Distribution Strategies Distribution & Logistics Strategy Henry C. Co Technology and Operations Management,  California Polytechnic and State University Contents Strategic Considerations in Distribution Strategy Formulation Contemporary Areas of Focus  Contemporary Issues and Practices Strategic Considerations in Distribution Strategy Formulation This part based on “Distribution & Logistics Strategy,” D. Betman, W&H Systems, Inc. Strategy strat·e·gy NOUN: Inflected forms: pl. strat·e·gies 1a. The science and art of using all the forces of a nation to execute approved plans as effectively as possible during peace or war. b. The science and art of military command as applied to the overall planning and conduct of large-scale combat operations. 2. A plan of action resulting from strategy or intended to accomplish a specific goal. See synonyms at plan. 3. The art or skill of using stratagems in endeavors such as politics and business.  Distribution strategy comprises of the interplay of 4 strategic considerations Customer Considerations Channel Considerations Company Portfolio Considerations  Company Operations Considerations Strategic Considerations Customer Considerations Customers' knowledge of the products,  Customers’ price sensitivity in the product category,  How Customers make purchase decisions Customers’ logistics and customer service needs, Customers’ comfort in using technology to meet their needs. Channel Considerations Ability to create differential product demand Coverage of targeted markets Customer service capacity Physical distribution systems Overall cost control orientation Ability to use technology in both demand creation and cost control. Company Portfolio Considerations Maturity of product portfolio often dictates support needed from the channel and therefore is a core driver of channel strategy.  For example, launching newer products that require significant end user education without the active support of trusted channels with long-term customer relationships can be very difficult. Company Operational Considerations Core operational considerations involve company philosophy towards demand creation through personal selling, internal customer service and logistics capabilities, and company approach to the use of information technology and e-commerce. Alignment Needs of the customer, needs/maturity of the products, and channel capabilities must be in alignment.  Channel conflicts arises when alignment between these three does not occur  e.g., manufacturers choose to go direct to a customer with high service or logistical needs they are unprepared to meet;  Distributors who build costs or capabilities into their business model that are not demanded and/or valued by customers. Minimize channel conflict by carefully analyzing the strategic position of industry players relative to all four considerations before designing or undertaking a shift in channel strategy. Five Areas of Focus  Five Areas of Focus       Facility Sizing / Space Requirements Warehouse Management Systems Storage Systems Order Fulfil
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