Basic Distribution Channel Structure

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A manufacturing company manufactures products. It then needs to deliver the manufactured products to the consumers. Many times, the place of manufacturing and the place where the consumers require the products is very far away from each other. For example: Tata Motors has a "Indica car" manufacturing plant in Pune but its customers are all over India. So, Tata Motors needs to set up an efficient distribution system so that the products reach its consumers. In case of some perishable food products, physical distribution is a very important part of the whole business. The transportation of "Amul Butter" to the stores that sell "Amul Butter" is a big challenge. While transportation, the butter has to be stored properly, so that it does not…show more content…
So, what need to be done is to decide what minimum level of service the customers will be satisfied by. For example: In case of a car, we may say that the minimum level of service is set to one day. This means that, the car has to be delivered within one day to the consumer. So, the distribution system/distribution channels of the company should be designed in such a way that the car can reach the consumer within one day flat. One day is the minimum level of service desired. If a company keeps the minimum level of service too high, it risks losing customers. In today’s competitive environment, if a car manufacturer delivers a car in one week and its competitors deliver the car in one day; the car manufacturer will lose business to the competitors. Today people will not wait a week if they can get something in a day. On reading the above paragraphs, one may tend to think that the physical distribution system is only related to transportation of goods from the company to the consumer. However, physical distribution is a whole lot more. Some of the major aspects of physical distribution are: * Transportation * Warehousing * Inventory Management * The problem with Inventory and Warehousing Transporting a car from the car manufacturer to the customer every time an individual order is placed would be very costly. Not only would this be costly, but also it would take too much time and the time of delivery would exceed the
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