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Unit 10: Logistics and Distribution

on its relevance to customer satisfaction. By storing goods in convenient locations for shipment Notes
to wholesalers and retailers, and by creating fast, reliable means of moving the goods, small
business owners can help assure continued success in a rapidly changing, competitive global
market.
Today firms are giving greater emphasis on logistics for a number of reasons. First, efficient
distribution through effective logistics contributes in earning customer service and satisfaction
which is the prime goal of many firms. Better distribution attracts new customers; poor
distribution brings in the opposite results. Second, logistics is a major cost element for most
firms. So, they always try to keep it at a minimum level through .sound distribution system.
Raising the level of physical distribution efficiency can result in cost savings for both the firm
and its customers. Third tremendous expansion in product variety has increased the need and
importance of improved logistics management. Ordering, shipping, stocking, and controlling a
wide variety of products offers a big logistics challenge.
Finally, advancement in information technology is being utilized for gaining distribution
efficiency. The increased use of computers, point-of-sale scanners, uniform product codes, satellite
tracking, electronic data interchange, and electronic funds transfer has enabled firms to build
more efficient systems for order processing, inventory control and handling, and transportation
routing and scheduling.

10.3 The Stages of Distribution

A typical channel of distribution consist of

1. Manufacturer

2. Wholesaler

3. Retailer

4. Final Consumer

A channel of distribution or trade channel is defined as the path or route along which goods
move from producers or manufacturers to ultimate consumers or industrial users. In other
words, it is a distribution network through which producer puts his products in the market and
passes it to the actual users. This channel consists of: producers, consumers or users and the
various middlemen like wholesalers, selling agents and retailers(dealers) who intervene between
the producers and consumers. Therefore, the channel serves to bridge the gap between the point
of production and the point of consumption thereby creating time, place and possession utilities.
A channel of distribution consists of three types of flows:
 Downward flow of goods from producers to consumers

 Upward flow of cash payments for goods from consumers to producers
 Flow of marketing information in both downward and upward direction i.e. Flow of
information on new products, new uses of existing products, etc. from producers to
consumers. And flow of information in the form of feedback on the wants, suggestions,
complaints, etc. from consumers/users to producers.

An entrepreneur has a number of alternative channels available to him for distributing his
products. These channels vary in the number and types of middlemen involved. Some channels
are short and directly link producers with customers. Whereas other channels are long and

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