Distribution Management: Definition, How It Works, and Advantages

What Is Distribution Management?

Distribution management refers to the process of overseeing the movement of goods from supplier or manufacturer to point of sale. It is an overarching term that refers to numerous activities and processes such as packaging, inventory, warehousing, supply chain, and logistics.

Distribution management is an important part of the business cycle for distributors and wholesalers. The profit margins of businesses depend on how quickly they can turn over their goods. The more they sell, the more they earn, which means a better future for the business. Having a successful distribution management system is also important for businesses to remain competitive and to keep customers happy.

Key Takeaways

  • Distribution management manages the supply chain for a firm, from vendors and suppliers to manufacturer to point of sale, including packaging, inventory, warehousing, and logistics.
  • Adopting a distribution management strategy is important for a company's financial success and corporate longevity.
  • Distribution management helps keep things organized and keeps customers satisfied.

Understanding Distribution Management

Distribution management is critical to a company's ability to successfully attract customers and operate profitably. Executing it successfully requires effective management of the entire distribution process. The larger a corporation, or the greater the number of supply points a company has, the more it will need to rely on automation to effectively manage the distribution process.

Modern distribution management encompasses more than just moving products from point A to point B. It also involves gathering and sharing relevant information that can be used to identify key opportunities for growth and competitiveness in the market. Most progressive companies now use their distribution forces to obtain market intelligence which is vital in assessing their competitive position.

There are basically two types of distribution: commercial distribution (commonly known as sales distribution) and physical distribution (better known as logistics). Distribution involves diverse functions such as customer service, shipping, warehousing, inventory control, private trucking-fleet operations, packaging, receiving, materials handling, along with plant, warehouse, store location planning, and the integration of information.

The goal is to achieve ultimate efficiency in delivering raw materials and parts, both partially and completely finished products to the right place and time in the proper condition. Physical distribution planning should align with the overall channel strategy.

Advantages of a Distribution Management Strategy

Aside from keeping profits up, there are many reasons a company may want to use a distribution management strategy. First, it keeps things organized. If there was no proper management system in place, retailers would be forced to hold stock in their own locations—a bad idea, especially if the seller lacks proper storage space.

A distribution management system also makes things easier for the consumer. It allows them to visit one location for a variety of different products. If the system didn't exist, consumers would have to visit multiple locations just to get what they need.

Putting a proper distribution management system in place also alleviates any potential for errors in delivery, as well as the times products need to be delivered.

Businesses can adopt distribution management strategies through electronic platforms, which can help simplify the process and boost product sales.

Distribution Management as a Marketing Function

The fundamental idea of distribution management as a marketing function is that the management of distribution happens in an ecosystem that also involves the consideration of the following:

  • Product: Not always a tangible object, product can also refer to an idea, music, or information.
  • Price: This refers to the value of a good or service for both the seller and the buyer, which can involve both tangible and intangible factors, such as list price, discounts, financing, and likely response of customers and competitors.
  • Promotion: This is any communication used by a seller to inform, persuade, and/or remind buyers and potential buyers about the seller’s goods, services, image, ideas, and the impact it has on society.
  • Placement: This refers to the process that ensures the availability, accessibility, and visibility of products to ultimate consumers or business users in the target channels or customers where they prefer to buy.

Effective distribution management involves selling your product while assuring sufficient stocks in channels while managing promotions in those channels and their varying requirements. It also involves making sure a supply chain is efficient enough that distribution costs are low enough to allow a product to be sold at the right price, thus supporting your marketing strategy and maximizing profit.

How Does Distribution Management Impact Business?

Distribution management is a key leg in the business cycle for both distributors and wholesalers, with company sales and ongoing profitability impacted by how quickly and efficiently a company can sell and distribute their products.

What Activities Occur During Distribution Management?

Distribution management involves moving finished goods from a manufacturer or supplier to the so-called end user. The process includes warehousing, inventory management, packing, shipping, and delivery.

What Are the Main Distribution Channels?

Distribution channels are the intermediaries through which goods or services pass on their way to the final buyer or consumer. The main channels include wholesalers, retailers, distributors, and in some cases, the internet.

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