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How intermediaries promote the efficiency and effectiveness
Transcript of How intermediaries promote the efficiency and effectiveness
What is Distribution Management?
Distribution management refers to overseeing the movement of goods from suppliers or manufacturer to point of sales including storage at warehousing location or delivery to retail distribution points.
Distribution management is an overarching term that refers to numerous activities and processes such as packaging, inventory, warehousing, supply chain and logistics.
Management functions of planning, organizing, leading, and controlling are widely considered to be the best means of describing the manager’s job, Although there have been tremendous changes in the environment faced by managers and the tools used by managers to perform their roles, managers still perform these essential functions.
Distribution planning systems can address the following operational issues faced by a supply chain manager
Product dispatching: When and where should a product be dispatched?
Product placement: Which product should be held at each location and in what quantity?
Vehicle loading: What products should be loaded on to a vehicle?
Vehicle choice: Which mode of transportation should be used?
Vehicle planning: How many vehicles of each type would be required on what days in the next one month?
Distribution system must be both effective (i.e., delivers a good or service to the right place, in the right amount, in the right condition) and efficient (i.e., delivers at the right time and for the right cost).
Requirements of a good distribution planning system
Minimize total cost of distribution.
Increase manager productivity through automated, high-speed planning.
Synchronize Distribution and Production planning.
Formalize informed decision-making and reduce variability in the Distribution planning process.
Advantage information collected through ERP and other transactional systems for optimized planning.
Improve information visibility and coordination between Marketing, Distribution and Production.
Organizing is the function of management, which follows planning.
A manager performs organizing function with the help of following steps:
1. Identification of activities
2. Departmentally organizing the activities
3. Classifying the authority
4. Co-ordination between authority and responsibility
Importance of Organizing Function:
Well defined jobs.
Growth and diversification.
Directing or leading is a crucial management because through directing, the management is able to influence and oversee the behavior of the staff in achieving the company's goals, as well as assisting them in accomplishing their own personal or career goals.
Regarding distribution management , leaders are required should play a key role in negotiating and signing up new distribution partners, Organize and conduct large scale investor seminars and conferences, Provide on-going communication and training to distribution partners and zeal offers attractive management bonus, competitive salary, MPF, Group Medical Plan
Controlling is the last of the four functions of management. It involves establishing performance standards based on the company's objectives, and evaluating and reporting actual job performance.
Regarding distribution, the controlling function should help managers measure performance standards of members involved in the channel of distribution, identify potential problems that can occur regarding the flow of products from the manufacture to the intermediaries and finally to the end user.
A distribution manager is often also called a logistics manager. His job is to ensure that the right products are delivered to the right place on time and in the most cost efficient way possible. A distribution manager might work for a manufacturer, a retailer, or a third party supplier of distribution services. The role is becoming increasingly important with the growth of e-commerce.
A distribution manager can be responsible for a large number of employees, including warehouse operatives, drivers, administrative and information technology staff.
What are intermediaries?
Distribution intermediaries help a firm to promote, sell, and make-available a good or service through contractual arrangements or purchase and resale of each of the item.
Three key intermediaries that are used to facilitate transactions between manufacturers and consumers include: retailer, wholesaler and manufacturer's agent.
Retailing is a distribution channel function where one organization buys products from supplying firms or manufactures who produce the product themselves, and then sells these directly to consumers. A retailer is a reseller (i.e., obtains product from one party in order to sell to another) from which a consumer purchases .
For consumers the most important benefits relate to the ability to purchase small quantities of a wide assortment of products at prices that are considered reasonably affordable. For suppliers the most important benefits relate to offering opportunities to reach their target market, build product demand through retail promotions, and provide consumer feedback to the product marketer.
Wholesaling intermediaries are firms that handle the flow of products from the manufacturer to the retailer or business user.
Wholesaling intermediaries add value by performing one or more of the following channel functions
Selling and Promoting
Buying and Assortment Building
Dr. Mohamed Abdel Razek
A manufacturer agent is usually used in the exporting or importing products & services.
A manufacturers' representatives (rep), also known as independent sales representatives sells a manufacturer's products to wholesale and retail customers.
When is a Manufacturer's Rep used?
A manufacturer representative is the most widely used type of agent. These types of reps are typically used in the following situations:
When there is lack of a sales force for the manufacturer. The manufacturer's rep will do all of the selling.
When introducing a new product into the market.
When there is a new market the company wants to enter, but the market is not fully developed for their own sales force to be used.
Advantages of using intermediaries
The advantages of using retailer as opposed to marketing direct to end-users can be demonstrated very easily. The efficiency of most marketing systems is improved by the presence of effective intermediaries.
Other advantages of using intermediaries include:
Betters assortment of products
Routinization of transactions
Easier searching for good as well as consumers
assuming risk--Provide working capital by paying for goods before they are sold.
Payment and title flow.
Disadvantages of using intermediaries
Some producers argue that intermediaries are worthless because they are too costly.
The argument made is that it is the producer who, by the sweat of his labor, provides the physical commodity and it is he/she who deserves to gain most from marketing transactions in that product. When it is observed that marketing costs are sometimes four or five times the price paid to the producer, and thus a sense of injustice can arise.
Role in improving efficiency & effectiveness
Improve exchange efficiency
Intermediaries are specialists in the exchange process, provide access to and control over important resources for the proper functioning of the marketing channel thus promoting effectiveness.
They bring more efficiency into the distribution system by eliminating duplicate efforts in ordering, processing, shipping, etc.
In terms of efficiency, there is an effect of decreasing returns as more intermediaries are added to the channels of distribution.
The value, if any that the intermediary adds to the product, by virtue of the functions performed, must be taken into account. McVey4 states that: cVey4 states that:
“You can do away with the middleman but you cannot do away with his functions.”
In other words, the functions that the intermediaries perform have to be carried out one way or another and the expense and risk of doing so has to be met. Any organization in the world still need services that intermediaries (wholesalers, retailers etc.) provide; if they were eliminated then someone else would have to assume the tasks (either producer or customer) .