Distribution management is the process uses by business organizations to oversee the movement of goods from suppliers, manufacturers, wholesalers, and distributors to the end customers. From the point of purchasing the raw material from the suppliers to providing the end product to the customer, there are many processes and activities are involved related to distribution management.
Distribution management is considered a part of the supply chain management system of business organizations. It is considered a challenging business function for most businesses. Due to the complexity and the involved risk types, businesses put extra effort to maintain a smooth distribution management system.
There can be many errors, issues, and risks that can happen in the process of distribution management. In manufacturing businesses, raw materials can arrive in the production process early and get bad before using for the manufacturing process. On the other hand, the raw materials can arrive in the manufacturing process too late, creating a gap in the production process.
It is crucial for businesses to have an effective distribution management system for a smooth supply chain management system as well as to use an inventory management system. Since it is involved with many moving and distribution methods, it is highly important to maintain an accurate and real-time information system.
Importance of Distribution Management
The main importance of maintaining a proper distribution management system is the possibility of organizing the entire process related to purchasing raw material to providing goods and services to the end customers. It helps businesses to minimize waste and to increase profitability. Apart from that, having a proper distribution management system allows the business to maintain a smooth production process without any material shortages and helps to increase productivity.
A distribution system is usually connected with a distribution network that provides access to a connected group of storage facilities and transport systems of the business. It helps to coordinate the distribution activities between each function of the business process.
Having an accurate and real-time distribution management system helps the business to manage inventory well without any surpluses and shortages. When considering as a whole, management of the distribution process helps every business function of the business process directly or indirectly and creates a major impact on the profitability of the business.
Channels of Distribution Management
In the traditional business environment, there were three main distribution management channels. However, with the increase in technology usage, e-commerce has also been added as a distribution management channel.
1. Wholesaler
Wholesalers are the businesses that sell products in large quantities at lower processes, typically for reselling purposes. Once the manufacturing process is completed, the goods are usually sent to the wholesalers for reselling.
2. Retailer
Once the wholesalers receive the products, they resell the products to retailers who will sell the products to the end customers. Retailers” price is higher than the wholesalers’ price of the product.
3. Distributor
Distributors are the channel of moving goods from manufacturer to authorized distribution parties. Distributors work as an intermediary between the manufacturer and sellers.
4. E-commerce
This is the newest addition to the distribution management channels. This is considered the most disruptive distribution channel. Goods and services available for selling are presented and showcased virtually online and distributed to the customers directly upon their order. Customers purchase products without physically checking the product. Improvements in technology and the increase of internet users all over the world have created a positive opportunity for businesses with e-commerce platforms to capture more market share than maintaining a brick-and-mortar business place.
The increase in e-commerce usage has led to major changes in the purchasing patterns of the customers and made the distributors rethink their traditional distribution strategies.