W8-CH11: Deliver the Goods: Determine Distribution
Strategy
358 - 381
Types of Distribution Channels and Wholesale
Intermediaries
physical distribution: the activities that move finished goods from manufacturers to final customers,
including order processing, warehousing, materials handling, transportation, and inventory control
channel of distribution: the series of firms or individuals that facilitates the movement of a product from
the producer to the final customer
channel intermediaries: firms or individuals such as wholesalers, agents, brokers, or retailers who help
move a product from the producer to the consumer or business user. An older term for intermediaries is
middlemen
Functions of Distribution Channels
create efficiencies because they reduce the number of transactions necessary for goods to flow from
many different manufacturers to large numbers of customers
occurs in two ways
breaking bulk: dividing larger quantities of goods into smaller lots in order to meet the needs of
buyers
create assortments: to provide a variety of products in one location to meet the needs of buyers
transportation and storage: occurs when retailers and other channel members move the goods from the
production point to other locations where they can hold them until consumers want them
facilitating functions: functions of channel intermediaries that make the purchase process easier for
customers and manufacturers.
risk-taking functions: the chance retailers take on the loss of a product when they buy a product from a
manufacturer because the product sits on the shelf because no customers want it
communication and transaction functions: happens when channel members develop and execute both
promotional and other types of communication among members of the channel
Evolution of Distribution Functions
future, channel intermediaries that physically handle the product may become obsolete
disintermediation (of the channel of distribution): the elimination of some layers of the channel of
distribution in order to cut costs and improve the efficiency of the channel
firms develop better ways to implement knowledge management: a comprehensive approach to
collecting, organizing, storing, and retrieving a firm’s information assets
internet as a distribution channel
online distribution piracy: the theft and unauthorized repurposing of intellectual property via the
Internet
, Wholesaling Intermediaries
firms that handle the flow of products from the manufacturer to the retailer or business user
Independent Intermediaries
: channel intermediaries that are not controlled by any manufacturer but instead do business with many
different manufacturers and many different customers
merchant wholesalers:intermediaries that buy goods from manufacturers (take title to them) and sell to
retailers and other B2B customers
legally own them, suffer losses if products are damaged, free to develop own marketing strategies,
setting prices
types
full-service merchant wholesalers: wholesalers that provide a wide range of services for their
customers, including delivery, credit, product-use assistance, repairs, advertising, and other
promotional support
have own sales force (to call businesses and organizational customers)
some carry a large variety of different items
some carry an extensive assortment of a single product line
limited-service merchant wholesalers: wholesalers that provide fewer services for their customers
types
cash-and-carry wholesalers: provide low-cost merchandise for retailers and industrial
customers
customers pay cash and provide their own delivery
truck jobbers: carry their products to small business customer locations for their inspection
and selection
often supply perishable items (eg fruits and vegetables to small grocery stores)
drop shippers: limited-function wholesalers that take title to the merchandise but never
actually take possession of it
take title: to accept legal ownership of a product and assume the accompanying rights
d ibili i f hi
Strategy
358 - 381
Types of Distribution Channels and Wholesale
Intermediaries
physical distribution: the activities that move finished goods from manufacturers to final customers,
including order processing, warehousing, materials handling, transportation, and inventory control
channel of distribution: the series of firms or individuals that facilitates the movement of a product from
the producer to the final customer
channel intermediaries: firms or individuals such as wholesalers, agents, brokers, or retailers who help
move a product from the producer to the consumer or business user. An older term for intermediaries is
middlemen
Functions of Distribution Channels
create efficiencies because they reduce the number of transactions necessary for goods to flow from
many different manufacturers to large numbers of customers
occurs in two ways
breaking bulk: dividing larger quantities of goods into smaller lots in order to meet the needs of
buyers
create assortments: to provide a variety of products in one location to meet the needs of buyers
transportation and storage: occurs when retailers and other channel members move the goods from the
production point to other locations where they can hold them until consumers want them
facilitating functions: functions of channel intermediaries that make the purchase process easier for
customers and manufacturers.
risk-taking functions: the chance retailers take on the loss of a product when they buy a product from a
manufacturer because the product sits on the shelf because no customers want it
communication and transaction functions: happens when channel members develop and execute both
promotional and other types of communication among members of the channel
Evolution of Distribution Functions
future, channel intermediaries that physically handle the product may become obsolete
disintermediation (of the channel of distribution): the elimination of some layers of the channel of
distribution in order to cut costs and improve the efficiency of the channel
firms develop better ways to implement knowledge management: a comprehensive approach to
collecting, organizing, storing, and retrieving a firm’s information assets
internet as a distribution channel
online distribution piracy: the theft and unauthorized repurposing of intellectual property via the
Internet
, Wholesaling Intermediaries
firms that handle the flow of products from the manufacturer to the retailer or business user
Independent Intermediaries
: channel intermediaries that are not controlled by any manufacturer but instead do business with many
different manufacturers and many different customers
merchant wholesalers:intermediaries that buy goods from manufacturers (take title to them) and sell to
retailers and other B2B customers
legally own them, suffer losses if products are damaged, free to develop own marketing strategies,
setting prices
types
full-service merchant wholesalers: wholesalers that provide a wide range of services for their
customers, including delivery, credit, product-use assistance, repairs, advertising, and other
promotional support
have own sales force (to call businesses and organizational customers)
some carry a large variety of different items
some carry an extensive assortment of a single product line
limited-service merchant wholesalers: wholesalers that provide fewer services for their customers
types
cash-and-carry wholesalers: provide low-cost merchandise for retailers and industrial
customers
customers pay cash and provide their own delivery
truck jobbers: carry their products to small business customer locations for their inspection
and selection
often supply perishable items (eg fruits and vegetables to small grocery stores)
drop shippers: limited-function wholesalers that take title to the merchandise but never
actually take possession of it
take title: to accept legal ownership of a product and assume the accompanying rights
d ibili i f hi
