While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency of a distribution channel are increasing or carefully picking the channel intermediaries, increasing the focus on supply chain management or consolidating the various distribution channels into a single, strong channel.
A distribution channel moves products or services from a business to the end user, regardless of whether that end user is a consumer or a business. A distribution channel is made up of a set of independent organizations that work to make a product or service available for sale and use.
Distribution channels normally consist of either direct-to-consumer sales such as direct mail and Internet sales, or sales through physical retail locations such as department stores or smaller stores.
Increasing Distribution Channel Efficiency
While many companies focus on increasing the number of distribution channels, it's possible to earn more revenue and profit through a focus on increasing the efficiency of a current distribution channel.
A company can increase the efficiency of a distribution channel by maximizing the benefit of channel intermediaries. Intermediaries are the additional companies that take a manufacturer's product and sell it to a company, such as a distributor or a retailer. Since these companies are experts at what they do, intermediaries can increase sales volumes and decrease costs.
Increasing supply chain management also increases distribution channel efficiency. Through dedicated supply chain managers, a company can reduce costs related to inventory, improve delivery and enhance product availability.
Another way to increase efficiency is to consolidate various distribution channels into a single, strong channel. For example, a manufacturer can acquire a distributor and a retailer, putting two distribution channels under a single umbrella.