The Distribution function looks after all the activities that facilitate efficient flow of raw materials, in-process inventory and finished goods from the point of procurement to the ultimate consumer.
The distribution planning therefore, involves the systematic decision making regarding the physical movement of goods and services from a producer to a consumer, as well as the related transfer of ownership (or) rental of them. It encompasses transportation, inventory management and customer interactions. The main distribution players in the chain called intermediaries are wholesalers, store-owners and marketing specialists like transportation firms that are acting in their roles as facilitators between manufacturers/service providers and the consumers.
The main activities in this function are as follows:
- The separation of merchandise into different categories.
- The process of making sure that a product is available when and where it is desired. Different forms are:
- Intensive Distribution: Where the retailer makes the item available in as many stores as possible.
- Exclusive Distribution: Where one store in a given market carries the item.
- Selective Distribution: Where the item is available in a selected few stores in a market area.
Retailers decide the level of exposure every specific product in the entire merchandise should receive at the store and regional level. With more outlets, the no. of stores to which that product must reach increases and thus it affects the final cost of the product.
For complete distribution planning of activities, retailers use statistical methods and models to assist management in choosing and assessing the values of various distribution channels. This is also used in determining store and warehouse locations and logistics for inventory purposes.
A simple example of thought process behind distribution planning:
For perishable items it is preferable to transfer goods directly from the suppliers to the stores instead of the normal route of; supplier transporting goods to the warehouse and then the warehouse transferring to various stores. This is known as DSD (Direct Store Delivery).
