3.1.1 Factors
Completion requirements
Three important factors to consider when planning product distribution are
- satisfying the customer,
- reducing distribution costs, and
- reducing cycle time.
Customer satisfaction is dependent on the goods and distribution services included with the purchase of the goods. If the additional services are missing or inadequate, customer satisfaction can be maintained by lower prices, better quality, or larger quantity. For example, a wholesaler who fails to deliver an order to a retailer on a specific date may offer the retailer a reduced price for the order.
Effective distribution strategies support customer satisfaction. Products must always be available in a timely manner, at an acceptable price, in a desired location. If not, distributors can provide customers with home delivery and other special services or incentives. Channel members may need to carry larger inventories. They may also have to accept some costs involved in replacing defective products. If customers are unhappy, they take their business elsewhere.
Effective distribution strategies support customer satisfaction. Products must always be available in a timely manner, at an acceptable price, in a desired location. If not, distributors can provide customers with home delivery and other special services or incentives. Channel members may need to carry larger inventories. They may also have to accept some costs involved in replacing defective products. If customers are unhappy, they take their business elsewhere.
Reducing distribution costs means completing the distribution activities in a cost-effective manner. Efficiency is the goal. Sometimes reducing the costs in one area can raise the costs in another. For example, cheaper transportation may be less reliable. Products may arrive late, or damaged. Then, the savings in transportation would be offset by product replacement costs.
Warehousing and inventory are distribution costs. Changing the distribution process is a distribution cost. Computer simulations can help, but can't be 100% accurate. Organizations must examine their objectives to determine the trade-offs they can afford, and then, they can choose the best means of meeting these objectives. Sometimes, "cheapest" is not "best".
Warehousing and inventory are distribution costs. Changing the distribution process is a distribution cost. Computer simulations can help, but can't be 100% accurate. Organizations must examine their objectives to determine the trade-offs they can afford, and then, they can choose the best means of meeting these objectives. Sometimes, "cheapest" is not "best".
Cycle time is the time
between placing the order and delivering the order. A quicker cycle time
gives a business a competitive advantage. For example, a pizza company
promises to deliver the pizza in 30 minutes or less, or the pizza is
free.
When customers need a speedy response to their orders, a short cycle time is a competitive advantage.
When customers need a speedy response to their orders, a short cycle time is a competitive advantage.