What Is Distribution

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Distribution is really one of the few aspects of any marketing mix that has been virtually unchanged over the years. Distribution is simply the process of delivering a product or service to the end user or consumer who needs it. This could be done directly by either the manufacturer or distributor, or via intermediaries or channels.

Distribution in simple terms is the taking possession of goods in one form or another. It may be physical or electronic or a mixture of both. The taking or possession could take place either at the location of production or at the point of sale. Distribution therefore involves labour, materials and costs. The nature of these components of distribution will vary according to the type of goods being distributed.

Distribution can also involve retailers. Retail distribution involves the buying by retailers of goods already manufactured and/or arranged to be purchased by their retailers. Distribution in this case does not necessarily require the physical movement of goods; rather it is the buying of goods from a distributor, the placing of orders and the delivery of goods to retailers. A retailer may obtain goods from a wholesaler, manufacturer or distributor and then distribute them under their brand name or sell them to customers. Wholesalers are the ones who sell directly to retailers.

Distribution is therefore, mostly, an on-line, electronic form of distribution management. In fact, distribution management is as much a part of the e-commerce as it is a part of traditional distribution management. E-commerce sites, such as eBay, have developed sophisticated inventory management systems, designed and structured in such a way as to ensure that buyers can find what they are looking for when they place orders. They use sophisticated search engines, coupled with sophisticated software programs for analyzing market data, and can even track the location and activities of buyers and sellers around the clock. All this is done without manual labor. E-commerce sites use modern distribution methods and logistics equipment to facilitate the exchange of valuable information between buyers and sellers.

The main objective of e-distribution is to save valuable resources for the manufacturing company, by reducing operational costs, and time inventory. The reduced operational costs result in increased profitability. On the other hand, time inventory reduces the potential impact of excess stock on the ordering cycle and enables the company to respond quickly to changes in demand for goods. Both these aspects can mean increased profit margins for the company.

Distribution channels play a vital role in the supply chain. Different distribution channels allow different products to be made available to the market. Common distribution channels are retail distribution, wholesale distribution, factory over floor distribution and point of sale distribution channels. Each of these has its own advantages and disadvantages and is suited to particular purposes. The nature and size of any company should be taken into consideration before selecting the distribution channel for the products manufactured.

Distribution channels can either be manually operated or computerized. A computerized distribution management system handles all distribution functions including real-time inventory, order tracking, and advanced order processing. This results in a considerable increase in efficiency, thereby improving the overall profit margin of any company. The speed and accuracy of computerized systems make them highly suitable for large and small companies, as well as wholesalers.

Wholesalers can benefit from a strong distribution network. By selling directly to retailers, wholesalers reduce the costs and risks of purchasing inventory and warehousing it themselves. The retailer receives direct access to the warehouse and gets a significant price break. Wholesalers can also earn higher margins through direct sales, through joint ventures, and by distributing promotional items such as brochures and free samples.