Video Transcript: Distribution Management

Hello, welcome. We're going to be discussing distribution management. What is  the channel of distribution, the process and partners that move a product from  the producer to the consumer. So how we move our product from the producer  to the consumer is the channel of distribution. How do we move it? How do we  get it there? Right? We want to distribute our product from a warehouse or from  our plant directly to a venue that a customer can purchase it from. Distribution  channel structure. Channel structure, the number of levels and companies  involved in the flow of product from producer to end user, direct channels  manufactured a commercial. I hate. Okay, can we just start the slide over?  Yeah? Sorry. Man, 5, 4, 3, 2, distribution, channel structure. Channel structure,  the number of levels and companies involved in the flow of product from  producer to end user. Direct channels, manufacturer to customer. This provides  full control over the execution of marketing strategy and a performance  benchmark for indirect channels. Company, sales force is an example, a  company, website, company owned retail outlets. So indirect channels rely on  intermediaries like provide amount, variety assortments for customers, provide  service and other facilitating functions, communicate with end users. So, so  indirect channels rely on these intermediaries to to get products out to the  consumer. So contact efficiencies, cyber media is right. They are the ones that  are the cyber the internet right is bringing the customer to the producer delegate based on core competencies, functions and cost of distribution and logistics. So  distribution channel structure its hybrid, dual or concurrent channels, a  combination of direct and indirect channel structures. So if you look at the graph, suppliers, agent, broker, distributor, flows down to the manufacturers, right and  the operators. So then the manufacturer flows down to the distributor and the  broker, who then resell, potentially to a middleman, to end customers, or the  manufacturer can sell directly to the resellers who sell to the end customers,  avoiding the middle man altogether. Sources of sales, marketing conflict. So  economic friction. Anytime there's an economic downturn, government policy,  high interest rates, anything like that, can interrupt sales. Cultural differences,  thought worlds, right? There's idea of socialism versus capitalism, salespeople,  customers, short term, right? So the customers may have a cultural difference  from the salespeople, which could create a conflict in the market. Marketing,  products, long term, right? So the products may not always fit the consumers  demands, differences between the two and orientation and competencies. It's  negatively related to cross functional collaboration, positively related to form,  firm performance. So in orientation, we need the source of sales to be the  marketing, right? But when there's conflict, it's negative. So we can't cross  functional collaborate between marketing and sales, but it is positive, positively  related to the firm's performance. So sales is in direct scope of marketing. So  sometimes marketing and sales can be in conflict, but we need them to be in  unison so that we can sell more products, direct channels, sales over company 

website, right? So brick and mortar, or brick and click distribution model,  company, Direct Website and additional to a traditional offline channel, so  Walmart, Best Buy, Staples, stuff like that, you can order online, go pick it up at  the store, etc. A variety of factors must be considered before going to this model, including backlash from existing channels. Will it cannibalize your current sales? Will your internet sales cannibalize your brick and mortar sales? That means,  eat into those revenues? So is my internet sales going to take away cash flow?  From my brick and mortar sales and vice versa, disintermediation, right? So  there is no intermediary between my online ordering and how I receive my  product from the producer, right? So I can buy direct from Amazon warehouse  and have it sent to me, whereas I've got to go into the market to a store, and  they're the intermediary that I have to go buy it from. So core competencies and  costs, sometimes those can be uncorrelated based on the number of sales from  the internet and the number of sales versus brick and mortar company owned  retail outlets, fully integrate retail sales in to marketing. So we need to integrate  our marketing philosophy and our marketing strategies in and have that  correlate directly into retail sales. Why channel evolution theory, consumers are  more comfortable going to a single brand store at a mature stage. Why?  Because they're used to that, right? They're used to going to a mature brand  that they've known for a long time, that they can, that they trust, they value, they  know the quality of the product right, and plus, you can control that customer  experience, because it's been tested for a long period of time, and you know  what the customer likes and what they demand and what their preferences are.  It can also cause conflict with intermediate intermediaries and indirect channels.  When we bypass indirect channels, they can sometimes feel left out, especially  if we do a lot of business together. So indirect channels, offline retail stores,  online retail stores, catalogs, kiosks, right? So this is where we can order, offline  retail stores, online retail stores, so they're indirect, right? There's no person to  person, right? It's just me ordering online. So the intermediaries, distributors,  buy from the manufacturer, sell to other resellers, typically national, right? So  that's what the intermediary is, right there to the distributor. But in indirect  channels, it can be these offline retail stores, online retail stores, catalogs and  kiosks can be how you order indirectly, but the indirect channels of media  intermediaries are the distributors resellers, and they are typically local types of  resellers. So add value through expertise, right? So let's say there is an  automotive shop, right? And they can add value because they're a mechanic,  and they buy these goods that you need, brake pads or transmission parts or  something like that. They can add value to those products because they know  how to put them on your vehicle. System integrators can specialize. Type of  reseller is specialized. They know everything there is to know about that product so they can sell it to the consumer and also offer expertise manage larger  complex projects, inbound versus outbound, storefront versus walk ins, or 

storefront for walk ins and calls on customers. So inbound, they walk in, they  buy at the storefront, and then they take it home, where calls on customers. I'm  making a call trying to sell them products, and hopefully they'll buy them,  traditional intermediaries match mass merchandisers, category killers, right? So  mass merchandisers, they are the ones, let's say like a Walmart, right? They're  Walmart. They offer everything, Sam's Club, Costco, so mom and pop stores  and franchises, they are the ones that kind of take the brunt from these big retail mass merchandisers coming in, managing hybrid channels, objectives. It  increases coverage, it maintains cost efficiency and it minimizes conflict. How  does it do this by gathering market data and then harmonize following the  contingency theory. So gathering market data market opportunity, we need to  assess that coverage models. We need to know we need to implement  successful statistical models that have been proven so we can measure the  data channel specific benefit cost analysis. We need to know what our cost  benefit analysis is now we can minimize costs, magnitude of conflict or the  degree of cannibalization. Again, cannibalization is how are we eating into  current sales already from another product or another way to purchase products effectively communicate justification for distribution strategies. So we need to  have a logical distribution strategy so that it makes sense to ship our products  this way, and it's cost effective and it's efficient process. And we need to be able  to quantify these results. Step two, harmonize following contingency theory. So  contingency approach to developing hybrid channels if the type of channel used  must match particular contingent factors to optimize outcomes. So we need to  make sure that we're using the proper channels right, that our tasks are on  target and that the channel performance is going through successfully, being  efficient and effective. So let's talk about multi channel marketing. Other  considerations, the tenor of the relationship, relational, first, adversarial. So, are  we trying to develop a relationship with our customer base? Are we trying to  gain market share by being somebody that they can trust and or are we being  an adversarial marketing campaign, or having an adversarial marketing,  marketing campaign versus our competitors to try to differentiate ourselves from  them. CRM is effectively tracks customers. This is a CRM is a type of way that  we can effectively gather data and track customers, especially at point of sale.  Service Oriented Architecture, we really need to be customer focused and  Related Compensation and communication that helps deliver quality customer  service through compensation of our employees and effective communication  from our employees to the consumer, supply chain management, logistical  management of incoming components and the manufacturing process. So we  really need to control this right logistical management of the incoming  components. How are we delivering raw materials? How are we storing them?  How are we effectively using them? We need to match the inflow of our direct  materials, or our raw materials, with the market demand, so we don't need to be 

ordering too much or too little. We need to make sure that we're ordering just  enough so that we don't have waste or excess and be able to cultivate that into  a product and get it on the shelves for our consumers to purchase. Challenges,  increasingly shorter life cycles of high tech products, innovation, new technology is coming up all the time. So they're always shifting marketing strategies and  sales strategies and product and development and research and development.  So with high tech products, the life cycle is shorter because things are always  changing technologically. So matching supply chain strategies to uncertainty.  What is demand uncertainty? So it's difficult to predict end consumer demand,  because tastes change, products change, technology changes, the bullet effect.  Market signals get distorted up the supply chain, so as so in the supply chain, if  we're going to be ordering raw materials in bulk, right for this quarter, but the  next quarter, the demand for our product is down, and we're not forecasting it to  be down. Now, up the supply chain, they think that we are going to purchase the same amount of raw materials, and so they may be planning ahead for that, but  then we come in with an order less, and then they're stuck holding more of the  materials that we would have bought low for functional products familiar to end  customers. So So you know, end customers are very familiar with our product,  so they know how much they want to buy and when they want to buy it high. For innovative products, the end consumer risk, right? We so when we buy new  technology, we don't know how quickly something is going to come out to  replace that technology. So we have as a consumer risk for highly innovative  products to reduce demand uncertainty, supply chain members must share  information about market demand constantly. So supply uncertainty is difficult.  It's difficult to predict the necessary quality and quantity of raw materials,  components, infrastructure, supply and services that we just spoke about, it's  difficult to predict the demand of the producer if you're a raw materials distributor or producer, so that's why you have to communicate up a supply chain all the  time and have it be efficient, effective communication. So. Up the supply chain.  They're not stuck holding more raw materials than necessary. It's low. So supply  uncertainty is low for a stable supply process mature technology. So if it's been  around, our processes are proven and stable. It's the risk is the uncertainty risk  is low here high for an evolving supply process. So if the so the uncertainty is  high, if we're a new start up or in the growth phase, and the business process is  evolving and technology is changing, so we may not know as a supplier what  the demand is going to be to reduce supply uncertainty. Early design  collaboration, we need to be collaborating with who we buy our inputs from  research and development innovation. We need to we can reduce the supply  uncertainty through this kind of collaboration, joint product development with  suppliers. We need to make sure this is again constant communication that's  effective with our suppliers, so that they can be in the process of helping us  develop our products. Participation in online marketplaces for synchronized 

planning with suppliers. So online marketplaces are good because you can have really quality, measurable statistics and analysis almost instantaneously through  online sales data collection, and through this process, we can synchronize and  plan with our suppliers.