Dist Channel

Distribution channels move products and services from businesses to consumers and to other businesses. Also known as marketing channels, channels of distribution consist of a set of interdependent organizations—such as wholesalers, retailers, and sales agents—involved in making a product or service available for use or consumption. Distribution channels are just one component of the overallconcept of distribution networks, which are the real, tangible systems of interconnected sources and destinations through which products pass on their way to final consumers. As Howard J. Weiss and Mark E. Gershon noted in Production and Operations Management, a basic distribution network consists of two parts: 1) a set of locations that store, ship, or receive materials (such as factories, warehouses,retail outlets); and 2) a set of routes (land, sea, air, satellite, cable, Internet) that connect these locations. Distribution networks may be classified as either simple or complex. A simple distribution network is one that consists of only a single source of supply, a single source of demand, or both, along with fixed transportation routes connecting that source with other parts of thenetwork. In a simple distribution network, the major decisions for managers to make include when and how much to order and ship, based on internal purchasing and inventory considerations.
In short, distribution describes all the logistics involved in delivering a company's products or services to the right place, at the right time, for the lowest cost. In the unending efforts to realize these goals, thechannels of distribution selected by a business play a vital role in this process. Well-chosen channels constitute a significant competitive advantage, while poorly conceived or chosen channels can doom even a superior product or service to failure in the market.
Multiple Channels of Distribution
For many products and services, their manufacturers or providers use multiple channels ofdistribution. A personal computer, for example, might be bought directly from the manufacturer, either over the telephone, direct mail, or the Internet, or through several kinds of retailers, including independent computer stores, franchised computer stores, and department stores. In addition, large and small businesses may make their purchases through other outlets.
Channel structures range from two tofive levels. The simplest is a two-level structure in which goods and services move directly from the manufacturer or provider to the consumer. Two-level structures occur in some industries where consumers are able to order products directly from the manufacturer and the manufacturer fulfills those orders through its own physical distribution system. In a three-level channel structure retailersserve as intermediaries between consumers and manufacturers. Retailers order products directly from the manufacturer, then sell those products directly to the consumer. A fourth level is added when manufacturers sell to wholesalers rather than to retailers. In a four-level structure, retailers order goods from wholesalers rather than manufacturers. Finally, a manufacturer's agent can serve as anintermediary between the manufacturer and its wholesalers, creating a five-level channel structure consisting of the manufacturer, agent, wholesale, retail, and consumer levels. A five-level channel structure might also consist of the manufacturer, wholesale, jobber, retail, and consumer levels, whereby jobbers service smaller retailers not covered by the large wholesalers in the industry.
Benefitsof Intermediaries
If selling directly from the manufacturer to the consumer were always the most efficient methodology for doing business, the need for channels of distribution would be obviated. Intermediaries, however, provide several benefits to both manufacturers and consumers: improved efficiency, a better assortment of products, routinization of transactions, and easier searching for goods...