Distribution – An Essential Element of Marketing

In commerce, distribution can be defined as “the transfer of goods and services from the production source to the final consumer, user, or final customer through a distribution channel, and also the transfer of payment in the opposite direction, straight to the actual producer or supplier.” In simple words, product distribution is one of the essential elements of marketing. Besides, distribution is also an essential component of Logistics & Supply chain management.

In supply chain management, distribution is described as distribution of a product from one business to other, be it producer to supplier, supplier to retailer, or retailer to the end user. It can also be expressed as a chain of intermediaries, each one moving the product to the organization at next step in the chain, before it reaches the final consumer. This process is referred as the ‘distribution chain’ or ‘distribution channel’, each having its own particular needs, which must be considered by the producer, in addition to those of the all-important final consumer.

These distribution channels might not be constrained to physical products from producer to end user in certain areas as both direct as well as indirect channels might be used. For instance, hotels can sell their services through tour operators, travel agents, tourist boards, airlines, centralized reservation systems etc. ways of transferring the goods or services from producer to the final consumer.

Distribution, in short, explains all the logistics drawn in to deliver a company’s goods and services to the correct place at the right time and at lowest possible costs. These channels of distribution opted for by the producer perform a vital role in the distribution process. The right choice of channels contributes to a significant competitive advantage, whereas wrong selections of the same might get a better product to failure.

These channel structures vary from two to five levels. The choice of these channels depends on the nature of goods and services. The two-level structure, being the simplest one, involves transfer of goods and services directly from the producer to the end user. A three-level structure, on the other hand, involves the retailers serve as mediators between the end users and the producers by ordering products directly from the manufacturers and selling them off to the end user. The fourth level of distribution channels is incorporated in the manufacturer selling his goods and services to a wholesaler rather than the retailer. In this distribution structure, the retailers buy goods from wholesalers instead of manufactures. Finally, a five channel distribution structure involves the manufacturer’s agent serving as an intermediary between the wholesalers and the manufacturer. This structure consists of the manufacturer, agent, wholesaler, retailer, and the end user.

The distribution channels might be as simple and as complex as possible. It is, however, the individual choice of the manufacturers, retailers, and the consumers to opt for these channels.

How to Label Your Libbey Glass Jars So They Are Retail-Ready

One of the most overlooked details in merchandising, how you label your Libbey jars can speak worlds about your company and your products. We are asked on a frequent basis how to address packaging concerns prior to retail distribution and what type of labels to use on specific Libbey designs. We’ve found that successful labeling approaches range the gamut; and the best strategies are those that align with your business’ vision and the target consumer’s expectation.

The simplest jars to label are straight sided: e.g, Libbey Status, Libbey Square, Libbey Double Old Fashioned or other tumblers, Libbey Apothecary Jars, also known as Classic Storage or Lucida (terraced apothecary jars), Libbey Cylinders, Candle Bowls and other basic glasses. If you are using any of these styles, you have the flexibility to put labels on the sides. However, if you are selling your candles in urban settings, large, conspicuous side labels may turn off potential consumers. If they are looking for something simple and you are selling into a “spa” concept, steer clear of complex colors and labeling strategies. The most effective branding approach is simple: decorative gift boxes and a clear strip around the neck of the jar with your company’s information. In this setting, “less is more.”

For standard retail settings targeting middleclass customers, large labels are attractive and do not disrupt the selling process. In fact, many customers in this category are looking to buy a “brand” or associate a product’s label with what is inside in terms of color, quality, texture and style. Thus, you can use the above styles and label them with no restrictions. Make sure that if you are color matching to labels, you keep your container’s look consistent with the message you are sending to the consumer. If you want them to pay more, for example, then don’t “overdo” the labels. If you want to create a novelty product, use custom artwork that evokes fun cultural themes. Try to regionalize your labels so that your Libbey product meets the consumer’s expectations for local home decorating styles.

Beyond the easy-to-label, round or curvy jars such as Libbey Interlude, Vibe, Whisper and Bean Pot Jars will not take labels on the sides. You have three options: (1) label the lid, (2) label the bottom or (3) label the neck. My experience has been that using creative labeling strategies around the neck either creating a choke collar or an attractive hang tag will generate more consumer enthusiasm than putting a label on the lid or bottom. Labeling the lid is not common – in most retail environments, this will hinder your retailing opportunities because the consumer will not have the ability to see inside the jar and this can detract from salability. Before you approach the labeling process, get samples of the Libbey styles you like best and think your potential customers will love. Do blind marketing tests of the shapes and labeling combinations until you find what works the best. You’ll find that your products will be retail-ready, and have great shelf appeal and branding potential.

Lean Six Sigma in Retail and Distribution – Value Stream Productivity

Project Outline

  • Used Value Stream Mapping, a Lean Six Sigma tool, as the foundation for evaluating costs from “Field to Table”
  • All direct and indirect processing costs were analyzed
  • A cross functional team of employees was formed to conduct this analysis including Accounting, Retail Operations, Distribution, Transportation, Marketing, Procurement and Merchandising
  • All departments that had a role in purchasing, advertising, distributing, retailing and accounting were mapped
  • Labor functions in each department were time studied
  • Outside purchased service costs were researched
  • All job functions in this process were unitized to a cost per case
  • Cost categories were sorted from highest to lowest
  • Observations and financial analysis derived from the time studies led to numerous cost reduction opportunities in the Value Stream
  • Results were presented to senior management, who in turn initiated a Lean Six Sigma program to form teams and implement the cost reductions in these areas
  • Projects were prioritized from highest to lowest cost savings

Project Details

The cross functional team began by creating a Value Stream Map. Using the map, they created a time study matrix. These team members were “subject matter experts” and knew where to go, whom to speak with and how to get the time study and financial data we needed to allocate all of the overhead expenses to a per case cost.

As an example, we time studied the time it takes to unload an inbound vendor truck at the distribution center. Based on the time it required, the hourly rate of the unloader and the number of cases unloaded, we could determine the “unitized” cost per case from unloading a truck.

Cost per Case = (Labor Time x Hourly labor rate) / # of Cases Processed

Even Accounting functions were unitized to a per case cost. The time required to process a vendor invoice was multiplied by an accounting clerk’s hourly rate and divided by the average case quantity on an order.

For services such as shipping, freight costs to the stores and financial data were gathered and allocated by the number of cases on the truck.

In addition to the detailed analysis, the team made observations while time studying different functions or when gathering financial data. Some of the highest priority cost reduction opportunities came from these observations.

Results Many companies search for cost reduction opportunities by soliciting employee feedback in an ad-hoc manner. Instead, this company used time study and financial analysis of their value stream, to calculate how much overhead functions were costing the company at the unit level. The highest cost areas, plus observations made during the time study analysis, identified many cost reducing opportunities.

These projects were prioritized by ease of implementation (easier were higher priority) and benefit (higher savings were higher priority). Management then began using Lean Six Sigma as a vehicle to address each opportunity and reap the savings. The easy to implement high savings projects were launched first.

Cost Reduction Opportunities Discovered

Below is a sample of the cost reduction opportunities discovered:

  • Checkout Productivity – productivity of the checkout clerks is below target
  • SKU Proliferation – Items for sale (SKU – or Stock Keeping Unit) had grown far above the target
  • Store are not optimizing ordering quantities to eliminate stock-outs and improve stocking productivity
  • What is the optimum store-open hours related to expense to keep the store open versus sales
  • Newspaper advertising effectiveness
  • Optimizing transportation costs between distribution centers, to stores and backhauling product from vendors
  • Newspaper Ads are reviewed multiple times by many executives, causing costs to increase and slowing down responsiveness
  • Vendor invoice discrepancies – resolution costs
  • Distribution Centers do not select items and place on pallets to enable quick stocking at the stores
  • Distribution Centers have numerous opportunities to improve order-selector productivity

These are the top ten cost reduction opportunities. In total, 30 possible Lean Six Sigma projects were identified. In addition, the initial projects identified other cost reduction opportunities.