Distribution Network – Basics | MM Marketing Mind

Exhibit 30.0   Illustration of FMCG distribution network.

A distribution network is a
set of interdependent organizations engaged in making goods and services
available to customers. It includes primary channel partners such as
wholesalers, distributors, retailers, agents and brokers who form the pipeline
or link between manufacturer and customers. It also involves ancillary channel
members who provide generic facilities such as transportation (logistics),
financing, storage, promotion and other such services. These primary and
ancillary intermediaries make the flow of goods to target customers efficient
and cost-effective.

Distribution channels vary from one class of goods
to another, and channel strategies too can differ from manufacturer to
manufacturer.

The FMCG distribution network in particular is
complex and widespread, and usually takes the form of a conventional channel,
such as that depicted in Exhibit 30.0. The retail universe,
as mentioned in the chapter Retail Tracking, comprises both the upper
(modern) and the lower (traditional) trade. The trade formats are
diverse varying from basic to advanced retailing concepts like virtual
shopping. The most prevalent FMCG trade formats are described in Chapter Category
Management.

The pipeline characteristics vary depending on the
nature of the product and the size of the market. Markets covering large
geographies such as India, Indonesia and China have extensive and elaborate distribution
networks.

Products like bread that have a short shelf life
require distribution networks that can cater for daily deliveries to retail
outlets. Other products like pasteurized milk and fresh foods require cool
chain distribution, whereas ice creams and frozen foods require cold chain
distribution.

A soft drink like Coca-Cola is distributed not
only in a very large number of stores, it is also available at food and
beverage outlets, and at many other indoor and outdoor locations through
vending machines. On the other hand, premium quality, niche and exclusive
products like gourmet foods or luxury personal care brands are only distributed
in select outlets.