PLACE PLACE

Place

Place• Make the product convenient for the

target customers to purchase

• Includes all company activities involved in making the product available to target consumers– Channels of distribution

– Extent of market coverage

– Managing quantity and assortment

– Retail locations

– Management of inventory

– Transportation

– Logistics

Effective Distribution• Providing the

product the customer wants

• Where they want it

• When they want it

• How they want it

Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing

Considerations in Building a Channel of Distribution

• Costs

• Coverage

• Control

15-5

Place• Channels of Distribution

– Is the path a product takes from producer (or manufacturer) to final user (or customer)

• Direct Channel of Distribution– Moves a product from producer to consumer with no in

between

• Indirect Channel of Distribution– Are people of businesses that move products between

producers and final users

• Dual Distribution– Combines more than one system

Channels of Distribution

7

Producer of product Consumer

Direct Channel

Manufacturer

Indirect Channel

Wholesaler Retailer Consumer

Manufacturer

Multiple Channels

Web Site

Retailer

Wholesaler

Consumer

Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing

Alternative Channels of Distribution

15-4

DIRECTCHANNEL

Producer

Consumers or Industrial User

RetailerChannel

Producer

Consumers or Industrial User

INDIRECT CHANNELS

WholesalerChannel

Agent/BrokerChannel

Producer

Consumers or Industrial User

Producer

Consumers or Industrial User

Wholesalers

Retailers or Industrial Distributor

Wholesalers

Agents orBrokers

Retailers or Industrial Distributor

Retailers or Industrial Distributor

Physical flow of products Payment flow

Flow of ownership Information flow

Promotion flow

Building a Channel of Distribution

• Physical Distribution of Product– Common carriers

• Transportation modes available for hire to the general public

– Contract carriers• Transportation modes that contract with individual shippers

– Private carriers• Shipper that own their own means or transport

• Modes of Distribution– Airplanes, trucks, railroads, pipelines, waterways

• Choice of Transportation– Based upon

• cost, transit time, reliability, capability, accessibility, trace ability

Small Business Management, 11th editionLongenecker, Moore, and Petty© 2000South-Western College Publishing

Components of a Physical Distribution System

15-6

TRANSPORTATIONComponent A

Airplanes Trucks Railroads Pipelines Waterways

STORAGEComponent B

Warehouses

MATERIALS HANDLINGComponent C

Forklifts Special Packaging

DELIVERY TERMSComponent D

F.O.B. Origin, Freight Collect

INVENTORY MANAGEMENTComponent E

Continuous Maximum Protection Minimum InventoryOperations Sales of Assets Investment

A Typical Supply Chain

                                                    

Place Decision QuestionsPlace Decision Questions• How will your product or service be distributed?• How will your products be shipped to your

business?• Is your location appropriate for your target

market? (explain)• Will the physical layout (floor plan) of your

business encourage or discourage sales?• Will the hours of operation match the times that

your target market prefers to do business?