KKH/DM/BU-1

DISTRIBUTION MGT (D.M.)

D.M. HAS 2 PARTS :
DISTRIBUTION CHANNEL (DC) & PHYSICAL
DISTRIBUTION/ MARKETING LOGISTICS (ML)
DISTRIBUTON CHANNEL (MARKETING
CHANNEL/TRADE CHANNEL
IS A SET OF INTERDEPENDENT
ORGANISATIONS INVOLVED IN THE PROCESS
OF MAKING A PRODUCT/SERVICE AVAILABLE
FOR USE/ CONSUMPTION.
www.a2zmba.com

KKH/DM/BU-2

ML CONSISTS OF DELIVERING
COMPLETED PRODUCTS TO CHANNEL
INTERMEDIARIES & END USERS /
CONSUMERS.
FUNCTIONS & FLOWS IN MARKETING
CHANNELS
(A) MARKETING CHANNEL MEMBERS
(E.G. MANUFACTURERS, WHOLESALERS,
RETAILERS, BANKS/FIN.INSTITUTIONS,
TRANSPORT CARRIERS, ETC) DO ONE OR
MORE OF THE FOLLOWING FUNCTONS /
TASKS / WORK.
www.a2zmba.com

KKH/DM/BU-3

(i) PROMOTION: TO COMMUNICATE ABOUT

PRODUCTS, TO GENERATE DEMAND/ATTRACT
CUSTOMERS. IT INCLUDES ADS,S.P., PERSONAL
SELLING, D.M., PUBLICITY.
(ii) NEGOTIATION: AGREEMENT BETWEEN A BUYER
& A SELLER, SO AS TO TRANSFER
OWNERSHIP/POSSESSION.
(iii) PHYSICAL DISTRIBUION: PHYSICAL
FLOW/MOVEMENT OF GOODS FROM
MANUFACTURER TO FINAL CUSTOMER.
IT INCLUDES MANY ACTIVITIES :
TRANSPORTATION, INVENTORY MGT.,
WAREHOUSING, ORDER PROCESSING / CUSTOMER
SERVICE, ETC.
www.a2zmba.com

KKH/DM/BU-4

(iv) INFORMATION : COLLECTING & SPREADING

MARKET INFO.I.E. CUSTOMERS, COMPETITORS,
ENVIRONMENT.
(v) FINANCING / CREDIT / PAYMENT:
EXTENDING CREDIT TO CUSTOMERS, WHO PAY
THEIR BILLS THRU BANK / FIN.INSITUTIONS OR
DIRECTLY TO SUPPLIERS
(vi) AFTER SALES SERVICE: DEPENDING UPON
SERVICE/PRODUCT,CUSTOMERS NEED
PREVENTIVE MAINTENANCE/REPAIRS
DURING/OUTSIDE WARRANTY PERIOD.
(EG: 2 WHEELERS, GEN. SETS)
www.a2zmba.com

KKH/DM/BU-5

DEPENDING ON WHO CAN DO ABOVE

FUNCTIONS EFFICIENTLY, THE
MANUFACTURER SHIFTS/SHARES SOME
FUNCTIONS WITH INTERMEDIARIES (EG
STORAGE/INVEN.CARRING, FINANACING,
PROMOTION)
(B) FLOWS IN MARKETING CHANNEL.
A FLOW IS THE MOVEMENT OF
FUNCTIONS/TASKS PERFORMED BY
CHANNEL MEMBERS, AS SHOWN.
www.a2zmba.com

( i) P R O M O T I O N F L O W /M O V E M E N T
M A N U F 'E R

( ii) N E G O T I A T I O N F L O W

( iii) P H Y S I C A L F L O W /D I S T R I B U T I O N

www.a2zmba.com

KKH/DM/BU-6

( iv ) T I T L E /O W N E R S H I P F L O W
M A N U F 'E R

( v ) I N F O R M A T I O N F L O W

( v i) O R D E R I N G F L O W
M A N U F 'E R

( v ii) P A Y M E N T F L O W

www.a2zmba.com

KKH/DM/BU-7

KKH/DM/BU-8

FLOWS / MOVEMENTS IN CHANNEL ARE

GROUPED AS
(A) FORWARD FLOWS ARE PROMOTION,
PHY.DISTRIN, & OWNERSHIP/TITLE.
(B) BACKWARD FLOWS ARE ORDERING &
PAYMENT.
(C) BOTH DIRECTION FLOWS / MOVEMENTS ARE
INFORMATION, NEGOTIATION & FINANCING.
www.a2zmba.com

KKH/DM/BU-9

ANALYSING MARKETING CHANNEL

STRUCTURES
MARKETING CHANNEL STRUCTURES VARY
BY
(1) CHANNEL LEVELS/CHANNEL LENGTH
WHICH IS BASED ON NUMBER OF
INTERMEDIARIES &
(2) DEGREE OF SPECIALISATION IN
FUNCTIONS / FLOWS, AS SHOWN
HEREAFTER.
www.a2zmba.com

BASED ON CHANNEL LENGTH/LEVELS

DIFFERENT TYPES OF CHANNEL STRUCTURES
ZE R O
LE VE L
M A N U F 'E R

D IR E C T
M A R K E T IN G
D IR E C T S E L L IN G
(Z E R O IN T E R M E D IA R IE S )

O NE
LE VE L
M A N U F 'E R

TW O
LE VELS

THR E E
LE VE LS

M A N U F 'E R

M A N U F 'E R

R E T A IL E R
R E T A IL E R

D IR E C T
C H A N N E L
www.a2zmba.com

KKH/DM/BU10

MULTI CHANNEL MATRIX STRUCTURES

KKH/DM/BU-11

(BASED ON SPECILISATION OF FUNCTIONS)

MANUFACTURER

D IR E C T
CHANNEL

I N D IR E C T
CHANNEL

NOTE : INDIRECT CHANNELS ARE TYPICALLY USED FOR CONSUMER

MARKETING (EXCEPT B2C) & DIRECT / MATRIX CHANNEL
www.a2zmba.com
STRUCTURES ARE USED MORE
IN INDUSTRIAL MKG.

KKH/DM/BU12

CRITERIA FOR HARMONIOUS RELATIONSHIP

CONVERG ENT
D IV E R G E N T
M IS U N D E R S T O O D
R E L A T IO N S H IP

H A R M O N IO U S
R E L A T IO N S H IP

A C R IM O N IO U S
R E L A T IO N S H IP

M IS M A N A G E D
R E L A T IO N S H IP

GOALS
HARMONIOUS RELATIONSHIP EXISTS IF GOALS ARE
CONVERGENT (SIMILAR), & THE PROCESS OF
DELIVERING SERVICE TO CONSUMERS IS EFFICIENT &
EFFECTIVE.
www.a2zmba.com

KKH/DM/BU13

TYPES OF RELATIONSHIPS IN MARKETING

CHANNEL
AD -HOC

O N - G O IN G

A L L IA N C E
R E L A T IO N S H IP

P A R T N E R IN G
R E L A T IO N S H IP

T R A N S A C T IO N
R E L A T IO N S H IP

C O O P E R A T IV E
R E L A T IO N S H IP

www.a2zmba.com

KKH/DM/BU14

1. WHAT IS RETAILING?
IT IS SELLING GOODS / SERVICES TO
FINAL CONSUMERS FOR PERSONAL /
FAMILY USE, NOT FOR BUSINESS USE.
GOODS / SEVICES MAY BE SOLD IN
STORES / SHOPS, STREET, OR
CONSUMERS HOME, BY PERSON, MAIL,
PHONE, INTERNET OR VENDING M/C.

www.a2zmba.com

KKH/DM/BU15

2. IMPORTANCE / ROLE OF RETAILER

* RETAILER IS THE FINAL BUSINESS IN A
CHANNEL, THAT LINKS A MANUFACTURER TO
CONSUMERS.
* RETAILERS PERFORM IMPORTAN ACTIVITIES
THAT INCREASE PRODUCT / SERVICE VALUE BY
20-50% OF FINAL COST OF MERCHANDISE.
RETAILERS ACTIVITIES:
(i) PROVIDING ASSORTMENT,
(ii) BREAKING BULK,
(iii) HOLDING INVENTORY,
(iv) PROVIDING SERVICES.
www.a2zmba.com

3. RETAIL ENVIRONMENT

KKH/DM/BU16

IT IS CHANGING IN INDIA. EG:

SHIFT IN CONSUMPTION HABIT OF OVER 1 BILLION
PEOPLE (DUE TO TV, LIBERALISED ECONOMY &
DEMANDING CONSUMERS)
USD 2.5 BILLION INVESTMENTS (70,000 # EMPLOYMENT)
(IN 10 YRS)
>1000 LARGE / SMALL WORLD CLASS RETAIL STORES IN
INDIA BY 2005.
MULTI-CULTURAL, SOCIO-ECONOMIC DIFFERENCES
(HENCE, PRODUCT-MIX MAY VARY)
COOKING OIL & VANASPATHI CONSUMPTION IS 1/3 OF
RURAL EXPENDITURE ON FMCG PRODUCTS.
URBAN POPULATION IS 30% OF TOTAL POPULATION.
50% OF POPULATION < 20 YEARS AGE.
20% RETAILERS OFFER CREDIT TO CUSTOMERS.
50% TEA CONSUMED INwww.a2zmba.com
RURAL INDIA.

KKH/DM/BU17

MAJOR FACTORS AFFECTING RETAILING

IN INDIA

HIGH REAL-ESTATE COSTS.

ABSURD RENT CONTROL LAWS

(EG - MAHDA 1976 ACT).
HIGH INTEREST COSTS.

UNPLANNED CITIES.

CORRUPTION.

HIGH ELECTRICITY COSTS.

WEAK CONSUMER
LAWS.
www.a2zmba.com

KKH/DM/BU4. RETAIL (ORGN.) STRUCTURES

18
ORGANISATION STRUCTURES DIFFER BASED ON
TYPE / SIZE OF THE RETAILER.
(i) ORG. STRUCTURE OF A SMALL RETAILER

R E T A IL S T R A T E G Y
R E T A IL F O R M A T

OW NER - MANAGER
S T R A T E G IC M G T .

M E R C H A N D IS E M G T
M A R C H A N D IS E ,
A D V . & S A L E P R O M O T IO N
M G R S / F U N C T IO N S
B U Y IN G
IN V E N T O R Y

P R IC E
P R O M O T IO N

O R G A N IS A T IO N S T R U C T U R E
S E L E C T L O C A T IO N S
F IN . C O N T R O L

STORES, HRM
D IS T R IB U T IO N
M G R S / F U N C T IO N S

www.a2zmba.com

A C C O U N T A N T F IN .
C O NTRO LS

KKH/DM/BU19

(ii) ORIGINAL STRUCTURE OF A DEPARTMENT STORE

CHAIN
C H A IR M A N / P R E S ID E N T

V.P.Sr
M E R C H A N D IS E
M E R C H A N D IS E
MGRS

S r. V . P .
STO RES

S r. V . P .
MRKTG

S r. V . P .
HRM

S r. V . P .
F IN

REGN.
V .P .
STO RES

MGR.
A D V .,
SP.EVE NTS

T R A IN
- IN G
P L A C 'T
COMPE
N S A T IO N
CUST.
S E R V IC E

A /C s
EXPN
C ONTROL
IN V E N T ORYCON
M IS

BUYERS
STO RES
MGRS.

www.a2zmba.com

S r . V . P .P L , D IS T
STORES
D IS T R IB U T IO N
M E R C H A N D IS E
P L A N N IN G
STORE
C O N S T R U C T IO N

KKH/DM/BU20

5) RETAIL BASED CHANNEL FORMATS OR TYPES OF

RETAILERS

(i) CONVENIENCE STORE : CONVENIENTLY

LOCATED, SMALL GROCERY STORE HIGH MARGIN,
LIMITED DEPTH, BROAD VARIETY, LOW WAITING TIME.
(ii) SPECIALITY STORE : LIMITED NUMBER OF
PRODUCT LINE WITH GREAT DEPTH OF SELECTION .
PRICES SAME AS DEPARTMENT STORES LOW WAITING
TIME.
(iii) DEPARTMENT STORE : ORGANISED INTO
SEPARATE DEPARTMENTS. FOR DIFFERENT PRODUCTS
MERCHANTISE. EG: CLOTHING, FOOD ITEMS,
APPLIANCES. WIDE VARIETY OF PRODUCTS WITH
MODERATE DEPTH. SPATIAL (SPACE) CONVENIENCE,
LOW WAITING TIME.
www.a2zmba.com

(iv) DISCOUNT STORE :

KKH/DM/BU21

WIDE VARIETY, LESS DEPTH MERCHANTISE, LOW

COST LOCATIONS, LESS SERVICE, LOWER
(DISCOUNTED) PRICES. TARGET CONSUMERS ARE
LOW/MIDDLE INCOME GROUPS.
OTHER TYPES OF RETAILERS ARE SUPER STORES
(20,000-50,000 SQ.FT), SHOPPING MALLS, SUPER
MARKETS (20,000 SQ.FT) SELF-SERVICE FOOD
STORES

6. SHOPPING BEHAVIOUR
(i) SHOPPING NEEDS : MANY PRODUCTS SATISFY
(a) FUNCTIONAL / RATIONAL NEEDS, AND/OR
(b) PSYCHOLOGICAL / EMOTIONAL NEEDS.
www.a2zmba.com

KKH/DM/BU22

(ii) TYPES OF BUYING DECISION

MAKING :
(a) EXTENDED PROBLEM SOLVING
(HIGH RISK & UNCERTAINITY)
(b) LIMITED PROBLEM SOLVING
IMPULSE PURCHASE (MODERATE
RISK &
UNCERTAINITY)
(c) HABITUAL DECISION MAKING (LOW
RISK & UNCERTAINITY)- BRAND
LOYALITY, STORE LOYALITY ARE
EXAMPLES.
www.a2zmba.com

STEPS / STAGES IN STORE SELECTION & BUYING PROCESS

S T A G E S IN
B U Y IN G P R O C E S S

P R E -S T O R E
V IS IT

IN - S T O R E
V IS IT

( U N S A T IS F IE D )
NEED RECOGN IT IO N

NEED
R E C O G N IT IO N

NEED
R E C O G N IT IO N

IN F O R M A T IO N
SEARCH

SEARCH
FO R RET- A IL E R S

SEARCH
FO R MER- C H A N D IS E

EVALUATE

EVALUATE
R E T A IL E R S

EVALUATE
M E R C H A N D IS E

C H O IC E

SELECT A
R E T A IL E R

SELECT
M E R C H A N ID IS E

V IS IT T H E
STORE

PURCHASE
M E R C H A N D IS E
POST PURCHASE
E V A L U A T IO N

www.a2zmba.com

KKH/DM/BU23

KKH/DM/BU24

RETAIL PLANNING & STRATEGIES

CONSIST OF FOLLOWING STEPS
(i) DEFINE BUSINESS MISSION.
(ii) CONDUCT SITUATIONAL AUDIT (SWOT).
(iii) DECIDE OBJECTIVES & GOALS.
(iv) EVOLVE RETAIL STRATEGY.
(v) DEVELOP FINANCIAL STRATEGY.
(vi) PREPARE ACTION PLAN (PERT-CPM)
(vii) IMPLEMENTATION & CONTROL.
www.a2zmba.com

KKH/DM/BU25

RETAIL STRATEGY CONSISTS OF

(a) TARGET MARKET SEGMENTS.
(b) RETAIL FORMAT/RETAIL
MARKETING MIX. IT INCLUDES :
(i) GOODS/SERVICES OFFERED,
(ii) PRICING,
(iii) PROMOTION,
(iv) STORE LOCATION, DESIGN &
VISUAL MERCHANTISE,
(v) CUSTOMER SERVICE
www.a2zmba.com

KKH/DM/BU26

(c) SUSTAINABLE COMPETITIVE

ADVANTAGE.
CAN BE BUILT BY FOLLOWING AREAS:
(i) CUSTOMER LOYALTY,
(ii) LOCATION,
(iii) VENDOR RELATIONS,
(iv) MANAGEMENT INFORMATION &
DISTRIBUTION SYSTEMS,
(v) LOW-COST OPERATIONS.
www.a2zmba.com

MERCHANDISE PLAN
RETAILER PLANS
(a) WHAT TYPE OF MERCHANDISE
(GOODS) TO BUY.
THIS DEPENDS ON RETAIL STRATEGY
3. FACTORS ARE RELEVANT :
(i) VARIETY(BREADTH),
(ii) ASSORTMENT(DEPTH)
(iii) SERVICE LEVEL
www.a2zmba.com

KKH/DM/BU27

KKH/DM/BU28

(c) HOW MUCH TO BUY.

DEPENDS ON : (i) SALES FORECAST - TOP
DOWN, BOTTOM-UP APPROACH &
FORECASTING METHODS.
INVENTORY
(ii)
TURNOVER

NET SALES
AVERAGE INVENTORY AT
RETAIL
THIS CAN BE CALCULATED ON MONTHLY /
QUARTERLY / YEARLY BASIS. RAPID INVENTORY
TURNOVER SHOWS FINANCIAL SUCCESS.
www.a2zmba.com

KKH/DM/BU29

PROCUREMENT & DESTRIBUTION

AFTER MERCHANTISE PLAN IS MADE, PROCUREMENT
FOCUSES ON BUYING MERCHANDISE. IT INCLUDES:
(i)
SELECTING VENDORS/SUPPLIERS,
(ii)
MEETING,NEGOTIATING,
(iii) DEVELOPING RELATIONSHIP.
RETAIL DISTRIBUTION / LOGISTICS
IT IS PHYSICAL FLOW OF MERCHANDISE FROM THE
SOURCE OF SUPPLY TO CUSTOMER.
VENDO R

C USTO M ER

www.a2zmba.com

KKH/DM/BU30

SOME RETAILERS HAVE DISTRIBUTION

CENTER TO STORE BUFFER STOCKS, AS
COST OF SPACE IS LESS.
IF RETAILER HAS FEW STORES, DIRECT
DISTRIBUTION TO STORES IS BETTER.
DISTRIBUTION CENTER ACTIVITIES :
TRANSPORTATION, RECEIVING,
CHECKING, STORING, MARKING, FILLING
ORDERS.
www.a2zmba.com

KKH/DM/BU31

RETAIL (STORE) MANAGEMENT

INCLUDES THE FOLLOWING:
(i) MANAGING STORE EMPLOYEES :
RECRUITING, SELECTING, TRAINING,
MOTIVATING, MEASURING & EVALUATING
PERFORMANCE,
(ii) MANAGING MERCHANDISE,
(iii) CUSTOMER SERVICE,
(iv) INVENTORY CONTROL,
(v) STORE PERFORMANCE EVALUATION.
www.a2zmba.com

KKH/DM/BU32

PERFORMANCE EVALUATION
SYSTEM IS DESIGNED BY H.R.
DEPARTMENT, BUT EVALUATION IS
DONE BY IMMEDIATE SUPERVISOR.
SUBJECTIVE & OBJECTIVE CRITERIA
SHOULD BE USED.
BOTH YEARLY/HALF YEARLY REVIEW +
FREQUENT APPRAISALS ARE DONE.
www.a2zmba.com

KKH/DM/BU33

WHOLESAILING (B2B)
IT INCLUDES SELLING PRODUCTS TO
BUSINESSES LIKE RETAILERS,
INDUSTRIAL & INSTITUTIONAL USERS,
CONTRACTORS & MERCHANTS, BUT NOT
TO HOUSEHOLD CONSUMERS.
WHOLESALER/DISTRIBUTOR SMALL
DIFFERENCE IS IGNORED.
TERMINOLOGIES/TERMS VARY IN
INDUSTRY.
www.a2zmba.com

KKH/DM/BU34

IMPORTANCE OF WHOLESAILING
LARGEST SALES IN WHOLESALE
TRADE.
SALES GROWTH > ECONOMIC
GROWTH.
STEADY GROSS MARGINS.
PERFORM IMPORTANT TASKS/
FUNCTIONS.
www.a2zmba.com

KKH/DM/BU35

FUNCTIONS/TASKS PERFORMED BY
WHOLESALERS/ DISTRIBUTORS.
SELLING & PROMOTING.
BUYING & ASSORTMENT BUILDING.
BULK BREAKING.
WAREHOUSING/STORAGE-INVENTORY
HOLDING.
TRANSPORTATION
FINANCING
RISK BEARING.
MARKET INFORMATION.
www.a2zmba.com

STRUCTURE OF WHOLESAILING

www.a2zmba.com

KKH/DM/BU36

KKH/DM/BU37

DIFFERENT FORMATS / TYPES OF

WHOLESALERS
(A) MERCHANT WHOLESALERS,
INDEPENDENT BUSINESSES, BY
MERCHANDISE, THEY ARE CALLED
JOBBERS,DISTRIBUTORS OR MILL
SUPPLY HOUSES. TWO CATEGORIES:
(i) FULL-SERVICE WHOLESALERS:
THEY CARRY STOCK, HAVE A SALES
FORCE, OFFER CREDIT, ARRANGE
DELIVERIES.
www.a2zmba.com

KKH/DM/BU38

TWO TYPES OF FULL SERVICE

WHOLESALERS
(a) WHOLESALE MERCHANTS SELL
TO RETAILERS &GIVE FULL RANGE
OF SERVICES.
(b) INDUSTRIAL DISTRIBUTORS :
SELL TO MANUFACTURERS, GIVE
SERVICES LIKE STORAGE, CREDIT,
DELIVARY.
www.a2zmba.com

FULL
S E R V IC E
W /S

W /S M E R C H A N T S (S E L L T O R E T A IL E R S )

KKH/DM/BU39

IN D U S T R IA L D IS T R IB U T O R S (S E L L T O , B U S IN E S S
C USTO M ERS)
C A S H & C A R R Y W /S . (S E L L F M C G T O S M A L L
R E T A IL E R S F O R C A S H )
T R U C K W /S (S E L L S E M I P E R IS H A B L E S T O
R E T A IL E R S , H O S P IT A L E S )

L IM IT E D
S E R V IC E
W /S

FORM A TS /
TYPES OF
W HOLES A LERS
(W /S )

(B ) B R O K E R S
(C ) A G E N T S

D R O P S H IP P E R S (O P E A T E H E A V Y E Q U IP T )
R A C K J O B B E R S (S E L L T O D R U G / G R O C E R Y R E T A IL E R S )
M A IL O R D E R W /S (S P E C IA L IT Y F O O D S )
P R O D U C E R S ' C O O P E R A T IV E S (F A R M P R O D U C T S )
M A N U F A C T U R E R 'S R E P S . (A G E N T S )
S E L L IN G A G E N T

(D ) M A N F 'S R E T A IL E R S
B R A N C H O /F s
(E ) M IS C E L L A N E O U S
W /S

P U R C H A S IN G A G E N T
A G R IC U L T U R A L A S S E M B L E R S
P E T R O L E U M B U L K P L A N T S / T E R M IN A L S
A U C T IO N C O M P A N IE S (C A R S , E Q P T S , O T H E R B U S IN E S S E S )
www.a2zmba.com

KKH/DM/BU40

(ii) LIMITED SERVICE WHOLESALERS OFFER

FEW SERVICES TO SUPPLIERS & CUSTOMERS.
FOLLOWING TYPES:

(a) CASH & CARRY WHOLESALERS HAVE

LIMITED FMCG PRODUCTS, SELL TO SMALL
RETAILERS FOR CASH.
(b) TRUCK WHOLESALERS SELL & DELIVER
LIMITED SEMI-PERISHABLE MERCHANDISE TO
RETAIL STORES, HOSPITALS, RESTAURANTS
(c) DROP SHIPPERS OPERATE IN BULK
INDUSTRIES LIKE HEAVY EQUIPMENT TO SHIP
FROM MANUFACTURER TO CUSTOMER.
www.a2zmba.com

KKH/DM/BU41

(b) RACK JOBBERS SELL TO GROCERY &

DRUG RETAILERS, DELIVER, DISPLAY, BILL
FOR GOODS SOLD TO CONSUMERS, KEEP
STOCK RECORDS.

(e) MAIL-ORDER WHOLESALERS.

(f) PRODUCERS CO-OPERATIVES : COLLECT
& SELL FARM PRODUCTS.
(B) BROKERS : BRING BUYERS & SELLERS
TOGETHER, NEGOTIATION HELP, COMMISSION
PAID BY PARTY WHO HIRED THEM. EX: REAL
ESTATE.
www.a2zmba.com

KKH/DM/BU(C) AGENTS : REPRESENT EITHER

42
BUYERS/SELLERS.
(i) MANUFACTURERS REPRESENTATIVES /
AGENTS,
(ii) SELLING AGENTS
(iii) PURCHASING AGENTS
(iv) COMMISSION MERCHANTS.

(D) MANUFACTURERS & RETAILERS BRANCH

OFFICES
(E) MISCELLANEOUS WHOLESALERS
(i) AGRICULTURAL ASSEMBLERS,
(ii) PETROLEUM BULK PLANTS / TERMINALS,
(iii) AUCTION COMPANIES.
www.a2zmba.com

SELECTION & USING WHOLESALERS

KKH/DM/BU43

WHOLESALERS ARE USED WHEN THEY ARE MORE

EFFECTIVE & EFFICIENT IN PERFORMING
IMPORTANT FUNCTIONS/TASKS.
WHOLESALER INDUSTRY IS VULNERABLE.
SELECTION OF WHOLESALERS DEPEND UPON :
(i) GIVING VALUE-ADDED SERVICES AS PER NEEDS
OF MANUFACTURERS & RETAILERS.
(ii) REDUCING COSTS WITH MODERN MATERIAL
HANDLING & I.T.
(iii) FULFILLING COMMITMENTS (AS PER
AGREEMENTS) LIKE SALES VOLUME, TIMELY
PAYMENTS & MARKET INFORMATION.
www.a2zmba.com

WHOLESALE STATEGIES

KKH/DM/BU44

(a) INCREASE PRODUCTIVITY BY BETTER

MANAGEMENT OF INVENTORIES & RECEIVABLES.
(b) IMPROVE DECISIONS ON
(i) TARGET MARKET & RELATIONSHIP BUILDING.
(ii) SELECT PROFITABLE PRODUCTS & SERVICES.
(iii) NEW PRICING STRATEGIES. (iv) DEVELOP
OVERALL PROMOTION STRTEGY.
(v) DEVELOP AUTOMATED WAREHOUSES &
SUPERIOR MIS & ORDER PROCESSING.
www.a2zmba.com

KKH/DM/BU-45

CHANNEL PLANNING
DESIGNING CHANNEL SYSTEM
STEPS ARE :
A. UNDERSTAND SERVICE OUTPUTS NEEDED BY
TARGET CUSTOMERS.
B. DECIDE CHANNEL OBJECTIVES & CONSTRAINTS.
C. IDENTIFY MAJOR CHANNEL ALTERNATIVES.
D. EVALUATE CHANNEL ALTERNATIVES & CHOSE A
CHANNEL SYSTEM.
www.a2zmba.com

KKH/DM/BU-46

(A) UNDERSTAND SERVICE OUTPUTS NEEDED BY

TARGET CUSTOMERS
SOME OF THE SERVICE OUTPUTS ARE :
(i) LOT SIZE,
(ii) WAITING TIME,
(iii) SPATIAL (SPACE) CONVENIENCE.
(iv) PRODUCT VARIETY/ASSORTMENT.
(v) SERVICE BACK-UP.
IF A CHANNEL GIVES MORE SERVICE OUTPUTS,
COST & PRICES GO UP. OPPOSITE IS TRUE.
EX: DISCOUNT STORES.
www.a2zmba.com

KKH/DM/BU-47

(B) DECIDE CHANNEL OBJECTIVES &

CONSTRAINTS.
(i) CHANNEL OBJECTIVES VARY WITH DIFFERENT
MARKET SEGMENTS. CHANNEL OBJECTIVES ARE
TARGETED SERVICE OUTPUT LEVELS.
(ii) CHANNEL OBJECTIVES VARY WITH PRODUCT
CHARACTERISTICS.
(iii) STRENGTHS & WEAKNESSES (CONSTRAINTS)
OF DIFFERENT INTERMEDIARIES MUST BE
CONSIDERED.
(iv) CONSTRAINTS OF ENVIRONMENT MUST BE
CONSIDERED.
www.a2zmba.com

KKH/DM/BU-48

(C) IDENTIFY MAJOR CHANNEL

ALTERNATIVES.
CONSIDER 3 ELEMENTS OF CHANNEL
ALTERNATIVES:
(i) TYPES OF INTERMEDIARIES.
(ii) NO. OF INTERMEDIARIES : EXCLUSIVE,
SELECTIVE, INTENSIVE DISTRIBUTION.
(iii) TERMS & RESPONSIBILITIES : PRICE
POLICY, CONDITIONS OF SALE,
TERRITORIES RIGHTS, SERVICES &
RESPONSIBILITIES.
www.a2zmba.com

KKH/DM/BU-49

(D) EVALUATE MAJOR CHANNEL

ALTERNATIVES & SELECT A CHANNEL SYSTEM.
CRITERIA USED FOR EVALUATION :
(i)ECONOMIC CRITERIA. ESTIMATE COST OF
SELLING DIFFERENT SALES VOLUME THRU EACH
CHANNEL.
(ii) CONTROL
(iii) ADAPTIVE CRITERIA. DEGREE OF CONTROL
VARIES WITH DIFFERENT CHANNELS. THE
MANUFACTURER NEEDS CHANNELS WHICH
ADAPT TO CHANGING NEEDS OF MARKETS.
www.a2zmba.com

KKH/DM/BU-50

ORGANISATIONAL PATTERNS IN
MARKETING CHANNELS.
TO DELIVER SERVICE OUTPUTS DESIRED BY ENDUSERS, DIFFERENT CHANNEL SYSTEMS ARE
DEVELOPED THESE ARE:
(1) CONVENTIONAL (FREE FORM) MARKETING
CHANNEL CONSISTS OF INDEPENDENT FIRMS
REPRESENTING MANUFACTURER, WHOLESALERS,
RETAILERS. EACH SEEKS TO MAXIMISE OWN
PROFITS. NO MEMBER HAS CONTROL OVER OTHER
CHANNEL MEMBERS. CHANNEL MEMBERS
BARGAINED OVER EACH TRANSACTION. THEY
WERE UNSTABLE & COULD NOT ACHIEVE
www.a2zmba.com
ECONOMIES AND SUPERIOR
SERVICE.

KKH/DM/BU-51

(2)VERTICAL INTEGRATION / VERTICAL

MARKETING SYSTEM (VMS)
TO IMPROVE EFFECTIVENESS & EFFICIENCY OF
FREE FORM/CONVENTIONAL MKT. CHANNEL,
VERTICAL MARKETING SYSTEM (VMS) HAS
EMERGED. IT IS A UNIFIED SYSTEM IN WHICH ONE
MEMBER, THE CHANNEL LEADER, OWNS OTHERS
OR HAS SO MUCH POWER THAT OTHERS
COOPERATE, BEHAVE BETTER, & HAVE LESS
CONFLICT. THERE ARE TWO TYPES OF VERTICAL
INTEGRATION :
(A)HARD VERTICAL INTEGRATION
(CORPORATE VMS).
(B)SOFT VERTICAL INTEGRATION, WHICH
www.a2zmba.com
INCLUDES

KKH/DM/BU-52

(B1) ADMINISTERED VMS, & (B2)

CONTRACTUAL VMS.
(A) HARD VERTICAL INTEGRATION
INCLUDES OWNERSHIP OF THE
CHANNEL BY ONE FIRM THRU
GROWTH/ACQUISITION. THIS STRATEGY
IS FOLLOWED BY COMPANIES (EX BATA
& CG-TRANF& HTSG) WHEN
PRODUCTION AND DISTRIBUTION ARE
COMBINED UNDER SINGLE OWNERSHIP.
www.a2zmba.com

KKH/DM/BU-53

www.a2zmba.com

KKH/DM/BU-54

DEGREES OF VERTICAL INTEGRATION & OUTSOURCING.

IN MARKETING CHANNELS, DECISIONS ON MAKE-OR-BUY ARE
SAME AS VERTICAL (FORWARD) INTEGRATION OR OUTSOURCE.

www.a2zmba.com

KKH/DM/BU-55

OUTSOURCING IS BUYING GOODS / SERVICES

FROM OUTSIDE VENDORS.
REASONS :
(I) LESS COST
(II) LESS CAPITAL INVESTMENT,
(III) BETTER QUALITY.
IN DISTRIBUTION MGT., OUTSOURCING
ACTIVITIES INCLUDE INVOICING, SHIPPING,
FINANCING, SELLING, WAREHOUSING, ETC.
CAUTION : IF A VENDOR GETS KEY
INFORMATION, IT CAN BECOME A
www.a2zmba.com
COMPETITOR.

KKH/DM/BU-56

ELECTRONIC CHANNELS
IT MEANS REACHING & SELLING
GOODS/SERVICES TO END-USERS
ELECTRONICALLY-BY USING THE INTERNET.
IT IS SIMILAR TO E-COMMERCE.
ON LINE SHOPPING IS THIRD MOST
POPULAR ACTIVITY ON THE INTERNET,
AFTER E-MAIL & RESEARCHING/ GETTING
INFORMATION.
MARKET POTENTIAL OF E-CHANNELS IS
HIGH, ALTHOUGH PRESENTLY SMALL.
www.a2zmba.com

KKH/DM/BU-57

SOME OF THE PROBLEMS OF E-CHANNEL

ARE :
(i) HOW VAT (VALUE ADDED TAXES) WILL
BE COLLECTED FOR ON LINE SALES?
(ii) ON-LINE-PAYMENTS PROBLEMS.
(iii) DIAL-UP SYSTEM IS SLOW FOR
ACCESSING WEB-SITES. OTHER SYSTEMS
LIKE ISDN, DSL, CABLE MODEM ARE
COSTLY.
www.a2zmba.com

KKH/DM/BU-58

MAJOR REASONS FOR ON-LINE

SHOPPING.

CAN SHOP ANY TIME.

LESS TIME THAN SHOPPING AT STORES.
ENJOY ON-LINE SHOPPING & EASY TO
SHOP.
LOWER PRICES, DONT LIKE CROWD AT
RETAIL STORES, PRODUCTS / BRANDS
NOT AVAILABLE WHERE THE BUYER
LIVE.
www.a2zmba.com

KKH/DM/BU-59

MAJOR REASONS FOR NOT MAKING ONLINE PURCHASE

PRODUCT RETURNS DIFFICULT.

DESIRED PRODUCT NOT AVAILABLE.
NOT SURE ABOUT TIMELY DELIVERY.
DONT WANT TO PAY SHIPPING
COSTS.
ENJOY SHOPPING AT RETAIL STORES.
TOTAL COST OF BUYING MORE.
www.a2zmba.com

KKH/DM/BU-60

CONFLICTS DUE TO ON-LINE SALES

MANUFACTURER SELLING DIRECTLY THRU
OWN WEB SITES, OR OTHER ON-LINE RESELLER
CAN FACE GOAL & DOMAIN RELATED
CONFLICTS.
MANAGING CONFLICTS
(i) SELLING AT LIST PRICE. (WITHOUT
DISCOUNTS) (EX. NIKE)
(ii) SELLING DIFFERENT PRODUCTS (EX. P&G).
(iii) GIVE CREDIT TO OFF-LINE RETAILERS.
(iv) PROMOTE, DONTwww.a2zmba.com
SALE.

KKH/DM/BU-61

CHANNEL MANAGEMENT
1.
2.

CHANNEL CONFLICTS.
CHANNEL POLICIES.

INTRA CHANNEL CONFLICT MEANS

CONFLICTS WITHIN A CHANNEL.
MULTIPLE CHANNELS HAVE
CONFLICTS BETWEEN 2 OR MORE
CHANNELS.
www.a2zmba.com

KKH/DM/BU-62

SOURCES/CAUSES OF CONFLICTS.

GOAL DIFFERENCES
DIFFERING PERCEPTIONS.
DOMAIN DIFFERENCES.
GRAY/BLACK MARKETS.

MANAGING CHANNEL CONFLICTS

SOME CONFLICTS CAN BE CONSTRUCTIVE.
ASSESS CONFLICT BY INTENSITY,

FREQUENCY & IMPORTANCE

OF
THE
ISSUE.
www.a2zmba.com

KKH/DM/BU-63

METHODS FOR MANAGING

CONFLICTS
EXCHANGE OF PERSONS.
COOPTATION
ACHIEVING COMMON GOALS.
DIPLOMACY.
MEDIATION.
ARBITRATION.
www.a2zmba.com

KKH/DM/BU-64

2.0. CHANNEL POLICIES

POLICIES ARE MADE TO MANAGE THE CHANNEL &
EFFORTS OF MEMBERS.
POLICIES DISCUSSED ARE:
MARKET & CUSTOMER COVERAGE, PRICING &
PRODUCT LINE.
2.1. MARKET COVERAGE POLICIES
INTENSIVE DISTRIBUTION MAY INCREASE
INTRABRAND COMPETITION.
SELECTIVE & EXCLUSIVE DISTRIBUTION TO
MINIMISE INTRABRAND & IMPROVE INTERBRAND
COMPETITION & SERVICE OUTPUTS.
LEGALITY VARIES IN COUNTRIES.
www.a2zmba.com

2.2. CUSTOMER COVERAGE POLICIES

WHOM INTERMEDIARIES RESELL
PREVENT GRAY MARKETS
PREVENT INTRABRAND COMPETITION

KKH/DM/BU-65

2.3. PRICING POLICIES

MANUFACTURER HAS PRICE LIST & DISCOUNT
POLICIES. FOR INTERMEDIARIES COST OF SERVICE
OUTPUTS, PROFITS, AND MARKET (COMPETITORS)
NORMS ARE CONSIDERED.
MAXIMUM RETAIL PRICE MAINTAINENCE (RPM) IS
ADOPTED.
www.a2zmba.com

KKH/DM/BU-66

PRICE DISCRIMINATION LEGALLY ALLOWS

DIFFERENT PRICES TO DIFFERENT BUYERS, AS
FOLLOWS:
(i)
(ii)
(iii)
(iv)
(v)

VOLUME DISCOUNT;
CUSTOMER SEGMENT PRICING;
IMAGE PRICING;
LOCATION PRICING;
TIME PRICING;

PREDATORY PRICING IS ILLEGAL,

www.a2zmba.com

KKH/DM/BU-67

2.4. PRODUCT LINE POLICIES

(A) EXCLUSIVE DEALING & TERRITORY
ARRANGEMENT ARE LEGAL IF
SELLERS MARKET SHARE IS NOT
DOMINANT & COMPETITION IS NOT
LESSENED SUBSTANTIALLY.
(B) TYING AND FORCING FULL PRODUCT
LINE ARE HELD BY COURTS AS ILLEGAL,
IF THE ARRANGEMENT LESSONS
COMPETITION SUBSTANTIALLY.
www.a2zmba.com

KKH/DM/BU-68

A PRODUCT MIX CONSISTS OF

PRODUCT LINES. EACH PRODUCT

LINE MANAGER TO DECIDE WHICH
PRODUCT ITEMS TO BUILD,
MAINTAIN, HARVEST, OR DIVEST,
BASED ON SALES, PROFITS,
MARKET PROFILE ANALYSIS.

www.a2zmba.com

KKH/DM/BU-69

CHANNELS INFORMATION SYSTEMS

1. ELEMENTS OF CHANNEL INF-SYSTEM :
(i) HARDWARE & NETWORKS.
(ii) DATABASES.
(A) DATABASE GENERATION.
(B) DATABASE USE.

2. IMPACT ON SERVICE.
(i) SPATIAL (SPACE RELATED) CONVENIENCE.
(ii) WAITING (DELIVARY) TIME REDUCTION.
(iii) STOCKING NEEDED PRODUCTS & AVOIDING
STOCK-OUTS. www.a2zmba.com

KKH/DM/BU-70

CUSTOMERS BY USING CHANNEL INFO.SYSTEM.

(BY USING DATABASES), FAST MOVING ITEMS ARE
ORDERED & SLOW MOVING PRODUCTS ARE
DELETED.
3. IMPACT OF INF.SYS. ON CHANNEL FLOW
PERFORMANCE
INF.TECHNOLOGY HAS IMPROVED PERFORMANCE
OF MAJOR CHANNEL FLOWS, AS SHOWN BELOW. IT
HAS INCREASED CONSUMER SATISFACTION &
REDUCED COSTS.
www.a2zmba.com

KKH/DM/BU-71

J IT D E L IV E R IE S R E D U C E P H Y S IC A L P O S S E S S IO N
IN V E N T O R Y N O T H E L D F O R L O N G T IM E
O W N E R S H IP F L O W S (M O V E M E N T S ) R E D U C E A T
D IS T R IB U T O R S / R E T A IL E R S
D IS C O U N T C O U P O N S A R E G E N E R A T E D
IN S T A N T L Y A T R E T A IL C H E C K O U T S
R E D U C T IO N O F P A P E R W O R K E N A B L E B U S IN E S S B U Y E R S
S P E N D M O R E T IM E O N N E G O T IA T IO N S W IT H S U P P L IE R S
P A P E R W O R K R E D U C E D D U E T O E L E C T R O N IC
PAYMENT SYSTEMS
A U T O M A T IC R E O R D E R IN G M IN IM IS E S H U M A N IN V O L V E M E N T
P O IN T - O F - S A L E D A T A R E D U C E S IN V E N T O R Y ,
W IT H O U T Lwww.a2zmba.com
O S IN G S A L E S

KKH/DM/BU-72

ASSESSING MARKETING CHANNEL

PERFORMANCE
1. MEASURING & EVALUATING CHANNEL
MEMBERS CONTRIBUTION TO CHANNEL
PERFORMANCE. THIS IS SAME AS MARKETING
COSTS & PROFITABILITY,DISCUSSED EARLIER.
THE STEPS ARE :
(i) IDENTIFY CHANNEL ACTIVITIES.
(ii) CONVERT NATURAL EXPENSES TO CHANNEL
ACTIVITIES/FUNCTIONS.
(iii) ALLOCATE FUNCTIONAL COSTS TO VARIOUS
CHANNELS.
(iv) PREPARE P & L FOR
EACH CHANNEL.
www.a2zmba.com

KKH/DM/BU-73

2. RESULT OF CHANNEL PERFORMANCE.

CHANNEL PERFORMANCE IS ASSESSED BY
AUDITING SERVICE QUALITY.
THIS IS DONE BY A QUESTIONNAIRE TO MEASURE
TARGET CUSTOMERS PERCEPTIONS, FOCUSING
ON FOLLOWING 5 FACTORS:
(i)
(ii)
(iii)
(iv)
(v)

TANGIBLES.
RELIABILITY.
REPONSIVENESS.
ASSURANCE.
EMPATHY.
www.a2zmba.com

KKH/DM/BU-74

MARKETING LOGISTICS
IT IS DELIVERING THE FINAL PRODUCT TO
CUSTOMERS & INTERMEDIARIES, AT
DESIRED TIME & LOWEST COST. IT IS ALSO
CALLED PHYSICAL DISTRIBUTION

www.a2zmba.com

KKH/DM/BU-75

IN DEMAND CHAIN MGT: A FIRM FIRST THINKS OF TARGET

MARKET & ITS DEMAND, & THEN DESIGNS SUPPLY CHAIN
BY WORKING BACKWARD. REPLACE CHAIN WORD BY
www.a2zmba.com
NETWORK IS FURTHER IMPROVEMENT.

KKH/DM/BU-76

MISSION OF LOGISTICS MGT IS TO PLAN &

COORDINATE AND INTEGRATE THOSE ACTIVITIES
THAT ARE NECESSARY TO SATISFY CUSTOMER
NEEDS OF EXCELLENT SERVICE AT LOWEST COST,
www.a2zmba.com
WITHIN THE ORGANISATION.

KKH/DM/BU-77

THE SUPPLY CHAIN IS A NETWORK.

www.a2zmba.com

SUPPLY CHAIN MGT (SCM)

KKH/DM/BU-78

IT IS A NETWORK OF CONNECTED &

INTERDEPENDENT FIRMS COOPERATIVELY
WORKING TO CONTROL, MANAGE & IMPROVE
FLOW OF MATERIALS & INFORMATION FROM
SUPPLIERS TO END USERS.

ACTIVITIES OF SCM ARE DESIGN OF PRODUCT,

PLANNING & FORECASTING, PURCHASE,
PRODUCTION, ORDER PROCESSING, INVENTORY
CONTROL, WAREHOUSING, MATERIAL HANDLING,
CUSTOMER SERVICE.
LOGISTICS SCOPE STARTS FROM MGT.OF RAW
MATERIAL THRU OPERATIONS TO DELIVARY OF
www.a2zmba.com
FINAL PRODUCT TO CUSTOMERS.

KKH/DM/BU-79

LOGISTICS & COMPETITIVE STRATEGY.

GOALS/COMPETITIVE ADVANTAGE A FIRM WANTS TO
ACHIEVE DELIVERING SUPERIOR CUSTOMER
SERVICE AT LOWER COST/SUPERIOR CUSTOMER
VALUE.

COMPETITIVE STRATEGIES ARE:

PERFORM VALUE CHAIN ACTIVITIES (PORTERS)
MORE EFFICIENTLY & DIFFERENTLY THAN
COMPETITORS..
USE LOGISTICS CONCEPT (& SCM) TO INTEGRATE
DISTRIBUTION, OPERATIONS, PROCUREMENT WITHIN
THE FIRM & NETWORK (RELATIONSHIPS) BUILDING
WITH SUPPLIERS & CUSTOMERS.
www.a2zmba.com

KKH/DM/BU-80

CUSTOMER SERVICE DIMENSION

IT HAS MANY ELEMENTS WHICH ARE GROUPED IN
3 CATEGORIES:
(i) PRE-TRANSACTION / PRE-SALES SERVICE.
(ii) TRANSACTION / DURING-SALES SERVICE.
(iii) POST-TRANSACTION / POST-SALES SERVICE.
SERVICE MUST BE CUSTOMISED, TO SATISFY
DIFFERENT NEEDS OF CUSTOMERS.
PERFECT ORDER ACHIEVEMENT CAN BE USED TO
MEASURE SERVICE PERFORMANCE & TO SET
SERVICE STANDARDS.www.a2zmba.com

KKH/DM/BU-81

DEVELOPING LOGISTICS
ORGANISATION & MANAGEMENT.
1. HOW TRADITIONAL ORGANISATION
PROCESSES A CUSTOMER ORDER. IT IS
SEQUENTIAL & TAKES A LONG TIME.

www.a2zmba.com

KKH/DM/BU-82

2. CONVENTIONAL (VERTICAL) ORG.

STRUCTURE IS ON FUNCTIONAL BASIS.

THIS ORG. IS INPUT FOCUSED & BUDGET

DRIVEN. IT CANNOT INTEGRATE LOGISTICS
MGT.TO ACHIEVE COMPETITIVE
www.a2zmba.com
ADVANTAGE.

KKH/DM/BU-83

3. HENCE, HORIZONTAL ORG.SHOULD

BE DEVEOPED WITH FOLLOWING
CHARACTERISTICS :
(A) ORGANISE AROUND PROCESSES &
NOT TASKS.
(B) HAVE A FLAT ORGANISATION.
(C) BUILT ON MULTI FUNCTIONAL
TEAMS.

www.a2zmba.com

KKH/DM/BU-84

(A) MARKET-BASED PERFORMANCE

MEASUREMENT.

www.a2zmba.com
FIG. HORIZONTAL
ORG. FOCUS

KKH/DM/BU-85

SOME OF CORE PROCESSES ARE :

(i)
(ii)
(iii)
(iv)

CUNSUMER DEVELOPMENT.
BRAND MANAGEMENT
CRM,
CUSTOMER SERVICE

www.a2zmba.com

KKH/DM/BU-86

THESE PROCESSES ARE BEST MANAGED

BY CROSS-FUNCTIONAL TEAMS.
LEADERS ARE INTEGRATORS, WHO
FOCUS THE TEAM ON MARKET BASED
GOALS.
REWARD SYSTEM SHOULD CHANGE.
PRODUCTION SHOULD PRODUCE WHAT
IS NEEDED BY MARKET.
FOR MARKET DRIVEN LOGISTICS,
CHANGE
FROM VERTICAL TO
HORIZONTAL IS IMPORTANT.
www.a2zmba.com

KKH/DM/BU-87

TRANSPORTATION DECISIONS
1. CAN AFFECT CUSTOMER
SATISFACTION.
2. THEREFORE SELECTION OF RIGHT
TRANSPORTATION MODE IS IMPORTANT.
3. ALTERNATIVES :
RAIL, AIR, TRUCK, WATERWAYS,
PIPELINES, RAIL-TRUCK,TRUCKWATER,RAIL-WATER, AIR TRUCK.
www.a2zmba.com

KKH/DM/BU-88

4. CRITERIA FOR SELECTION

DEPENDABILITY, AVAILABILITY, SPEED,
LOSS / DAMAGE, & COST.
5. MARKETERS CHOOSE FROM :

PRIVATE CARRIERS.
CONTRACT CARRIERS.
COMMON CARRIERS.

www.a2zmba.com

KKH/DM/BU-89

WAREHOUSING DECISIONS
1. EACH FIRM STORES FINISHED PRODUCTS
UNTIL THEY ARE SOLD.
2. PRODUCTION & COMSUMPTION CYCLES
DO NOT ALWAYS MATCH.
3. THEREFORE, FIRMS MUST DECIDE :

(i) HOW MANY WARE HOUSES ARE

NEEDED .
(ii)THEIR LOCATION.
www.a2zmba.com

KKH/DM/BU-90

4. DECISION DEPENDS ON :
(A) MARKET COVERAGE,
(B) CUSTOMER SERVICE LEVEL,
(C) DISTRIBUTION COSTS.
5. TYPES OF WAREHOUSES AVAILABLE
(i) PRIVATE (COMPANY OWNED)
(ii) PUBLIC (LEASED/RENTED)
(iii) STORAGE (MEDIUM-LONG TERM)
(iv) DISTRIBUTION CENTRES.
(v) AUTOMATED. www.a2zmba.com

KKH/DM/BU-91

INVENTORY MANAGEMENT
1. INVESTMENT IN INVENTORY IS HIGHEST,
OUT OF TOTAL INVESTMENT IN ASSETS.
2. INVENTORIES ARE HELD AT:
PRODUCTION, DISTRIBUTION, RETAIL
LEVELS.
3. INVENTORY COST RISES AT FASTER RATE AS
CUSTOMER SERVICE LEVEL COMES CLOSER
TO 100%.
4. A FIRMS OBJECTIVE : SUPERIOR
CUSTOMER SERVICE AT LOWER COST.
www.a2zmba.com

KKH/DM/BU-92

5. INVENTORY DECISIONS ARE :

(A) WHEN TO ORDER?
(B) HOW MUCH TO ORDER?

www.a2zmba.com

KKH/DM/BU-93

MARKETING LOGISTICS COST AND

PERFORMANCE
1. MARKETING LOGISTICS/PHYSICAL
DISTRIBUTION (PD) COST, P, IS AS FOLLOWS:
P = F+W+I+LS
F = FREIGHT/TRANSPORTATION COST.
W = WAREHOUSE COST.
I = INVENTORY COST.
LS = COST OF LOST SALES, DUE TO
DELAY IN DELIVARY.
www.a2zmba.com

KKH/DM/BU-94

2. TWO APPROACHES FOR

PERFORMANCE MEASUREMENT.
(A) MINIMISE TOTAL COST OF P.D. (P).
(B) RETURN ON INVESTMENTS (ROI).

www.a2zmba.com

KKH/DM/BU-95

MATERIAL HANDLING (M.H.)

OBJECTIVES: TO INCREASE USABLE
CAPACITY OF THE WAREHOUSE AND TO
IMPROVE OPERATING EFFICIENCY.
GUIDELINES/PRINCIPLES OF MATERIAL
HANDLING.
OPTIMISE MATERIALS FLOW.
SIMPLIFY BY REDUCING, ELIMINATING,
COMBINING MOVEMENTS.
USE GRAVITY PRINCIPLE.
www.a2zmba.com

KKH/DM/BU-96

MAKE OPTIMUM USE OF BUILDING

SPACE.
SELECT RIGHT M.H.EQUIPMENT.
STANDARDISE M.H. METHODS &
SIZES/TYPES OF EQUIPMENT.
ADOPT SAFETY PRINCIPLE.

www.a2zmba.com

KKH/DM/BU-97

BENCHMARKING
1. MEANING : STUDYING WORLD-CLASS
PERFORMERS & ADOPTING BEST
PRACTICES, OR STUDYING BEST
PRACTICE COMPANIES TO IMPROVE
PERFORMANCE.
2. INITIALLY BENCH MARKING WAS
FOCUSED ON COMPETITORS, BUT NOW
IT IS FOCUSED ON TOP PERFORMING
FIRMS, REGARDLESS OF THEIR
INDUSTRY.
www.a2zmba.com

KKH/DM/BU-98

3. STEPS INVOLVED IN BENCHMARKING

(i) DECIDE WHICH FUNCTIONS TO
BENCHMARK.
(ii) IDENTIFY KEY PERFORMANCE VARIABLES.
(iii) IDENTIFY BEST IN CLASS COMPANIES.
(iv) MEASURE PERFORMANCE OF THESE FIRMS.
(v) MEASURE THE COMPANYS PERFORMANCE.
(vi) SPECIFY ACTION PLAN TO CLOSE THE GAP.
(vii) IMPLEMENT ACTION PLAN.
(viii) MONITOR RESULTS.
FOR SR.NO. (iii), ASK CUSTOMERS, SUPPLIERS,
DISTRIBUTORS, MGT.www.a2zmba.com
CONSULTING FIRMS.