When a business makes a new pr…
When a business makes a new product or service they need to think how they are going to distribute it and get it to the right customer. Many businesses now sell their products through retailer, this is called distribution channels. There are a number of factors to consider when deciding how to distribute their products. The availability of products is important because for instance if a customer wanted to buy a LG TV and they didn’t have a LG store near them, they could simply look in stores like Curry’s PC World, Argos or Tesco because they always have most products in store.
This allows LG to still sell their products despite not having it in their own store. Also it is cheaper for LG to sell their products at different retailers. When getting the product from the manufacturer to the customers, there are various ways the products can go through.
The first method is going straight to the customer which is known as a ‘direct channel’, it can go to the retailer, which is usually owned by the manufacturer and then customers buy it from the retailer, this is known as a ‘modern channel’ and the final method is going from a manufacturer to a wholesaler who will offer advice and then to a retail shop before it reaches a customer, this is method is known as a ‘traditional channel’. Some manufacturers decide to sell their products in bulk to a wholesaler, who will then distribute the products in smaller amounts to a retail store. This allows the product to reach a higher number of customers. Quite often wholesaler offer services such as labelling or packaging.
As mentioned before, businesses have three options on how to distribute the products; straight to a customer, to the customer via retailers or to the customer via wholesalers and retailers. As for retail control of the supply chain there is own brands and eRetailing to be considered. Customer recognises the name of big brands like McDonald’s or Tesco. That is because they have spent time thinking of the name and the design. Retailers offer their own brand products, such as Tesco value at a better price that the manufactures’. ERetailing is about retails being able to promote and sell their products online. This has put retailers at an advantage because they are available 24/7 and there are a wider range of products online plus customers can see if items are in their local store and if not order it.
Furthermore, the internet has given an opportunity to interact with the customers directly. Both of these factors are giving retailers a great advantage over manufacturers and wholesalers. Most retailers will need to think of extra provisions of the products in order to enhance their functions. Retailers like DFS or SCS will need to provide transport for the products to customers’ homes. If retailers use home delivery it put them at an advantage with their competitors. They would also have to think of the storage of the products, especially if they receive it in bulk; they need to have enough storage, having a warehouse or a stockroom. Having a stockroom is beneficial for both customer and the retailer because when customer wants something it is more likely to be in stock.
After-sale service is important because retailers want to keep the relationship with the customer after the sale. Therefore it is crucial that the retail handles complaints or offer convenient delivery times. Moving on to the distribution process, retails must ensure that products are always available for the customers; to order to achieve that a retailer must have a well-functioning supply chain. The main purpose of the supply chain is to supply required goods to the customer. The chain starts at raw materials which go to a factory, and then it is kept in a warehouse, and then moved to a retailer and at the end it reaches the customer. To make sure the supply chain is efficient the stock availability must be improved and there has to be a wide choice of products. As retailers are expanding, goods must be moved within the UK as well as overseas.
There are various types of transport used to distribute products; by rail; by road; by train; by air; by water; by container. Transporting via road and rail are most popular methods because it is efficient and cheaper. Moving products via rail is very efficient if it is planned well. The rail network is highly developed in the UK therefore it is very cheap to transport goods via trains. However, more time must be spent on planning the distribution to mainland Europe because the rail network is not as highly developed as it is in the UK is some parts of Europe. The most popular way of transportation is by road, in a van or a big truck there are a lot of options for companies to choose from. So practically saying the vehicle type is made to suit the type of product being transported.
A very fast option to transport goods is by air, especially when transporting further away. However the cost is very high therefore businesses don’t use this method much unless it is absolutely necessary. A totally opposite and a very slow but economical way is transporting by water. It is very slow and delays might be caused by weather condition or loading and unloading the goods. Last method that can be used to transport goods is by containers. They are very expensive to produce but have a high level of security therefore companies can rely on them. If the UK sources in the UK it is time efficient and cheaper.
The further UK’s retailer decided to source the more they will pay. However, making goods in China or Thailand is sometimes cheaper than making them in the UK because of the wages that employees get; so quite often big brands like Nike, Sony or Apple make their products in some western countries. Many large companies decide to have few suppliers so that they are never out of stock. The suppliers are categorised into four groups; manufactures; independent craftspeople; import sources; distributors. Picking up from the last paragraph, distributors or wholesalers as mentioned before, represent a company overseas. They purchase goods from different suppliers and then sell it in a retail store. Wholesaler should have financial strength to carry out stock levels; be in a market which they have distribution rights; be prepared for risk; be ready to buy in bulk to bring the transport cost down.
The logistics process ensures that the products are available at the right quantity and at the right time. The management of the resources is responsible to keep stock levels balanced. There are various storage locations for products; warehouses which are able to store and receive large amount of products; distribution centres are similar to a warehouse but they can be bigger and they are part of the logistic process; stock rooms should be close to the retail stores because they are the first storing place for good and because they usually are fairly small, the space should be used to the maximum. The use of ICT has a major effect of the supply chain. It is essential that companies use ICT to develop supply chain relationships, decrease the response time, improve customer service or attain international standards. Distribution through eRetail straight to the customer must meet requirements; they need to be fast and efficient. In order to achieve that there are two methods to follow; store picking and having dedicated warehouses.
Store picking happens at a lot of stores like Tesco now. It is basically employees doing customers shopping and picking the products from the shelf and after they are being delivered to the customer. The advantages of this method are short delivery distance and it is faster. There are some disadvantages as well and they include some products might be out of stock; the employee might get distracted by customers at the store or the capacity constraints. Dedicated warehouses are very important because big brands like Tesco or Asda need regular deliveries so they don’t have products out of stock which might cause loss of customers. Last part of the distribution process is the grey market and non-conventional channels. The grey market follows the distribution channels that are unauthorised by the manufacturer.
They products are not illegal but those companies have no relationship with the manufacturer.