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8.4 Managing distribution

So far we have been talking about closing the gap between our product, here, and our customers over there, in terms of channels that are available, how they are organised and/or constrained, and how channel members behave within the channel. In other words, we have been identifying the parameters of channels that act as a means to close the gap but we have not yet discussed the actual detail of closing the gap: that is, the physical movement of the product through the channel.

Efficient distribution has considerable implications for profit, for example, one general principle is that, a $1 saving has the same effect as a $100 increase in sales. Effective physical distribution is also closely tied to offering good customer service.

Consider this

Ask yourself this question: if customers do not find the brand they want, what impression will they have of it and would they buy a competitive one?

Physical distribution is concerned with the tasks of location, warehousing, inventory levels, materials handling and transportation. Unfortunately the costs involved in manufacturing and distribution are treated in a fragmented manner. That is, while it is cost-effective for the production department to have long production runs, this may be cost ineffective for the warehousing department. However, operations research and the use of computers in recent years is helping to optimise manufacturing and physical distribution. The Japanese innovation of just-in-time production has, in fact, revolutionised distribution.

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