What company offers a manufacturer’s retail store?

Distribution management has long been a business challenge. Raw goods can arrive too early and go bad before they are used. Or, finished products can arrive too late, allowing a competitor to seize the lion’s portion of market share.

Effective distribution is so crucial that sub-discipline practices became an integral part of supply chain and inventory management, such as just in time inventory. Overall, successful distribution involves many moving parts and methods requiring a strong distribution management strategy fueled by real-time information.

Video: What Is Distribution Management?

What Is Distribution Management?

Distribution management is the process used to oversee the movement of goods from supplier to manufacturer to wholesaler or retailer and finally to the end consumer. Numerous activities and processes are involved, including raw good vendor management, packaging, warehousing, inventory, supply chain, logistics and sometimes even blockchain.

What Is a Distributor?

A distributor is an entity that supplies products to retailers and other businesses that sell directly to consumers. Take, for example, a wholesale liquor distributor that supplies alcohol to restaurants, grocery stores and liquor stores.

Other examples include a produce distributor that supplies lettuce, tomatoes and other produce to restaurants; and a pharmaceutical distributor that supplies a variety of prescription-controlled drugs to pharmacies.

Distribution vs. Logistics

Logistics refers to the detailed planning and processes involved with the effective supply and transportation of goods. Logistics includes activities and processes such as supply management, bulk and shipping packaging, temperature controls, security, fleet management, delivery routing, shipment tracking and warehousing. It is perhaps easiest to think of logistics as physical distribution.

Distribution is a management system within logistics that is focused on order fulfillment throughout distribution channels. A distribution channel is the chain of agents and entities that a product or service moves through on its way from its point of origin to a consumer. Examples of distribution channels include ecommerce websites, wholesalers, retailers and 3rd party or independent distributors. Distribution includes activities and processes such as consumer or commercial packaging, order fulfillment and order shipping. In short, distribution is most easily understood as commercial or sales distribution.

Why Is Distribution Management Important?

Distribution management is first and foremost about organizing everything involved in getting goods to the buyer in a timely fashion and with the least amount of waste. Therefore, it has a direct impact on profits.

What Is a Distribution Network and What Are the Benefits?

A distribution network is a connected group of storage facilities and transportation systems. It is formed in accordance with a distribution strategy designed to move goods from manufacturer to wholesalers, retailers or buyers.

Advantages of Distribution Management

Besides delivering higher profits, distribution management eliminates waste in a number of ways, ranging from reduced spoilage to reduced warehousing costs since products and goods can be delivered as needed (“just in time” inventory), rather than stored in bigger bulk (“just in case” inventory).

Distribution management leads to decreased shipping charges and faster delivery to customers, and it also makes things easier for buyers as it enables “one stop shopping” and other conveniences and rewards, such as customer loyalty rewards programs.

Distribution Management Challenges

Distribution challenges can arise from a variety of disruptions. Natural disruptions include severe weather events, raw material shortages (e.g. bad crop years), pest damages, and epidemics or pandemics. Human disruptions include riots, protests, wars and strikes.

Transportation disruptions include transport vehicle disrepair, maintenance downtimes and accidents, as well as delayed flights and restrictive or new transportation regulations such as those regularly seen in trucking.

Economic challenges include recessions, depressions, sudden drops or increases in consumer or market demands, new or changes in fees or compliance costs, changes in currency exchange values and payment issues.

Product disruptions include product recalls, packaging issues and quality control issues. Buyer disruptions include order changes, shipment address changes and product returns.

5 Factors That Influence Distribution Management

Many things can influence distribution management. The five most common are:

1. Unit perishability – if it’s a perishable item then time is of the essence to prevent loss,
2. Buyer purchasing habits – peaks and troughs in purchasing habits can influence distribution patterns and therefore varying distribution needs that can be predicted,
3. Buyer requirements — e.g. changes in a retailer’s or manufacturer’s just in time inventory demands,
4. Product mix forecasting – optimal product mixes vary according to seasons and weather or other factors and
5. Truckload optimization – relies on logistics and fleet management software to ensure every truck is full to capacity and routed according to the most efficient path.

3 Distribution Management Strategies

At the strategic level, there are three distribution management strategies:

1. The mass strategy aims to distribute to the mass market, e.g. to those who sell to general consumers anywhere.

2. The selective strategy aims to distribute to a select group of sellers, e.g. only to certain types of manufacturers or retail sectors such as pharmacies, hair salons, and high-end department stores.

3. The exclusive strategy aims to distribute to a highly limited group. For example, the manufacturers of Ford vehicles sell only to authorized Ford dealerships, and producers of Gucci-brand goods only sell to a narrow slice of luxury goods retailers.

Choosing a Distribution Management System

Choosing the right distribution management system for your organization depends a great deal on your organization’s distribution goals and challenges, and the distribution models and channels your company uses. But as a general rule, companies should evaluate:

• Ease of integration and compatibility with legacy systems.
• Scalability and elasticity
• Security
• Data management and analytics, including real-time data streaming and ecosystem data-sharing
• Adaptability, whether the system is agile enough to accommodate the rapid changes needed to overcome obstacles or seize new opportunities

What Are the 4 Channels of Distribution?

There were historically three distribution channels:

1. Goods are distributed from manufacturers to wholesalers in this channel. For example, liquor distillers distribute their brands of liquors to wholesalers.

2. Goods are distributed from manufacturer or wholesaler to retailers. For example, big name designer clothing and accessories are distributed to higher end retailing chains such as Neiman Marcus, Nordstrom and Macy’s.

3. This channel moves goods from the source or manufacturer to an authorized distributor. For example, a Ford factory distributes various Ford makes and models to authorized Ford dealerships for sale to consumers or company fleets.

4. This is the newest and most disruptive distribution channel wherein goods and services are represented virtually online and then distributed directly to the buyer. Ecommerce as a fourth channel has led to rapid changes and makes distributors rethink their traditional strategies.

What Are the Elements of Distribution Management?

The elements of distribution management systems are the steps involved in getting the product from the manufacturer to the end customer and can include: supply chain, blockchain, logistics, a purchase order and invoicing system, vendor relationship management (VRM), customer relationship management (CRM), an inventory management system (IMS), a warehouse management system (WMS) and a transportation management system (TMS).

A wholesaler is a business that buys products from manufacturers and sells them to other businesses. The wholesaler doesn't operate a store; instead, they supply your small business with inventory that you sell to customers.

Whether you run a brick and mortar business or e-commerce store, wholesale distributors play an important role in connecting manufacturers and store owners.

• A wholesaler is a business that buys products from manufacturers and sells them to other businesses. 
  
• Wholesale distributors play an important role in connecting manufacturers and store owners.
  
• To find the right wholesale supplier, look for one that at least connects you with the manufacturers and products your business needs, has prices you can afford, serves your geographic region, and is reliable and trustworthy.

As a small business, you may work with one wholesale distributor or several. But finding the right one to partner with can be tricky. You'll need to find a wholesale distributor that:

• Connects you with the manufacturers and products your business needs
• Has prices you can afford
• Serves your geographic region
• Is reliable, trustworthy, and easy to work with

Before you can find the right wholesale company to work with, you need to know what products you are selling. Once you know what you're looking for, you can begin searching for the right wholesaler to supply your business.

There are many ways a product can go from manufacturer to retailer. Not all wholesalers serve the same market. Understanding your industry's distribution channels and supply chain can help you find the right wholesale supplier for your retail or online business. Different types of wholesalers include:

• Manufacturer: For some products, you can buy directly from the manufacturer. Boutique stores generally buy from small (sometimes one person) manufacturers.
• Importer/Exclusive Distributor: A company might have the sole right to import and distribute a product in a certain country. Some may sell directly to retailers, others sell to smaller local wholesalers who in turn sell to stores.
• Wholesaler/Regional Distributor: There are usually regional wholesalers who take delivery of boxcar-sized lots and sell to local wholesalers, who then sell to small businesses.
• Jobbers: These individuals make daily deliveries to local grocers and retail brick-and-mortar stores.

Some retailers will move enough volume to bypass jobbers, or maybe in a smaller industry, importers sell directly to retailers. Each industry has its own unique distribution channels, which can then vary by product, region, or country.

When you first start, you'll be buying from the smaller wholesalers at higher prices. As your volume increases, you'll be able to get better pricing or move up the supply ladder to a bigger wholesaler.

Paying wholesalers cuts into your profits. To remove middlemen from the equation, you can start at the source.

If you're selling branded items, go directly to the manufacturer of the product. They might sell to you depending on their minimum order requirements. If you're too small for them or they only sell through established distribution channels, ask them for a list of reputable distributors you can contact. In the context of supply chains, the more steps involved, the more links there are on the chain. This is sometimes referred to as "margin stacking," whereby each business associated with the supply chain takes a cut of the profit.

The fewer people you have to go through, the lower your cost will be, allowing you to be more competitive in the marketplace.

When you contact the manufacturer, request a sample of the product you intend to sell. This will allow you to look it over and inspect the quality to make sure it's something you want to sell.

Begin contacting wholesale distributors, either using the list you got from the manufacturer, phonebook listings, or a wholesale directory. You want to find out:

• Their minimum order requirements
• Their wholesale unit prices
• The region they supply

You can make this initial contact by phone or email, then follow up by phone if you need more information or would like to move forward. To find the best possible match for your business, be honest about what you're looking for and don't try to sound bigger than you are.

Don't be afraid to let the people you talk to know you are doing research and looking at other competitors as well. This can help you get better prices, even if you are starting out small.

If you do an online search, don't just search for general wholesalers or distributors. Be sure to include keywords from your products or niche. Try product names, model numbers and brand names. If any of the potential distributors you find don't have an email address or phone number readily available, you could do a WHOIS search to find the website owner's contact information.

The more potential wholesalers you find, the better you'll be able to comparison shop and get a feel for what normal industry prices are, as well as get competitive quotes.

Since eBay mainly targets retail consumers, the wholesale options you'll find here are usually only suitable for very low volume retailers. But if you're just starting out, eBay might be the easy start you need to dip your toes into e-commerce.

It's also possible that the people who are selling direct to consumers on eBay also have a business-to-business side of their business as well. It's easy to make contact with them on eBay to find out if that's the case.

There are many large B2B marketplaces online where you can buy large lots of products at low prices. Alibaba.com is one of the largest B2B marketplaces of manufacturers, importers, and wholesale distributors. Other B2B marketplaces include:

• Global Sources (USA)
• Buyer Zone (USA)
• EC21 (Korea)
• EC Plaza (Korea)
• Busy Trade (Hong Kong)

Look for a marketplace that serves your country or region. There are also industry-specific B2B marketplaces; these can either serve a single country or a global population of retailers.

More experienced small business owners in your industry or niche are often the best source of information about wholesalers. However, other retailers likely will not be eager to share supplier information with competitors. Invest time in networking to build the trust and connections that will help you find the best possible wholesale suppliers for your small business.

Participate in online forums which can be a great source of free information and help from other people with experience in your market or industry. You can also build your LinkedIn profile, subscribe to industry newsletters, and join your local Chamber of Commerce or small business networking groups to build your professional connections.

Trade magazines are a wealth of information about businesses and relationships in your industry. Nearly every advertiser in the magazine will be a product manufacturer or distributor looking to reach you, and a single issue of a trade magazine can provide the names of dozens of wholesalers or small manufacturers.

In addition to magazines, subscribe to online newsletters and blogs. These are often the best way to keep up with daily or weekly industry news and updates.

Trade shows are one of the most powerful ways to build and grow your business. These events are designed for retailers to connect with distributors and manufacturers.

Trade shows allow you to meet and speak with dozens of wholesalers or manufacturers in a single day. These face-to-face conversations often avoid misinformation or communication difficulties that can occur when contacting people online.

The Trade Show News Network is the largest directory of trade shows online. You can search for a trade show by industry, date, city, state or country and/or event name.

Your first wholesale supplier may not be a vendor that you work with long term. Creating your perfect supply chain is an evolution involving a lot of trial and error.

Remember that all you need from your first supplier is a product that you can ship at a profit. It may not be the best wholesale price for you, but you can make changes as your business and professional network expand.

Your first goal is to ship a product. Then you can improve your bottom line by trying other wholesale suppliers as you continue to build and grow your business.

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