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.
Production and Operations Management, a basic distribution network consists of two parts
- A set of locations that store, ship, or receive materials (such as factories, warehouses, retail outlets)
- 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 part of the network. 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. Complex distribution network includes many sources and destinations.
Marketing channels helps in the movement of goods and services for producers to consumers. It overcomes the major time, place and possession gaps. Manufacturers, wholesalers, and retailers as well other channel members exist in channel arrangements.
Standard functions performed by the Channel Members
- Information gathering and distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange
- Developing and spreading persuasive communications about an offer
- Finding and communicating with prospective buyers
- Shaping and fitting the offer to the buyers needs including activities such as manufacturing, grading, assembling and packaging
- Reaching an agreement on price and other terms of the offer so that ownership or possession can be transferred
- Transporting and storing goods
- Acquiring and using funds to cover the costs of the channel work
- Assuming the risks of performing out the channel work
- Carrying of inventory, demand generation or selling, after sales services
