Evaluation of distribution channel efficiency in a selected manufacturing enterprise – part 2
From a macroeconomic point of view, distribution means the process and structure of moving goods from manufacturers to final recipients. From a microeconomic point of view, however, distribution is often identified with the process of selling and delivering a specific company’s products to final buyers.
Distribution is a profit-oriented activity that includes planning, implementation, and control of the physical flow of materials and final products from the place of production to the place of sale. The goal of distribution is to manage supply chains, i.e., the flow of value from suppliers to end users.
Depending on the type of enterprise (industrial, service, and commercial) and the goods they produce, the distribution network can be more or less developed, and consequently, more or less complex, so the logistical distribution functions performed by enterprises are very diverse. Furthermore, the number of intermediaries in the logistical process of product flow from the supplier (manufacturer) to the end-user recipient varies.
Distribution system
Distribution includes several types of activities. The first is sales forecasting, where, based on this information, the company plans production and accumulates the appropriate amount of raw materials in the materials and raw materials warehouse. In the next stage, these raw materials are processed into finished goods. The finished goods warehouse acts as a link between the customer order, which reduces the level of goods in warehouses, and the company’s production activity, which increases this level.
Enterprises are increasingly paying attention to total distribution costs, which in some cases reach 30% to 40% of the total product costs. According to P. Kotler, the elements that make up the total cost of distribution are:
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transport 37%,
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inventory financing 22%,
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warehousing 21%,
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customer service and distribution administration 20%.
Distribution costs contribute to an increase in product prices and reduce the value of the offer perceived by buyers. Therefore, when planning distribution channels, a manufacturer should take into account their varying efficiency and the willingness of buyers to pay a higher price for better distribution service, as well as the significant durability of the adopted solutions. (…)