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HOW TO CHOOSE THE RIGHT DISTRIBUTION CHANNEL

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The supply chain distribution industry continues to evolve as companies are expected to meet customer expectations. Finding and creating a distribution chain that will support growth and improve performance is one of the key factors to staying ahead of the changes in the market.

With multiple options to choose from, it can be confusing to know the differences between each channel, how it can benefit the company and what the key things are to consider.

What is a supply chain distribution?

Simply put, supply chain distribution is the way businesses get their products to customers. Part of this process is the distribution plans which largely depend on the financial and company goals of the business.

With a secure distribution plan, businesses can reduce cycle times for deliveries’ increase order fulfillment and balance supply and demand. As the market continues to change, emerging technologies are fast becoming a deciding factor when picking the options.

But knowing the difference between the types of distribution channels can be challenging. As well as this, it’s important to consider the role technology plays and making sure the chosen channel is sustainable for further industry changes.

What are the main channels of distribution?

Before deciding on a set distribution channel, it’s important to know in-depth about each of the options and whether they are compatible with your business needs.

Direct

With direct distribution, a company is fully responsible for delivering products to consumers. This means products do not go through intermediaries before reaching their final destination. For smaller companies, this would benefit them as it gives total control over the distribution channel.

A benefit of this choice is that it has the potential to be much more cost efficient and less time consuming as there are fewer middlemen involved.

However, for medium to larger sized manufacturers, dealing with direct distribution could be challenging as the business starts to grow or due to a high amount of customers.

Indirect

Indirect distribution utilises wholesalers and retailers to make their products available without much contact between the manufacturer and the consumer.

With this method the distributors, be they retailers or wholesalers, take on the duties of sales, deliveries and customer service.

With an infrastructure already in place, the advantages include convenience and speed. One of the reasons many companies opt for this option is the scalability of the plan. It enables the business to outsource in areas such as management and enables employers to focus on other core processes.

Dual distribution

Dual distribution involves using two channels such as direct and indirect to release their products. The main advantage of choosing this strategy is that each channel helps businesses expand their presence in the market and reach a bigger market.

Although advantageous, it can be harder to control multi channel distributions. When working with multiple segments in the supply chain, making sure all processes are running smoothly can be a challenge.

Efficiency and accuracy come into play; however investing in two channels can be costly, and for smaller businesses, it may present a problem in the long-term.

Staying versatile

Although there are a number of options available to find a distribution channel, emerging technologies are changing the industry. After examining the different methods, it’s important to find a system that can adapt and be innovative in alignment with the changing market.

You may find pursuing one distribution channel doesn’t offer flexibility or that as your business expands you need additional features such as inventory management and real-time operational visibility. Bringing together critical business processes within a single ERP has the potential to provide this as well as streamline processes.

Finding the right distribution channel can be tough, and it’s a choice that should be made in direct alignment with your company’s goals and objectives. The most important thing you can do when choosing a distribution channel is to carefully consider your options. It may provide the opportunity to discover hidden advantages or find new ways of reaching customers in an innovative manner.


About the Author

ECI Staff Contributors love to share their insights and expertise on a variety of topics including sales, marketing, cloud, ERP, and SMB development as well as on product specific education. With offices throughout the United States, Mexico, England, the Netherlands, Australia, and New Zealand, more than 40 employees contribute to blog on a regular basis.