective

Customer service Objective

Profitability Objective

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Market Coverage Objective

Customer buying behavior

The type of distribution required

Channel structure

The degree of control necessary for success

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Product Characteristics

Objective Product value Technicality of product

Degree of market acceptance

Degree of substitutability Product Bulk

Product Perish ability

Degree of market concentration Seasonality

Width & Depth of Product line.

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Customer Service Objective

Availability

Order Cycle

Communication

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Profitability Objective

Corporate cost of money applied to accounts

receivables

Corporate opportunity cost of money used as a

charge for all other assets acquired by eachchannel alternatives.

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Design options for distribution

network

Manufacturer storage with direct shipping

Manufacturer storage with direct shipping and

in-transit merge

Distributor storage with package carrier

delivery

Distributor storage with last mile delivery

Manufacturer / distributor storage withcostumer pickup

Retail storage with customer pickup

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Manufacturer storage with direct

shipping

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direct shipping and in-transit

merge

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Distributor storage with

package carrier delivery

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Distributor storage with last mile

delivery

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Manufacturer / distributor

storage with costumer pickup

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Retail storage with customer

pick-up

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End of Lecture