DISTRIBUTION AND PLANNING STRATEGY IN SCM

Nithya Nair
MBA(FT),S3 Roll no:24 School of Management Studies CUSAT, Kochi-22 Email-nithunair90@gmail.com

Abstract: Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Successful supply chain management requires several decisions relating to the flow of information, product and funds. These decisions fall into 3 categories mainly, the supply chain strategy/design ,the supply chain planning and the supplychain operations and distribution process. Effective planning and distribution strategies are vital for the smooth functioning and success of any business. This assignment covers the topics, planning and distribution strategies in SCM, their importance, aggregate planning in SCM, the different strategies available, guidelines for effective planning etc. Keywords: Supply chain management, Supply chain Planning, Aggregate planning, Supply chain distribution ,Distribution channels, Distribution strategies, Distribution management.

1.INTRODUCTION
Supply chain management (SCM) is management of a network of interconnected businesses involved in the provision of product and service packages required by the end customers in a supply chain. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption.."Supply chain management is the systematic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole. Supply chain management must address the following problems:

Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers. Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, and transportation control (e.g., owner-operated, private carrier, common carrier, contract carrier, or third-party logistics (3PL)). Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized. Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc. Inventory Management: Quantity and location of inventory, including raw materials, workin-process (WIP) and finished goods. Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.

, Planning includes decisions regarding which markets will be supplied from which locations, the planned building of inventories, the subcontracting of manufacturing, the replenishment and inventory policies to be followed, the policies that will be enacted regarding backup locations in case of a stock out and the timing and size of marketing promotions. Supply Chain Planning focuses on effective supply chain strategies for companies that operate globally, with an emphasis on how to plan and integrate supply chain components into a coordinated system. It is the component of supply chain management involved with predicting future requirements to balance supply and demandProducing products alone does not assure a sale, even if such products are actually in demand. Somehow these products must reach the end user, otherwise they will be stuck in a warehouse somewhere. Without sales to customers to draw down finished inventories. Future production of these products would ultimately end. This is where distribution networks come to the rescue of producers, atleast in the case of customer products. The task is to bring the products so close to the customer so that they can be readily purchased. The challenge is to do so without clogging the entire supply chain with too much inventory or running short of fifnished products sought by customers. So effective planning and distribution strategies are vital for the success of any business.The objective of effective planning is to synchronize a variety of efforts to efforts to achieve the

desired high-level outcomes of the larger organization, which is essential for the success of a business. Effective distribution strategies are essential to ensure that the customer demands are met properly and on time. 2.DISTRIBUTION AND PLANNING STRATEGY IN SCM Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they reduce their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and the velocity of inventory movement. Successful supply chain management requires several decisions relating to the flow of information, product and funds.These decisions fall into 3 categories mainly, The Supply chain strategy or design The Supply chain planning and The Supply chain operations and distribution. 2.1 THE SUPPLY CHAIN PLANNING As a result of the planning phase , companies define a set of operating policies that govern short term operations. For decisions made during this phase, the supply chains configuration determined in the strategic phase is fixed. This configuration establishes constraints within which planning must be done. Companies start the planning phase with a for the coming year of demand in different markets. Planning includes decisions regarding which markets will be supplied from which locations, the planned building of inventories, the subcontracting of manufacturing, the replenishment and inventory policies to be followed, the policies that will be enacted regarding backup locations in case of a stock out and the timing and size of marketing promotions. Planning establishes parameters within which a supply chain will function over a specified period of time. In the planning phase, companies must include uncertainty in demand, exchange rates, and competition over this time horizon in their decisions. Given a shorter time horizon and better forecasts than the design phase, companies in the planning phase try to incorporate whatever flexibility may have been built into the supply chain in the design phase and exploit it to optimize performance in the shorter term. For many companies, putting together a supply chain can be an easy part of supply chain management. The real difficult parts often seem to come from adequate supply chain planning. The difficulties that often arise as a result of poor planning can be extremely problematic for a business. The following sections will explain some of these problems and will seek to address their root causes. First, businesses need to understand exactly what the term supply chain planning means. Supply chain planning refers to a companies ability to make accurate forecasts regarding their demands in the near future. For example, the company may forecast X amount of sales and may order enough goods from vendors to cover those sales. However, if fewer sales are the reality, the company could end up with excessive inventory and may see a l;arge,

sudden decrease in profits. Likewise, too many sales could cause the company to need to order additional shipments of goods at the last minute which may force vendors to need additional materials and to pay overtime to their workers. These costs will usually be passed on to the buyer and will also reduce profits. Too many sales may mean companies cannot meet the end-user demand and distributors may be left with no product to sell to waiting customers. This is also a problem which have to be cared of by the business. Obviously, supply chain planning is important to a company's success. Poor planning will result in a loss of profits and/or revenue while accurate planning allows the company to operate smoothly and to minimize expenses. The question then is how to more effectively create business forecasts for supply chain activities. Many companies have turned to their customers for help. By communicating directly with customers about what they want and by getting their feedback on existing products, businesses are able to more accurately understand the needs and wants of their target audiences. With this information, they can make a forecast that reflects customer reality, not the hopeful expectations of marketing and sales teams. Furthermore, improved technology has made it even easier for businesses to get their hands on customer feedback. The Internet, for example, makes it possible for companies to communicate with customers in real-time, so they can then use the data immediately in their forecasts, again thanks to the advancements in technology. Supply chain planning can be made easier by technology in other ways as well. For example, cash-to-cash cycle time is an important part of supply chain planning because it impacts the revenue of the business. Cash-to-cash cycle time refers to the time span between the purchase of the raw materials and the sale of the finished product. The faster the cash-tocash cycle the better. On average, 26% of businesses have been able to reduce their cash-tocash cycle time to under 30 days thanks , in part to the improved technology. Information technology advancements such as payment processing, procurement of direct supplies, and customer order entry have helped significantly reduce the length of the cash-to-cash cycle for many of these businesses. In fact, less than 25% of the businesses today have a cash-to-cash cycle time of more than 90 days This is also due to technological advancements.. These technology improvements along with real-time customer feedback have made it possible to more accurately predict revenue, profit, and sales in the near future. More accurate planning means that businesses can work together with their vendors and distributors to outline a plan that makes sense based on those forecasts so that no one is put into a negative situation. Overall, supply chain planning is a critical component of any business's supply chain management. Without accurate planning abilities, businesses end up cutting into their revenue unnecessarily and possibly putting vendors and distributors into difficult situations that may strain the supply chain relationships in the long run. Only by communicating with customers directly and in real-time can businesses have a solid, reliable foundation on which to base their supply chain planning forecasts. Likewise, they need to use technology to free up revenue from the supply chain by reducing their cash-to-cash cycle time.

Planning in SCM mainly refers to the demand and supply planning of a business. And this demand and supply planning involves planning and conducting demand forecasting, managing inventories, aggregate planning, managing predictable variability in demand and supply, distribution management etc.First thing that comes is forecasting.

The forecast of future demand forms the basis for all strategies and planning in a supply chain. Some of the important functional areas in a business that are depending on demand forecasting are as follows : Production Marketing Finance Personnel In supply chain management, reducing inventory is a critical component of cost control. While there are many methods for reducing inventory, one of the primary ones is demand forecasting trying to obtain an accurate picture of what demand will look like in the future. Approaches to demand forecasting vary, but generally fall into one of two categories:

Quantitative Forecasting Qualitative Forecasting

Quantitative forecasting utilizes statistical models to predict future values. These models may take into account current and historical trends. Qualitative forecasting is less mathematical and more intuition-based. In many instances, especially those that feature rollouts of unique products (like the original iPhone), statistical models can provide inadequate results because they dont have enough past data to make an accurate prediction of future demand. This is where human expertise enters the process: smart demand forecasters can often take into account factors that statistical models cannot turn into mathematical equations The Time Series Method The time series method is a quantitative forecasting technique that bases calculations of future demand on historical patterns. It assumes that the past is a good indicator of the present and future the assumption of continuity. The time series method statistically analyzes three main components: basic value, trend, and seasonality. Basic value represents the baseline the historical rate of sales. The trend analyzes which way (if any) demand is trending is demand for this item increasing or decreasing? Seasonality takes seasonal variations into account: obviously, some goods (like ice cream) are in higher demand at certain times of the year (in this case, summer). Under a time series analysis, a projection of future demand is constructed from historical data of these three components. While the results can be skewed if other factors need to be taken into account (say, price changes), it is usually reasonably accurate. AGGREGATE PLANNING IN SUPPLY CHAIN

Aggregate planning is a process by which a company determines levels of capacity,production,subcontracting,inventory,stockouts, and even pricing over a specific

horizon.The goal of aggregate palnning is to satisfy demand in a way that maximizes profit. Aggregate planning answers questions like, How should a firm best utilize the facilities that it currently has? The aggregate planners main objective is to identify the following operational parameters over the specified time horizon. Production rate Workforce Overtime Machine capacity level Backlog Inventory on hand

AGGREGATE PLANNING STRATEGIES The aggregate planner must make a trade-off among capacity, inventory, and backlog costs. An aggregate plan that decreases one of these costs typically results in an increase of the other two. In this sense costs represents a trade off.To lower inventory cost, a planner has to increase capacity cost or backlog cost. In general the fundamental trade-offs available to a planner are among the following. Capacity Inventory Backlog/lost sales There are essentially three distinct aggregate planning strategies for achieving balance among these costs.They are as follows: Chase strategy-using capacity as lever. Production rate is synchronized with demand by varying machine capacity or hiring and laying off workers as the demand rate varies However, in practice, it is often difficult to vary capacity and workforce on short notice Expensive if cost of varying capacity is high Negative effect on workforce morale Results in low levels of inventory Should be used when inventory holding costs are high and costs of changing capacity are low

Time-flexibility from workforce or capacity strategy Can be used if there is excess machine capacity Workforce is kept stable, but the number of hours worked is varied over time to synchronize production and demand Can use overtime or a flexible work schedule Requires flexible workforce, but avoids morale problems of the chase strategy Low levels of inventory, lower utilization Should be used when inventory holding costs are high and capacity is relatively inexpensive

Level strategy-using inventory as the lever

Maintain stable machine capacity and workforce levels with a constant output rate Shortages and surpluses result in fluctuations in inventory levels over time Inventories that are built up in anticipation of future demand or backlogs are carried over from high to low demand periods Better for worker morale Large inventories and backlogs may accumulate Should be used when inventory holding and backlog costs are relatively low

Effective strategies coupled with a well-defined plan and the right tools will help alleviate pressure today and ready managers for market changes in the future. Strategy 1: Adopt demand-driven planning based on real-time demand insights and demand shaping. The right prediction and contingency planning tools will ensure a complete view and an effective response to risks such as suppliers going out of business, political upheaval, and natural calamities affecting manufacturing. Companies then can adjust pricing and promotions strategies to shape demand, move additional product quickly, drive revenue growth, or further expand margins for a high-demand product with limited market supply. The key is to have the foresight to leverage opportunities and mitigate challenging events so that your business not only survives, but succeeds. Strategy 2: Build an adaptive supply chain with rapid planning and integrated execution. Once executives are able to better predict demand and risk, they need to adapt their supply chains to changing market opportunities and events. Companies must put in place dynamic planning and continually fine-tune operations. The old model was to wait until the end of the month or quarter to shift production and supply based on shipments and sales. The new model calls for more continuous, dynamic supply chain adjustments to rapidly respond to market changes. This can minimize or even eliminate shocks across the supply network. The results include better visibility; enhanced collaboration across the value chain, including sourcing and supply, manufacturing, transportation, warehousing, and distribution; and accelerated decisionmaking with better analytics and support. Strategy 3: Optimize product designs for supply, manufacturing, and sustainability in order to accelerate profitable innovation. Innovation is crucial to being one step ahead of the competition. But innovation doesn't exist in a vacuum. In order to be successful, products must be manufactured at the right cost. Decisions made in the early cycles of product development can make or break the product. Designs must be optimized for supply and manufacturability, and all the true costs must be accurately captured. In addition, product innovation and competitive advantage increasingly stem from the selection of suppliers and technologies. If a company can manage the information, people, processes, and decisions regarding a product throughout its life cycle, it can achieve strong dividends and market leadership.

Strategy 4: Align your supply chain with business goals by connecting sales and operations planning (S&OP) with corporate business planning. Although S&OP processes provide coordination among sales, manufacturing, and distribution, there still are disconnects and gaps among finance, strategy, and operations in many companies. One way to bridge these gaps is with integrated business planning. This process integrates financial strategic budgeting and forecasting systems with operations planning. The resulting marriage of processes ensures revenue goals and budgets developed in finance are validated against a detailed, bottoms-up operating plan. Concurrently, the strategy reconciles the operating plan against financial goals. Integrated business planning, which connects S&OP processes with corporate business planning, enables companies to achieve the right balance of supply and demand, aligned with strategic business goals. It provides real-time visibility to all the key dimensions for success--demand, supply, product, risk, and performance--across the organization and throughout the extended supply chain. Strategy 5: Embed sustainability into supply chain operations. The triple bottom line of people, profit, and planet has never been more important than it is today. Studies show that companies striving for social and environmental sustainability achieve major competitive advantages, especially with regard to production efficiency, supplier management skills, and attractiveness to employees. Substantial opportunities exist for sustainability in supply chain operations:

2.2DISTRIBUTION STRATEGIES IN SCM Producing products alone does not assure a sale, even if such products are actually in demand. Somehow these products must reach the end user, otherwise they will be stuck in a warehouse somewhere. Without sales to customers to draw down finished inventories. Future production of these products would ultimately end. This is where distribution networks come to the rescue of producers, atleast in the case of customer products. The task is to bring the products so close to the customer so that they can be readily purchased. The challenge is to do so without clogging the entire supply chain with too much inventory or running short of fifnished products sought by customers. Completing sales of finished goods involves three distinct tasks: Transortation Storing Selling Most of the time, transport and storing of products are done several times on the often long path from a production floor to a retail shop. These move and store operations are usually affected by distribution networks.Alongside product management, promotion, and pricing, distribution is one of the four key components of marketing. In simple terms, distribution provides an inlay between the producer of a product and the seller of that product. After a product is made, it is usually then sold to a distributor, who in turn will sell the product either directly to customers, or to retailers who will in turn sell it to customers. What is Distribution?

Throughout history, distribution has been related to questions in the field of logistics, namely, how does one get a particular product to a customer. Thus, the distribution end of supply chain management must contend with such decisions as to whether to sell the product directly, or through a retailer; whether the product should be distributed on a wholesale basis; whether the product should be sold via multi level marketing channels; whether members of the channel should share advertising costs, etc. One important function of Enterprise Planning is logistic planning of items which are acquired from elsewhere within the organization. In Enterprise Planning, this type of supply is known as distribution. The distribution volume / quantity are planned in the form of planned distribution orders. Within the master-planning horizon, these planned distribution orders serve as a distribution plan. When a distribution quantity is planned, the related requirement of the item is passed on at the appropriate level of depot / warehouse, so that system can take this dependent demand into account. Setting up a structure for distribution planning is done by defining clusters and by modeling the goods flow through supply chain by supplying relationships and sourcing strategies. Clusters: Enterprise Planning uses clusters to model distribution structures within a site and/or between related sites. A cluster is a group of entities such as warehouses/ work centers. A cluster normally represents a geographical location, consisting of one or more warehouses (usually non-nettable warehouses) that are considered as one unit for planning purposes DISTRIBUTION TYPES 1. Intensive distribution means the producer's products are stocked in the majority of outlets. This strategy is common for basic supplies, snack foods, magazines and soft drink beverages. Selective distribution means that the producer relies on a few intermediaries to carry their product. This strategy is commonly observed for more specialised goods that are carried through specialist dealers, for example, brands of craft tools, or large appliances. Exclusive distribution means that the producer selects only very few intermediaries. Exclusive distribution is often characterised by exclusive dealing where the reseller carries only that producer's products to the exclusion of all others. This strategy is typical of luxury goods retailers such as Gucci

2.

3.

DISTRIBUTION STRATEGIES Centralized distribution strategy The results of this practice are: shorter and more reliable lead-times, lower inventory costs, constant transport constant transport costs and the more rapid introduction of new products. Responsiveness to the Customer It appears as an attribute of the service being a component of market or client orientation, which has been measured using scales like SERVQUAL and SERVPERQ

Customer Orientation strategy Involves a set of critical actions for company competitiveness that are intended to support the client: after-sales service, customized customer service,distribution logistics, information supplied on request,review of the delivery schedule, customer satisfaction assessment etc. Company-customer Operational Collaboration This supplier-customer interaction tends to be marked by: information sharing on demand (quantity, delivery time and price) and regarding forecasts of demand and sales, exclusively commercial relationship. THE CHANNELS OF DISTRIBUTION Quite often, there is a chain of intermediaries who pass the product down to other organizations. The product might change hands several times before it eventually reaches the customer. This is what the distribution channel means. The producer has to take in to account the fact that each level of the distribution channel might have particular needs they are hoping to have fulfilled by the product and that is before it even reaches the end user! Several distribution channel options might be available, depending on the exact nature of the product or service you are offering. It might be best, for example, for you to eliminate the channel altogether and sell direct via the Internet, mail order, or the telephone. Or you can go through an agent, who will sell your product directly on behalf of you. Alternately, you can use a distributor, who will sell your product to retailers. They, in turn, will make sure your product get to end customers. There are many ways by which a product might be sold. But services are also sold in this fashion. Hotels often sell their service, which is essentially a room, via travel agents, airlines, centralized Internet portals, etc. In fact, recent years have seen a number of innovations in the sector of service distribution. One instance has been a vast increase in rental services as well as franchising. Rental services these days might offer anything from tools through televisions and beyond. There has also been a lot of integration in the service industries, with two or more related services coming together to offer related services. This is particularly evident in the area of tourism and travel. Sometimes, you can rent a car, book a flight, and book a hotel all on the same website. There is also an increasing demand for retail outlets for services. In shopping centers, you can easily find travel agencies, real estate companies, and more service providers. There can be a number of different levels to each distribution channel. There is the zero level channel, which involves distribution with no intermediaries whatsoever. The one level channel involves one intermediary in the case of consumer goods, this usually refers to the retailer. If it is industrial goods we are talking about, then that one intermediary will generally be a distributor. For smaller markets, using a zero or one level scheme can be quite practical and effective. For larger markets, however, it is generally better to use a two level system, which will involve a wholesaler. This enables a ton of smaller retailers to receive and sell the product. The Japanese market uses even further levels than this, having evolved a highly complex distribution system for even simple consumer items. In the realm of supply chain management, of course, we must also take in to consideration the relationship among the various members of the distribution channel.

Generally, the relationship among the players can be described in one of three ways. First, there is the conventional channel relationship, which involves a bunch of middlemen passing the goods on from the producer to the end user. Then, there is the single transaction relationship, wherein a channel is set up for only one transaction. This frequently happens when a piece of real estate is sold, for example. Then there is the Vertical Marketing System, or VMS, in which disparate distribution elements are all integrated in to one cohesive system. Keep in mind that a lot of the marketing techniques that you apply to external customers of your company can also be applied to each divisions internal customers, as well. This might come about in the form of a formalized arrangement, wherein goods are transferred to different units in the distribution channel at a transfer price. When this happens, all sides should view the interaction as a normal relationship between a buyer and a seller. The same marketing techniques can thus be employed. Whats more, administrative and service divisions of the business can also employ marketing techniques. These techniques can be used to optimize their relationship with their customers, who may only be the other members of the organization. The way that non-profit organizations have typically dealt with their clients is a good example for this. Management of Distribution Channels It is important to make a wise, informed decision about how extensive your businesss distribution channel shall be. If you want to achieve wider distribution, then the cost will be a lot lower if you use intermediaries. In fact, the vast majority of product manufacturers are unable to sell directly to customers, as it would be way too costly for them. The bigger the producer, the more intermediaries should be used in order to have a cost effective operation.Most of the concepts surrounding distribution channels are related to costs. Many of the practical matters relating to distribution channels, however, have to do with customer control. A lot of businesses think that by selling their product in to the distribution channel, their role in the matter has come to an end and they no longer have to do any work. But in order to be effective, it is vital for businesses to take a market-oriented approach and manage every level of their products distribution until it arrives at the end user. There are three levels of channel distribution membership. The first one is intensive, wherein a large majority of the resellers are stocking the product. The normal pattern, however, is selective distribution. In this membership model, only suitable resellers are selling the product. Finally, there is exclusive distribution, in which only selected resellers are permitted to sell the product this is usually one seller per geographical region. Sometimes it can be tough for suppliers to motivate their distribution team to provide the sales they require. There are many ways a company might motivate their distributors to make more sales on behalf of their organization. One way is through bribery, wherein you offer a better profit margin to tempt your distributors to push your product rather than the competitions. Alternately, competition might be offered to the sales personnel of the distributor, tempting them to push the product. There is another side of the spectrum wherein the personnel of the agent are trained to the same standard as the suppliers own sales staff. These instances are quite rare, though. A vital element of supply chain management is the management and monitoring of the distribution channels. Just like a companys own sales and distribution departments have to be overlooked and taken care of, each level of the distribution chain will have to be managed in a

similar vein. In reality, however, most companies utilize a mixture of different distribution channels. They might help compliment a direct sales team, call on bigger accounts, work with agents, or help take care of smaller accounts and prospects. One of the more recent developments in distribution is the concept of vertical marketing. This unites the producer, wholesalers, and retailers in to one integrated channel. Sometimes this happens as a result of one of the members of the distribution chain owning the others outright this is referred to as corporate systems integration. For example, a supplier might own its own retail outlets; in this case, it is called forward integration. Backward integration, in which the retailer owns its own suppliers, is a much more common example. The furniture retailer, MFI, falls in to this category, as they own Hugena, who manufactures their kitchen and bedroom units. Another integration model occurs via franchising, as is the case with McDonalds fast food restaurants. Another model occurs with simple cooperation, in the sense that Marks & Spencer cooperates with their suppliers. Another approach is via a contractual system. These are often dictated by retail or wholesale cooperatives. Then there are administered marketing systems. When one member of the distribution chain with more power is able to use its position to coordinate the activities of other members, then there could be said to be an administered marketing system. Typically, it is the manufacturer who has the dominant position in this scenario. The point of vertical marketing is to give everyone on the distribution channel some power over what goes on there especially the retailers and suppliers. Research shows, however, that it is best to pursue these strategies at the mature stage. If one sets out at an early stage of the product using these methods, it could do more harm than good in terms of profits.

Some of the distribution strategies are: Direct Selling Direct channel: marketing channel that moves goods directly from a producer to ultimate user Direct selling: strategy designed to establish direct sales contract between producer and final user Channels Using Marketing Intermediaries Producer to wholesaler to retailer to consumer Producer to wholesaler to business user Producer to agent to wholesaler to retailer to consumer Producer to agent to wholesaler to business user Producer to agent to business user Dual Distribution: Network that moves products to a firms target market through more than one marketing channel Reverse Channels: Channels designed to return goods to their producers.

3.0 CHANNEL STRATEGY DECISIONS Selection of a Marketing Channel Factors which impact the selection of a marketing channel include: Market factors Product factors Organizational factors Competitive factors 3.1 FACTORS INFLUENCING MARKETING CHANNEL STRATEGIES Determining Distribution Intensity Distribution intensity: number of intermediaries through which a manufacturer distributes its goods. Intensive distribution: channel policy in which a manufacturer of a convenience product attempts to saturate the market Selective distribution: channel policy in which a firm chooses only a limited number of retailers to handle its product line Exclusive distribution: channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products in a particular geographic area 3.2 PHYSICAL DISTRIBUTION A companys physical distribution system contains the following elements: Customer Service Transportation Inventory Control Protective packaging and materials handling

Order Processing Warehousing 3.3 TRANSPORTATION Class Rate Commodity Rate Classes of Carriers Common carriers move freight via all modes of transportation for the general public Contract carriers do not serve the general public Private carriers do not offer services for hire, but provide transportation services solely for internally generated freight

4.0 SUPPLY CHAIN DISTRIBUTION MANAGEMENT It is important to make a wise, informed decision about how extensive your businesss distribution channel shall be. If you want to achieve wider distribution, then the cost will be a lot lower if you use intermediaries. In fact, the vast majority of product manufacturers are unable to sell directly to customers, as it would be way too costly for them. The bigger the producer, the more intermediaries should be used in order to have a cost effective operation. Most of the concepts surrounding distribution channels are related to costs. Many of the practical matters relating to distribution channels, however, have to do with customer control. A lot of businesses think that by selling their product in to the distribution channel, their role in the matter has come to an end and they no longer have to do any work. But in order to be effective, it is vital for businesses to take a market-oriented approach and manage every level of their products distribution until it arrives at the end user. There are three levels of channel distribution membership. The first one is intensive, wherein a large majority of the resellers are stocking the product. The normal pattern, however, is selective distribution. In this membership model, only suitable resellers are selling the product. Finally, there is exclusive distribution, in which only selected resellers are permitted to sell the product this is usually one seller per geographical region. Sometimes it can be tough for suppliers to motivate their distribution team to provide the sales they require. There are many ways a company might motivate their distributors to make more sales on behalf of their organization. One way is through bribery, wherein you offer a better profit margin to tempt your distributors to push your product rather than the competitions. Alternately, competition might be offered to the sales personnel of the distributor, tempting them to push the product. There is another side of the spectrum wherein the personnel of the agent are trained to the same standard as the suppliers own sales staff.. A vital element of supply chain management is the management and monitoring of the distribution channels. Just like a companys own sales and distribution departments have to be overlooked and taken care of, each level of the distribution chain will have to be managed in a similar vein. In reality, however, most companies utilize a mixture of different distribution channels. They might help compliment a direct sales team, call on bigger accounts, work with agents, or help take care of smaller accounts and prospects.

One of the more recent developments in distribution is the concept of vertical marketing. This unites the producer, wholesalers, and retailers in to one integrated channel. Sometimes this happens as a result of one of the members of the distribution chain owning the others outright this is referred to as corporate systems integration. For example, a supplier might own its own retail outlets; in this case, it is called forward integration. Backward integration, in which the retailer owns its own suppliers, is a much more common example. The furniture retailer, MFI, falls in to this category, as they own Hugena, who manufactures their kitchen and bedroom units. Another integration model occurs via franchising, as is the case with McDonalds fast food restaurants. Another model occurs with simple cooperation, in the sense that Marks and Spencer cooperates with their suppliers.

Another approach is via a contractual system. These are often dictated by retail or wholesale cooperatives. Then there are administered marketing systems. When one member of the distribution chain with more power is able to use its position to coordinate the activities of other members, then there could be said to be an administered marketing system. Typically, it is the manufacturer who has the dominant position in this scenario. The point of vertical marketing is to give everyone on the distribution channel some power over what goes on there especially the retailers and suppliers. Research shows, however, that it is best to pursue these strategies at the mature stage. If one sets out at an early stage of the product using these methods, it could do more harm than good in terms of profits. These methods can also pull attention away from more important business matters. Theoretically, suppliers do not do well in retail situations, whereas retailers should focus on selling rather than on bothering with manufacturing facilities. Then there is horizontal marketing, which is used less often and has less to do with marketing. It typically refers to situations in which several non competing businesses work together on a venture because it is beyond their capacity to go at it alone. 4.1 Marketing Strategies A company that is market oriented first figures out who its customers will be, then build their products or services around that market group. Marketing theory has it that a specific customer uses a product or service because he or she has a particular need, and that by using that product or service their needs will be fulfilled.

In the realm of supply chain management, marketing focuses on two specific tasks: recruiting new clients and retaining and expanding relationships with current clients. The former task is called acquisition, while the latter is referred to as base management. Once the marketer has succeeded in acquiring a new purchaser, then it is time for base management to take over. This second half of the marketing process ensures that a relationship is established between the firm and the client, that the relationship is nurtured, and that the benefits that led the client to make a purchase in the first place are not simply discarded but heightened. The product or service that is being offered should be continually improved in order to maintain a successful relationship with the client. Marketing entails expertise in many branches of the social sciences, such as economics, psychology, and sociology. Even anthropology, to a certain extent, can be useful for those entering the field of marketing. Many of the creative arts are also involved in marketing, particularly in the advertising branch.

Marketing is said to focus on the four Ps: Product, Placement, Pricing, and Promotion. This mixture of different facets should be planned out in advance to reflect the needs of the customers in the target group . Using knowledge gleaned via market research, one can come up with a quality marketing plan that will teach you both what people want and how to provide it, not to mention how much you can earn from it. Via marketing management, everything that you have learned is then applied to the target group. In fact, today's distribution chain is facing unprecedented changes that pose challenges and rewards to all participants in the supply and distribution trade. Partners all along the "traditional" distribution and supply chain channel are being challenged by new entrants into supply and distribution markets across many industries. The waters have been muddied by the Internet and the introduction of consumers and end-users into supply chain distribution.Successful distribution and supply chain management is characterized by a solid organization featuring a centralized hub supported by satellite chain distributor. Picture it as the spokes of a wheel connected at the middle--the hub.The "new" supply chain and distribution channel has several key components, which fall under the supply chain management "umbrella." These components include: 1. Distribution--the physical logistics of moving inventory along a chain of distribution. 2. Inventory management--the entities that control how much is moved and where it is stored. 3. Customers--identifying who the "real" customers are and keeping their loyalty despite all of the changes to the supply chain and distribution channel. Distribution management is of great importance for any business as it is the ultimate aim of any business. Some guidelines for distribution management of any business are as follows: Plan the chain of distribution carefully Manage your plan from within your chain, not from above. If you use statistics and historical data, you are not getting the whole picture. Talk to your partners and understand their needs using the traditional one-on-one approach. Try: Examine successful supply chain distribution, some examples of companies that have refined and reworked their own distribution and supply chain management strategies. These include Dell Computers, which has assembled a world-class distribution chain and Praxair, which advertises itself as "North America's largest inventory of welding equipment, filler metals, gas apparatus, and safety products." Choose your distribution chain players Who do you trust to make you successful? The answer should be your distributor partner. Not only is that partner a known commodity, but they can also provide business in the growing global market. Your newest partner could be half a world away, thanks to globalization and the new global economy. Try: Meet the changing face of supply distribution markets by being "fully loaded" with two types of channel partners: private equity firms and planning/forecasting consultants. Contact Supply Chain Equity Partners for questions on investment possibilities and Supply Chain Consultants for forecast improvement analysis.

Use supporting distribution chain management software Technology has made supply chain management for distributors manageable and reliable. Supply chain management software helps in planning, projecting and implementing the chain of distribution. Try: There are many different software programs to choose. It is best to test drive a few before finding the one that suits your business model the best. Request more information and product trials with Netsuite and Logility. Ross SCM software provides original solutions to manufacturers of the food and beverage, life sciences, metals, chemicals and natural product industries. Are you in the retail and wholesale distribution business? Sentai's Trax Distribution offers an integrated accounting and inventory control solution. Request a free demo.

Plan and implement a supply chain and distribution program, understanding the role of each player along the distribution channel, including the "new" global community and the changing face of end-users. Research the tools and training needed to have a successful supply chain distribution strategy.

5.REFERENCES

1.

https://blogs.oracle.com/scm/entry/5_strategies_for_better_supply_chain_management_in_the_cur rent_economy 24.08.12 2. http://www.google.co.in/url?sa=t&rct=j&q=scm+three+aggregate+planning+strategies&source=web &cd=4&cad=rja&ved=0CDQQFjAD&url=http%3A%2F%2Fwww.clt.astate.edu%2Fasyamil%2FSCM _Chopra%2Fchopra3_ppt_ch08.ppt&ei=ji9CUI73K4LyrQeDyYGgBQ&usg=AFQjCNGmfIUis_CKDK -KA7GMY7zalUjfOA 24.08.12 3. http://www.authorstream.com/Presentation/sudhanshukhatri-243200-supply-chain-managementscm-bullwick-effect-business-finance-ppt-powerpoint/24.08.12 4. http://skylergreene.hubpages.com/hub/Supply-Chain-Management-Introduction 24.08.12 5. http://en.wikipedia.org/wiki/Distribution_(business)#Channels_and_Intermediaries 25.08.12 6. http://en.wikipedia.org/wiki/Supply_chain_management#Activities.2Ffunctions 25.08.12 7. http://en.wikipedia.org/wiki/Supply_chain_management 28.08.12 8. http://web.mit.edu/dslevi/www/r4bro1.PDF 28.08.12 9. http://www.google.co.in/url?sa=t&rct=j&q=planning+and+distribution+strategies+in+supply+chain+ management&source=web&cd=6&cad=rja&ved=0CE8QFjAF&url=http%3A%2F%2Fdspace.mit.ed u%2Fbitstream%2Fhandle%2F1721.1%2F35030%2F33356471.pdf&ei=rTxCUO26J8srAeUnYDADQ&usg=AFQjCNEPUGsiCPv8ur02LpuZsL2JxEKnFw 28.08.12 10. http://supplychainplanning.com/?page_id=6 28.08.12 11. http://www.business.com/guides/supply-chain-distribution-7668/ 29.08.12 12. http://www.exforsys.com/tutorials/supply-chain/supply-chain-distribution-management.html

29.08.12
13. 14. 15. 16. 17. 18. 19. 20. http://www.joscm.com.br/previous/3-2/download/JOSCM_VOL3_NUMBER2_4.pdf 29.08.12 http://www.exforsys.com/tutorials/supply-chain/what-is-supply-chain-management.html 29.08.12 http://en.wikipedia.org/wiki/Forecasting 29.08.12 http://www.slideshare.net/wimmba/demand-forecasting-in-scm 01.09.12 http://www-scf.usc.edu/~yingtaor/publications/BullwhipEffect.pdf 01.09.12 http://www.exforsys.com/tutorials/supply-chain.html 01.09.12 http://searchmanufacturingerp.techtarget.com/definition/supply-chain-planning-SCP 01.09.12 http://www.google.co.in/url?sa=t&rct=j&q=supply+chain+planning+ppt&source=web&cd=1&cad=rja &ved=0CC0QFjAA&url=http%3A%2F%2Fwww.sclgme.org%2Fshopcart%2FDocuments%2FSuppl yChainPlanning.ppt&ei=EglDUOWyFYLKrAe52IDoDQ&usg=AFQjCNHVNf6fN4etHA6wof4JbLShB w4G3g 02.09.12 21. http://www.scribd.com/doc/16544013/Supply-Chain-Plan-ppt 02.09.12 TEXTBOOKS 1. Sunil Chopra, Peter Meindl , SUPPLY CHAIN MANAGEMENT,2002,3rd edition 2. Eli Schragenheim, H. William Dettmer, J. Wayne Patterson, Supply Chain Management at Warp Speed, 2009, 1st edition 3. Donald Waters, LOGISTICS- An introduction to Supply Chain Management, 2004, 2nd edition.

4.

John J. Coyle, C. John Langley, Brian J. Gibson, Robert A. Novack, Edward J. Bardi, A Logistics Approach to SUPPLY CHAIN MANAGEMENT., 2009, 5 th edition.