Distribution Management: Meaning and Importance

Distribution management refers to the process of overseeing the movement of goods from supplier or manufacturer to point of sale. It is an overarching term that refers to numerous activities and processes such as packaging, inventory, warehousing, supply chain, and logistics.

Distribution management is an important part of the business cycle for distributors and wholesalers. The profit margins of businesses depend on how quickly they can turn over their goods. The more they sell, the more they earn, which means a better future for the business. Having a successful distribution management system is also important for businesses to remain competitive and to keep customers satisfied.

Distribution management is critical to a company’s financial success and corporate longevity. Executing it successfully requires effective management of the entire distribution process. The larger a corporation, or the greater the number of supply points a company has, the more it will need to rely on automation to effectively manage the distribution process.

Modern distribution management encompasses more than just moving products from point A to point B. It also involves gathering and sharing relevant information that can be used to identify key opportunities for growth and competitiveness in the market. Most progressive companies now use their distribution forces to obtain market intelligence which is vital in assessing their competitive position.

There are basically two types of distribution: commercial distribution (commonly known as sales distribution) and physical distribution (better known as logistics). Distribution involves diverse functions such as customer service, shipping, warehousing, inventory control, private trucking-fleet operations, packaging, receiving, materials handling, along with plant, warehouse, store location planning, and the integration of information.

The goal is to achieve ultimate efficiency in delivering raw materials and parts, both partially and completely finished products to the right place and time in the proper condition. Physical distribution planning should align with the overall channel strategy.

Importance of distribution are as follows

The salesman is today looked upon as an economic necessity. He helps the producers and manufacturers by familiarizing their goods, distrib­uting them and by creating new demands. He is the key figure in the business world of manufacture and distribution.

The old view, however, was that the salesman’s work was unproductive and economically a waste. Today it is realized that it is the salesman who is responsible for making it possible for us to have more article in our homes and offices.

By educating the customer to make the right purchases, the salesman has increased the demand and has made mass production possible with its consequent advantages.

Distribution is akin to veins through which the life blood must flow. If goods are unsuitable or if proper channels of distribution are not carefully selected the expenses and effort involved in the manufacture or production of such goods would be wasted.

Distribution would on the face of it seem to be a comparatively simple matter if looked upon as one of packing and dispatching goods to the purchaser.

This is, however, an incomplete concept as distribution consists in the actual placing of the goods in the hands of the ultimate consumer at the proper time as well as at the proper price.

The function of distribution is often not fully appreciated. Distribution is frequently believed to mean transport. The true position that the term distribution covers all the services necessary to place the product in the hands of the consumer.

Distribution Management as a Marketing Function

The fundamental idea of distribution management as a marketing function is that the management of distribution happens in an ecosystem that also involves the consideration of the following:

• Product: Not always a tangible object, product can also refer to an idea, music, or information.
• Price: This refers to the value of a good or service for both the seller and the buyer, which can involve both tangible and intangible factors, such as list price, discounts, financing, and likely response of customers and competitors.
• Promotion: This is any communication used by a seller to inform, persuade, and/or remind buyers and potential buyers about the seller’s goods, services, image, ideas, and the impact it has to society.
• Placement: This refers to the process that ensures the availability, accessibility, and visibility of products to ultimate consumers or business users in the target channels or customers where they prefer to buy.

Effective distribution management involves selling your product while assuring sufficient stocks in channels while managing promotions in those channels and their varying requirements. It also involves making sure a supply chain is efficient enough that distribution costs are low enough to allow a product to be sold at the right price, thus supporting your marketing strategy and maximizing profit.