Dr.

Suleman Alvi

What is a Channel
Supply chain consist of all parties and their activities that help a

manufacturer create and a marketer deliver the product to the final

customer. A marketer is mainly concerned with the front end i.e.

the Distribution Channels

All independent organizations and their activities that help move

the goods from manufacturer/marketer to the end user are

collectively called Distribution channel

Channel Members
Marketer Marketing company / Supplier / Manufacturer
Specialist Organization:
Resellers take ownership of products from marketing company with the

intention of selling to others

Retailers sell direct to end users

Wholesaler / Distributors buy from marketer and sell to retailers
Industrial Distributors B2B (buy from industrial suppliers)

Specialty Service Firms:

Agents & brokers bring suppliers and buyers together for a fee
Distribution Service Firms offer services aiding in the movement of products
(assistance with transportation, storage and order processing)
Others provide additional service (e.g. insurance and routing)

Channel Activities

Ordering
Packaging
Handling
Shipping
Sorting
Storage
Display / Merchandising
Promotion
Bundling
Selling / Invoicing
Informing / Educating
Information feedback
After Sales Service
Others
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Why we need Channels ?

Specialization
Reduce Time to reach customers
Convenience / add variety

Larger number of transactions with smaller denominations

(small value per transactions)

Increase reach and coverage
Sales creation
Information flow

Customer Service
Financial support
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Channel Development & Change

Demand-Side factors
Facilitation of Search
Addressing Assortment Discrepancy - natural miss-match
between goods/service made by a manufacturer and good/service
demanded by an end user. Manufacturer produce a large quantity of a
small variety of goods, while end user require small quantities of larger
variety
Sorting breaking down a heterogonous supply into separate stocks
that are relatively homogenous
Accumulation bring together similar stocks from a number of
manufactures into a homogenous supply
Allocation Breaking down a homogenous supply into smaller and
smaller lots. Allocation at Wholesale level is terms as Breaking Bulk
Assorting building up an assortment of products for resale in
association with each other
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Channel Development & Change

Supply-Side factors
Routinization of transactions

Transactions are made routine to decrease cost and bring

Standardization in the process

Continuous Replenishment Program (CRP) is a classic example of

routinization process.

In CRP manufacturing and retailing partners share inventory and

stocking information to avoid under/over stock.

In CRP transactions are more frequent but smaller resulting in lower

turnaround time and lower inventories in the system
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Marketing Flows in Channels

Physical
possession

Physical
possession

Physical
possession

Ownership

Ownership

Ownership

Promotion

Promotion

Promotion

Negotiation

Negotiation

Producer

Retailer

Wholesaler

Negotiation

Financing

Financing

Financing

Risk taking

Risk taking

Risk taking

Ordering

Ordering

Ordering

Payment

Payment

Payment

EndUser

Identifying Channels
Industry /
Sector

Manufacturer /
Suppliers

Category

Potential Members
of Distribution
channel

Pharmaceuticals

GNC

Vitamins (OTC)

Pharmaceuticals

Abbott

Antibiotics (on
Prescription)

FMCG

Colgate Palmolive

Oral Care (Toothpaste)

Information /
Knowledge

Oxford University
Press

Books
Non Fiction

Automobiles

Indus Motors /
Toyota

Sedan
Corolla

Chemicals

BASF

Dyes / colors for textiles

Insurance

EFU Life

Life assurance

Insurance

EFU General

Vehicle insurance

?
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Identifying Channels (2)

Industry /
Sector

Manufacturer /
Suppliers

Category

Potential Members
of Distribution
channel

FMCG

P&G

Diapers

Natural elements

ICI

Soda Ash

Telecom

Mobilink

Pre-paid mobile phone

packages

Print media

Jang group

National Daily /
Newspaper

Dairy products

Nestle

Low Fat Milk

Pest/Insect
control

R&B

Flying Insect Killer

Aviation

Emirates

Long Haul
International Travel

Computing

Dell

Laptops

?
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Length of Channel

Channel length = number of levels in a distribution channel.

2 level
Manufacturer

3 level
Manufacturer

4 level

5 level

Manufacturer

Manufacturer
Agent

Consumer

Wholesaler

Wholesaler

Retailer

Retailer

Retailer

Consumer

Consumer

Consumer
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Intensity of Channel
Channel intensity: the number of intermediaries at each level of the

marketing channel.
Intensive

All Possible
Intermediaries

Selective

Relatively Few
Intermediaries

Exclusive

Just One
Intermediary
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Technology and Channels

Technology has impacted the way channels are structured and

evaluated
Flow of good and information through Channels is now driven by

level of technology employed

Impact on speed and cost of transit

Internet / e-Commerce
Business Process Management
SAP / ORACLE

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