Distribution and Distribution Requirements Planning

• Author: R. Inman
• Pages: 184-187

Page 184

A supply channel is composed of three structures. At one end of the channel is the manufacturer. The manufacturer focuses on the development and production of products and originates the distribution process. The terminal point in the channel is the retailer who sells goods and services directly to the customer for their personal, non-business use. In between the two lies a process called distribution, which is more difficult to define. One involved in the distribution process is labeled a "distributor." The APICS Dictionary describes a distributor as "a business that does not manufacture its own products but purchases and resells these products. Such a business usually maintains a finished goods inventory." The proliferation of alternative distribution forms, such as warehouse clubs, catalog sales, marketing channel specialists, and mail order, have blurred functional distinctions and increased the difficulty of defining both the distribution process and the term distributor.

One ultimately could maintain that distributors include all enterprises that sell products to retailers and other merchants—and/or to industrial, institutional, and commercial users—but do not sell in significant amounts to the ultimate customer. According to this definition, most companies that are involved with the disbursement of raw materials and finished products belong, in one sense or another, to the distribution industry. By adopting this definition, distribution is expanded to cover nearly every form of materials management and physical distribution activity performed by channel constituents, except for the processes of manufacturing and retailing.

Distribution involves a number of activities centered around a physical flow of goods and information. At one time the term distribution applied only to the outbound side of supply chain management, but it now includes both inbound and outbound. Management of the inbound flow involves these elements:

Material planning and control

Purchasing

Receiving

Physical management of materials via warehousing and storage

Materials handling

Management of the outbound flow involves these elements:

Order processing

Warehousing and storage

Finished goods management

Page 185

Material handling and packaging

Shipping

Transportation

Distribution channels are formed to solve three critical distribution problems: functional performance, reduced complexity, and specialization.

The central focus of distribution is to increase the efficiency of time, place, and delivery utility. When demand and product availability are immediate, the producer can perform the exchange and delivery functions itself. However, as the number of producers grows and the geographical dispersion of the customer base expands, the need for both internal and external intermediaries who can facilitate the flow of products, services, and information via a distribution process increases.

Distribution management also can decrease overall channel complexity through sorting and assistance in routinization. Sorting is the group of...