The length of the distribution channel as a factor of its efficiency

Aleksandra Anđelković,Marija Radosavljević

doi:10.5937/straman2002009a

Abstract

Distribution network is a system of activities that provide transfer of products between producers and final users. It is also known as distribution channel, marketing channel, distribution chain, distribution pipeline, market chain and trade chain. This network has two or more partners, so it has to be coordinated in the direction of order fulfilment and satisfied demand. As a partnership business network, distribution channels are very important, due to their role in responding to customers' requests. Distribution channels could provide competitive advantage for all partners along the network, through shorter delivery lead time and higher product availability. Although the main purpose of distribution channels is providing continuous flows of products to customers, they should be designed to fill customer's demand with minimum total cost. Determining the right number of facilities and proper locations for distribution network is an essential issue for companies involved in the channel. The issue of distribution channel's length has become more interesting due to the parallel existence of two different trends. On one hand, there is tendency for reducing number of partners, facilities or stages of distribution channels, with the purpose of avoiding extra expenses, but on the other hand there is a necessity to involve more partners in distribution channel, because that is a way for providing greater market share. Configuration of distribution channels depends on many factors. These factors have internal or external character. Therefore, the fact that the distribution of the same products in different countries can be performed completely differently is not surprising at all. In this regard, the aim of this papers is to classify the factors that affect the length of the distribution channel. In addition, the paper will also indicate advantages as well disadvantages of both long and short distribution channels. The goal of the analysis of the factors and the way of designing distribution channels, in terms of its length, is to make an adequate decision for increasing efficiency of the distribution network.

Highlights

Distribution includes a set of operations for transmitting products from manufacturers to final users (Fayaz & Azizinia, 2016)
Distribution network is a system of activities that provide transfer of products between producers and final users
Solving the dilemma of choosing direct or indirect distribution channels depends on defining an adequate model

Summary

Introduction

Distribution includes a set of operations for transmitting products from manufacturers to final users (Fayaz & Azizinia, 2016). Segetlija, Mesarić & Dujak (2011) explains distribution as a system of all activities for transferring products between manufacturers and customers. Distribution system assumes coordination of preparation, adequate type and volume of products, at the right time and space, with the purpose to ensure fulfilment of orders and satisfied demand (Segetlija et al, 2011). Distribution operations or activities are, performed inside distribution channel. A distribution channel is linearly ordered by operations in the purpose to achievement physically flow from one to another intermediaries down to the final user (Oklander, 2005; Larina, 2005).

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