Distribution Channels and Logistics Management
Channel structure
A marketing channel is the set of interdependent organisations that make a product available to consumers. Know the levels: zero-level (direct), one-level (retailer), two-level (wholesaler and retailer), three-level (agent, wholesaler, retailer). Understand channel functions - information, promotion, negotiation, ordering, financing, risk taking, physical distribution, payment and title transfer - and that these functions must be performed by someone; they can be shifted, not eliminated.
Channel design and management
Design steps: analyse customer service needs, set objectives and constraints, identify major alternatives, evaluate them on economic, control and adaptive criteria. Then select, train, motivate, evaluate and possibly terminate channel members. Understand channel conflict - vertical (different levels) versus horizontal (same level) - and channel power (coercive, reward, legitimate, expert, referent).
Logistics
Physical distribution covers warehousing, inventory, transportation and order processing. Trade-offs are central: more warehouses mean faster delivery but higher inventory and handling cost. Know just-in-time, economic order quantity, cross-docking and the total cost approach. Also retail formats and the growth of omnichannel and direct-to-consumer models.
Traps in questions
- Believing intermediaries can be removed without cost; functions remain.
- Confusing vertical conflict (manufacturer vs retailer) with horizontal (two retailers).
- Choosing the cheapest transport mode without regard to service level.
- Treating logistics as cost minimisation rather than service-cost trade-off.
Worked example
A manufacturer bypasses wholesalers to sell direct. Functions like storage, credit and breaking bulk still must be performed - now by the manufacturer. Total cost often rises unless scale or digital reach offsets it.
Rule of thumb
Evaluate channel alternatives on economic, control and adaptive criteria; then manage conflict by aligning incentives, not by decree.