Supply

A supply channel is composed of three structures. At one end of the channel is the manufacturer. The manufacturer focuses on the development and production of products and originates the distribution process. The terminal point in the channel is the retailer who sells goods and services directly to the customer for their personal, non-business use. In between the two lies a process calleddistribution, which is more difficult to define. One involved in the distribution process is labeled a "distributor." The APICS Dictionary describes a distributor as "a business that does not manufacture its own products but purchases and resells these products. Such a business usually maintains a finished goods inventory." The proliferation of alternative distribution forms, such as warehouse clubs,catalog sales, marketing channel specialists, and mail order, have blurred functional distinctions and increased the difficulty of defining both the distribution process and the term distributor.
One ultimately could maintain that distributors include all enterprises that sell products to retailers and other merchants—and/or to industrial, institutional, and commercial users—but do not sell insignificant amounts to the ultimate customer. According to this definition, most companies that are involved with the disbursement of raw materials and finished products belong, in one sense or another, to the distribution industry. By adopting this definition, distribution is expanded to cover nearly every form of materials management and physical distribution activity performed by channelconstituents, except for the processes of manufacturing and retailing.
Distribution involves a number of activities centered around a physical flow of goods and information. At one time the term distribution applied only to the outbound side of supply chain management, but it now includes both inbound and outbound. Management of the inbound flow involves these elements:
* Material planning andcontrol
* Purchasing
* Receiving
* Physical management of materials via warehousing and storage
* Materials handling
Management of the outbound flow involves these elements:
* Order processing
* Warehousing and storage
* Finished goods management
* Material handling and packaging
* Shipping
* Transportation
Distribution channels are formed to solvethree critical distribution problems: functional performance, reduced complexity, and specialization.
The central focus of distribution is to increase the efficiency of time, place, and delivery utility. When demand and product availability are immediate, the producer can perform the exchange and delivery functions itself. However, as the number of producers grows and the geographical dispersionof the customer base expands, the need for both internal and external intermediaries who can facilitate the flow of products, services, and information via a distribution process increases.
Distribution management also can decrease overall channel complexity through sorting and assistance in routinization. Sorting is the group of activities associated with transforming products acquired frommanufacturers into the assortments and quantities demanded in the marketplace. Routinization refers to the policies and procedures providing common goals, channel arrangements, expectations, and mechanisms to facilitate efficient transactions. David F. Ross describes sorting as including four primary functions:
1. Sorting is the function of physically separating a heterogeneous group of itemsinto homogeneous subgroups. This includes grading and grouping individual items into an inventory lot by quality or eliminating defects from the lot.
2. Accumulating is the function of combining homogeneous stocks of products into larger groups of supply.
3. Allocation is the function of breaking down large lots of products into smaller salable units.
4. Assorting is the function of...