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0 10-July-2020

Study Guide in Advertising and Sales Promotion Module No. 5

STUDY GUIDE FOR MODULE NO. 5

Chapter 5: Distribution Planning

MODULE OVERVIEW

Congratulations! You’re now on your 5th module! This time, we will focus on the third elements of
marketing mix – distribution (place) planning - and its role and function in developing effective
advertising campaign.

As you go along the module, try your best to read and answer the exercises and quizzes. You will
be given enough time to accomplish and submit your outputs. We will be having a virtual meeting
for clarification and virtual recitation to assess your learning once a week all throughout the
semester (Reading habit and asking for clarification is the key). Do not memorize every single word
but understand and familiarize them instead.

*Contents are drawn from the references at the end of the module for further reading. PDF file of
Ken Kaser 2013 Advertising and Sales Promotion. Cengage Learning Asia Pte Ltd. Philippines
will be provided.

MODULE LEARNING OBJECTIVES

At the end of the module, you should be able to:

1. Explain the functions of the channel of distribution and channel members.

2. Identify various distribution channel options.
3. Describe the processes involved in supply chain management.
4. Identify factors that can influence supply chain decisions.
5. Define logistics and explain its role in distribution.
6. Explain the importance of product storage, handling, and packaging in the distribution
process.

LEARNING CONTENT 1: CHANNEL OF DISTRIBUTION

The Function Of Distribution Channels

Distribution involves the methods used by businesses to get their products to customers.

The channel of distribution is the path on which products and services flow from the producer to
the final consumer. The simplest distribution channels involve only the producer (manufacturer) and
the final consumer. Most distribution channels are more complex and involve many businesses or
channel members.

Channel Members

- producers—manufacturers that make products and sell them to other businesses or

consumers •
- retailers—businesses that sell products directly to consumers
- wholesalers—businesses that buy products from producers and then sell the products to
other businesses, often retailers
- transportation companies—businesses that move products by airplane, railroad, ship,

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truck, pipeline, or a combination of methods

- warehouses—storage facilities used to store products as they move through the channel of
distribution
- agents and brokers—businesses that work to bring producers and buyers together in
exchange for a fee
- consumers—final end user of a product

Distribution Channels at Work

Consumers have varying needs when it comes to products. These needs relate to the quantity,
assortment, and location of a product. In addition, consumer demand for certain products varies
throughout the year. Products are moved through the channel of distribution to meet consumer
needs and demand in the most efficient way.

Channel Options

 Direct Channels
When producers sell directly to final consumers. When a direct channel is used, the
producer or consumer is responsible for completing all of the marketing functions (market
planning, product and service management, distribution, pricing, promotion, selling,
marketing-information management, financing, and risk management). Examples of direct
channels include telemarketing, mail-order and catalog shopping, online shopping, television
home-shopping networks, factory outlets, and farmers’ markets. The Internet has made it
easier for businesses to use direct channels of distribution.
 Indirect Channels
Involves intermediaries, or individuals and businesses that move a product from the
producer to the consumer. Intermediaries may include retailers, wholesalers, and agents.
Indirect channel members buy the product from the producer or other channel members to
sell to consumers or other businesses.
 Multiple Channels
Producers market the same product to several target markets. Each target market may have
different needs and purchasing behaviors.

LEARNING ACTIVITY 1

Assessment/ Guide question:

1. What factors make it more likely that a business will use direct channels of distribution
instead of indirect channels? Explain.

LEARNING CONTENT 2: SUPPLY CHAIN MANAGEMENT

A supply chain includes all of the businesses involved in the flow of products, services, resources,
and information from the producer to the consumer.

Supply chain management is the coordination and implementation of supply chain activities in a
way that maximizes customer satisfaction. When members of a supply chain cooperate and share
information, they are able to respond quickly to changes in the supply and demand of a product.

Supply Chain Activities

 Purchasing Materials
In order to function, businesses need a variety of products and services. They need raw

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materials, component parts, and equipment to produce products. They also need equipment
and supplies that are used in the daily operations of the business, such as office furniture,
computers, and paper. Businesses also require services that support the production, sales,
or maintenance of their products and services.
 Processing Orders
A customer’s order is often what sets the supply chain in motion. A customer commonly
places an order with a sales associate, but the order may also be placed by telephone, fax,
or electronically, such as through the Internet. Once received, the order works its way
through the order processing system.
 Managing and Controlling Inventory Businesses must maintain an adequate level of
inventory to meet customers’ demands. Several types of information must be maintained in
an inventory control system, including the types of products in inventory, the quantity of each
product on hand, and the length of time each product has been in inventory. Inventory
systems must also have a method of determining what products to order, when to order
them, and how many to order.
 Warehousing and Shipping
Many businesses need to store their products until the buyer wants or needs them, or they
simply may have excess product that needs to be stored. Businesses also may need to
store the raw materials or components that are used in the production of products. In all of
these cases, products likely will be stored at a warehouse.
 Managing Supply Chain Risks
To prevent supply chain disruptions, all potential risks must be identified. Supply chains face
many risks involving safety, security, distribution, and inventory control. Safety risks apply to
products, buildings, equipment, employees, and customers. Procedures must be established
to reduce the risk of damage or injury when shipping products from one location to another.

Supply Chain Management Considerations

 International Markets
 Imports
 Exports
 Quotas
 Tariffs
 Outsourcing
Outsourcing is becoming an important part of the distribution process. Outsourcing occurs
when the manufacturer or supplier hires a third party (another company) to perform specific
supply chain management functions, such as order processing, warehousing, or shipping.
 Digital Distribution
Some products can be distributed electronically through the Internet or a satellite
transmission.
 Eco-Friendly Practices
Businesses are recognizing the advantages of eco-friendly practices. Efforts to protect the
environment are evident throughout the supply chain. Recyclable or reusable packages and
packing materials are designed to prevent excess pollution and waste.

LEARNING ACTIVITY 2

Assessment Exercise:

1. Design a flowchart that describes the supply chain management process/activities. Within
the flowchart, include a brief description of each process.

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LEARNING CONTENT 3: DISTRIBUTION LOGISTICS

Logistics is the physical distribution process that involves transporting, storing, and delivering
products throughout the supply chain. Logistics requires careful planning to ensure products are
moved through the distribution channel efficiently.

Modes of Transportation

 Railroads
Heavy, bulky items can be transported by railroad. The cost of shipping by rail is reasonable
for large quantities but more expensive for only one or a few carloads of a product.
Transportation by rail is slow as is the loading and unloading of materials from rail cars.
Some parts of the country do not have rail service, so other forms of transportation are
needed to move products from the closest rail site to the final destination.
 Trucks
Flexibility and low cost are common reasons businesses use trucks to transport products.
Trucks can accommodate small or large shipments, durable or fragile products requiring
special handling, and short- or long-distance deliveries.
 Airplanes
For rapid delivery of products, many businesses rely on airplanes. Small items can be
transported on commercial flights, and large items or large quantities of an item can be
transported on cargo planes. Although the cost of transportation by air is high, other cost
savings can be realized. The speedy delivery may reduce the need for product storage and
handling, which could result in less product spoilage, damage, and theft.
 Ships and Boats
The growth of international trade has increased the transportation of products by ship or
boat. Ships can move large quantities and large products at relatively low prices. The
biggest drawback for transporting products by ship is the time it takes. It could take several
weeks for a product to arrive at its destination. Products can be damaged by weather or
other conditions while traveling by ship.
 Pipelines
Gas, oil, and water that must be moved over long distances are transported through
pipelines. Building and maintaining a pipeline is expensive. Once the pipeline is in operation,
however, it is an inexpensive way to move large quantities of a product from one location to
another.

Transportation Considerations

- Cost—The amount charged to move a product from one location to another

- Travel time—The amount of time it takes for a product to arrive at its destination after
leaving the shipper’s location (includes the time for pickup, delivery, handling, and transit)
- Reliability—The transporter’s record of making on-time deliveries in acceptable condition
- Capability—The ability of the transporter to move specific kinds of products, such as those
requiring refrigeration or other special handling
- Accessibility—The ability of the transporter to access specific routes
- Traceability—The ease with which the location of a shipment can be tracked

Product Storage, Handling, and Packaging

A warehouse is a building designed to store large quantities of products safely. Any of the
businesses along the channel of distribution, such as the manufacturer, retailer, or wholesaler, may
own a warehouse. By owning its own warehouse, the business can conveniently locate it and
design the building as needed to house its products.

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A distribution center is a large facility that offers a variety of supply chain services to help move a
product to the marketplace more efficiently. While the main function of a warehouse is storage, a
distribution center offers other services in addition to storage, including order processing and
fulfillment, packaging and labeling, and shipping and receiving.

Although product packages are designed to help promote products, they are also designed to help
protect the product as it moves through the channel of distribution. Products often are shipped,
stored, and handled many times between production and consumption.

LEARNING ACTIVITY 3

Assessment/Guide Question:

1. After studying the basic of distribution planning, what do you think is the biggest role of
distribution in developing effective advertising campaign?

Quiz No. 6:

We will have a quiz (objective type) covering Learning Contents 1-3.

*Reminder: Do not memorize every single word but understand and familiarize them instead.

Do some extra mile:

Review and refresh your mind with the basic and common concepts and terms in marketing for we
will be studying them again in the next modules.

SUMMARY

The channel of distribution is the path on which products and services flow from the
producer to the final consumer.
Channel members include producers (manufacturers), retailers, wholesalers, transportation
companies, warehouses, agents and brokers, and consumers.
Products can be moved to consumers through direct channels and indirect channels. Direct
channels involve the producer selling directly to the consumer. Indirect channels involve
intermediaries that move the product from the producer to the consumer. Multiple channels
of distribution may be used to market the same product to several target markets.
Supply chain activities include purchasing materials, processing orders, managing and
controlling inventory, warehousing, shipping, and managing supply chain risks.
Factors that must be considered when making supply chain decisions include international
markets, outsourcing, digital distribution, and eco-friendly practices.
Logistics is the physical distribution process that involves transporting, storing, and
delivering products throughout the supply chain.
The most common modes of transportation for product distribution include railroads, trucks,
airplanes, ships/boats, and pipelines.
When choosing a mode of transportation, factors for businesses to consider include, cost,
travel time, reliability, capability, accessibility, and traceability.
Finished products must be stored until they need to move to the next channel member.
Warehouses and distribution centers help facilitate the storage and handling processes.
Packaging helps protect the product as it moves through the channel of distribution.

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REFERENCES

Chapter 5
Kaser, Ken. 2013. Advertising and Sales Promotion. Cengage Learning Asia Pte Ltd.
Philippines

markiv_asp.pdf at http://www.pondiuni.edu.in/storage/dde/downloads/markiv_asp.pdf

(17E00317) ADVERTISING AND SALES PROMOTION MANAGEMENT.pdf at

http://www.bimkadapa.in/materials/ASPM%20TOTAL%205%20UNITS%20MATERIAL.pdf

https://slideplayer.com/slide/8964702/

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