Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Conor Cunningham

Task 2 – Understanding Retail
a) You are to conduct research and produce an informative report, which will form the
basis of a future article on distribution, which explains, with examples, 3 different
distribution channels which exist between different manufacturers and consumers
...


3 different distribution channels to include direct (multiple retailer) and
indirect channels (independent retailer) and contrasting products such as
clothing and food
...


The role of the wholesaler in distribution

iii
...


Methods of transportation used to move goods through distribution channels
...
Distribution ensures that
products and goods reach shelves in small,
independent stores as well as multiple
operators
...

Distributing a product can be carried out via
road, air, sea or rail
...
For example, perishable
goods such as milk must be distributed to retailers and customers immediately after
production as its shelf life is very short
...

“Product distribution (or place) is one of the four elements of the marketing mix
...
” https://en
...
org/wiki/Distribution_(business) (Accessed on
9/10/15)

Conor Cunningham

The method used by retailers and wholesalers to ensure that products are available for
purchase is very important
...
The speed of these items arriving in store may mean the
survival or death of a business
...


Distribution channels for retail
There are three different distribution channels for retail
...


http://beta
...
net/business/reference/marketing-distribution-channels (Accessed on
9/10/15)
Producer to wholesaler to retailer to consumer (1)
This channel has two stages between producer and consumer
...
A wholesaler buys and stores large quantities of several
producers’ goods and then breaks these items into bulk deliveries
...
An example of
this would be “Cash and Carry”
...
Business
owners and retailers will buy in large quantities from these establishments
...
In this case, the intermediary is known as the retailer
...
These large companies sell their
goods directly to large retailers such as Tesco and Amazon which then sell them onto the
consumer
...
With this type of
distribution, items or goods are produced at source and sold at source
...
These items are grown or produced and then
sold from the same point
...

Distribution
Having indicated how products can be distributed, it is important to note that goods or
products can be sold in a multi-channel retail scenario
...
These three primary
multiple channels are very popular in todays retailing
...

The role of the wholesaler
Wholesalers play a vital role in the channel of distribution
...
They are also known as distributors
...
The main functions to be performed by wholesalers include;


Bulk buying; the wholesaler buys a product
in massive quantities
...

They then sell these products on to the
retailer for a profit
...




Mass selling; diverse selling
...
For example, a wholesaler selling 20 washing machines to Hardy’s, 20
washing machines to Curry’s, and 20 washing machines to Argos
...

They will then break these products down into smaller groups and will sell them on
to separately to different retailers/businesses
...
They can then sell these products to businesses at a higher price resulting in
huge profit margins if it is done correctly
...
If a retailer demands a product, the wholesaler will need to ensure that
the product is delivered quickly so that retailers will continue to buy from them
...




Warehousing; wholesalers have to have appropriate warehousing to store the goods
and products they have
...
They also create and increase time utility of goods by storing
them and maintain proper balance between production and demand
...
Producers cannot
provide credit facility to retailers
...
Wholesalers make arrangement of finance for the producers in the
process of sales and distribution of goods
...
As a result, they would have to bear all
the risks



Market information; wholesalers also provide information about market situation,
competitors' strategy and their market position, information about different goods
in markets, customers and their needs and interest etc
...
blogspot
...
uk/2012/06/role-and-functions-ofwholesalers
...
These locations must be
sounds and secure structures to ensure products can be housed, organised and prepared for
distribution, the geographical location must support the connections and choice of transfer
required i
...
road, sea, air and rail
...
Another key consideration involves the immediate support roots

Conor Cunningham

that connect the wholesaler with its retailers
...
You
need the product to be in date and in trend in order for it to sell and be a success
...
A product with a really long shelf life is far easier to store as
it is not likely to go off while being stored
...

Physical location; the physical location is important as the storage location will need to be
near transport connections such as docks, so if the products need to be transported they
can be without any fuss or hassle
...

Size of storage capacity and facilities required;
if the Business is successful and wishes to
expand they may require bigger facilities and
storage capacity in order to store and sell more
products to make a bigger profit
...

Build or lease premises; one of the key decisions is will you buy or lease your premises
...
Buying your premises will cost more at the start but once you pay the
one big payment that’s it paid for and you don’t have to worry about monthly payments and
you own the premises and have control of it
...

The territorial distribution of retail outlets; this is an important factor as they want them
close so it is easier to distribute out their products rather than having to distribute them half
way across the country as that will cost them
...


Conor Cunningham

Density (concentration) sales; this is the volume of the sales
...

Manpower/ labour required; this is how many people they need to do their work
...

The nature of growth and development; this influences the storage as if the business at
some points looks to grow and expand they will need bigger storage space as they will be
buying in more stock as they will be selling more and trying to make a bigger profit
...

The communal expenses; these are the additional payments like leases etc
...


Methods of transportation used to move goods through distribution channels
1
...
There is a wide range of vehicle types available, so companies can design a
transport system around their products
...
For example, road transportation may not be
appropriate for perishable goods
...

2
...
However, it is important
that companies think about the entire journey that the goods take to ensure it is
efficient enough for the goods to arrive on time
...
It is better to ship large quantities of goods in one single
shipment in order to be cost effective
...
Air: Transport by air is a fast option and allows
retailers to hold smaller stock levels
...
Problems can also occur with
delays at airports, as goods have to be loaded
and unloaded
...
Sea: This is a slow but economical method of transportation
...


Considerations when choosing which method to use
Businesses rely on transportation to receive goods from their suppliers as well as deliver
orders to their customers
...
For example, milk will have to be
distributed to the consumer significantly quicker than clothing
...

Supplier production lead times
Product availability
Customer lead times
Source of supply (eg UK or abroad)
...
The source of supply is very important when considering the most
appropriate method of distribution
...
This is the number of products being sold which may influence the method of
distribution
...
For example, products bought in bulk typically are
stored in large boxes or crates
...
For example, a
product could be delivered by road, followed by sea and finally delivered by road again
...
(M2)
This section of your report must also address:
i
...


Lead times

iii
...


Currency (being up to date/having fresh food)

Conor Cunningham

v
...


vi
...


Cost Efficiencies

Introduction
In this task I will be comparing the distribution channels of locally sourced milk and clothing
made in China
...
The report will also look at the lead times, currency, storage
requirements, choice and cost effectiveness of the products
...
Down
...
Cartons of milk are then filled from
this tank after it has been filtered
...

The clothing is made in China
...
This product is then sold to people
across the world
...
The amount of milk
produced is subject to quota
...
Direct sellers have to make an annual
declaration to the RPA detailing the amount of
milk and/or milk products purchased or sold
...

The milk cartons must be labelled which shows what the milk contains
...
Allergens should also be displayed
...


Conor Cunningham

Clothing; There are regulations in place to ensure the people who manufacture the clothing
are being paid a fair wage
...
The clothing will be
made to particular sizes depending on what the demand is
...
The consumer – no matter where they may be in the world –
should know everything about the clothing they purchase
...
This is divided into five lead times
...
Order Lead Time; Time from customer order received to customer order delivered
...
For the clothing however, it could
take up to 2 weeks
...
Order Handling Time; Time from customer order received to sales order created
...
ICT has helped speed up this process significantly
...
Manufacturing Lead Time; Time from sales order created to product finished (ready
for delivery)
...
However, for the clothing it could take at least a week before
they are manufactured
...
Production Lead Time; Time from start of physical production of first
submodule/part to production finished (ready for delivery)
...
The clothing could take a couple days to be
manufactured
...
Delivery Lead Time; Time from production finished to customer order delivered
...
The clothes could take around a
week to be delivered from China, especially if the customer is on the other side of
the world
...
This includes toys to tools to
computers
...

The milk farmer will be fairly responsive to the consumer demand
...
With the clothing manufacturing in China,
they will work well to meet consumer demands
...

Just-in-time inventory systems; This is a management system in which materials or products
are produced or acquired only as demand requires
...
Retailers only want stock that is going to be sold to consumers right away
...

The farmer will only produce milk which is going to be used
...

Manufacturing resource planning; This is a method for the effective planning of a
manufacturer's resources
...
The milk farmer could use this to monitor the amount of milk produced and the
amount of milk sold
...

Accurate response systems; Technique that allows companies to match supply and supply in
an uncertain environment
...
This would help both the
milk and clothing manufacturer see trends in their industry and it will allow them to make
changes to the amount of products they are manufacturing at an early stage
...
However, the clothing company would be trading with the

Conor Cunningham

involvement of many currencies as they are supplying clothing around the world
...

This would then be dealing with Euro (€)
...

If a business only has to supply its products on a local level, it will ultimately be significantly
cheaper than a business who has to transport its goods and services around the world
...

The china clothing manufacturer may lose out on exchange rates if customers are from
different places around the world
...
The
costs for the farmer would be quite small as it operates on a very small level in comparison
...

The milk would have to be refrigerated and
stored in a cool place
...
The milk should be tightly packed
in plastic to avoid busted cartons
...
Temperatures would have to remain consistent as well as labelling on the
cartons
...
The
clothing is stored in a completely different way
...
The clothing could be stored hanging in boxes to prevent
damage to them
...
Duration between order
and transit will impact on how items are handled and packed
...


Choice
Customers have more choice when it comes to clothing
...
In recent years, clothing

Conor Cunningham

and the interest in fashion has grown significantly so competition is at an all-time high
...

There is less choice with milk
...
However, there is less choice with milk as there
is with clothing
...
Tesco for example buy lots of milk from their supplier which has
actually put other milk producers out of business as they can’t afford to charge the low
prices that Tesco suppliers can get away with
...

Cost Efficiencies

For any business to increase its profits, it can reduce its costs
...
For businesses to ensure they are being
efficient with their costs, they could consider;


Methods of distribution; Road, Rail, Air, Sea
...
However, this may
take longer for the product to reach the consumer
...




Channels of distribution; If a retailer usually buys from a wholesaler, they could try
and see if they can buy directly from the manufacturer
...
However, they must ensure that they don’t slow down the speed at
which the products are delivered to them
...
This evaluation should cover
all of the areas investigated in part b above and any other aspects you consider
relevant
...

Introduction
In this report I will evaluate the different distribution systems which are used to deliver the
two products previously chosen
...
Key aspects that impact or affect production and distribution will also be
evaluated
...

The distribution of products
When a product is ordered, it has to be distributed to its consumer from the supplier
...
Different
products are distributed in different ways
...

Milk is a product which has to be delivered
very quickly due to its low shelf life
...
Retailers order the
quantity of milk required and it is usually
delivered the following day
...
The consumer can buy
directly from the producer too
...
Typically, milk is distributed quite locally as it is a product which needs
to be constantly refrigerated and consumed quickly after it is produced
...
Milk is usually
transported by road due to the consumers being local
...
Milk would rarely be delivered by

Conor Cunningham

sea but could be to perhaps islands off the side of mainland
...
It is a very popular product which is always in demand, so
suppliers must be able to cope with the demand and delivery the number of products which
are required
...
This means that distribution
of clothing spans thousands of miles
...
The clothing can be manufactured and sold to a
wholesaler followed by the retailer and eventually the consumer
...
This channel of distribution is common as it means
there is less costs included for the retailer
...
It must be remembered that the more stages in the
channels of distribution means that the price of the clothing increases
...
It is common for clothes to be delivered via air, sea and road
...

Clothing is in demand across different parts of the world which means that suppliers must
be able to distribute their products over many
miles
...
A
disadvantage for supplier of clothing is that the
distribution costs are quite high due to the
miles that the clothing has to travel, especially
from a country like China to the UK and
America
...
Clothing has to be delivered
promptly and many websites now have delivery
included in the price of the products
...
Clothing is
rarely delivered on the same day of order, however it is very common for milk as its shelf
life is much shorter
...
Stores sell clothing and
milk
...
This means that these two products are
constantly available to people across the world and suppliers of them have to be able to
cope with the high demand of both products
...
If a product has a low shelf life it
needs to be delivered extremely quickly when the consumer demands it
...
Suppliers must look at the best way to
distribute their products: they will take into consideration things like the time they have to
deliver the product, the distance the product has to travel and the distribution costs
...

For example, if there is an economic recession, people wont be able to afford to buy things
so production of particular products will subsequently decrease
...
For example, if there is poor weather and grass isn’t growing, animals on
a farm will struggle to produce a large yield of milk
...




Competition; if there is a lot of competition and people chose a competitor over
another, their production will go down as customers are buying from someone else
...




Disposable income; if people don’t have
the excess of money to pay for particular
products such as luxury clothing, the
production wont be high in clothing
businesses
...
From my research I
learned that when the economic
downturn hit the UK in the last couple of
years, many businesses were actually put out of business due to people not having a
disposable income to shop with them
...
For example, t-shirts and
sunglasses will sell better in the summer so businesses will produce more in the
summer
...

If a product is in high demand, the production will obviously be high
...


Conor Cunningham



Time of the year/season; the time of the year has an effect on the production of
particular items
...
This is because particular products sell better
depending on the season or the time of year
...


Key aspects that affect distribution
Different factors affect distribution and the method used
...
Some aspects that
affect distribution are highlighted below;


Perishability; A manufacturer should choose minimum or no intermediary as channel
of distribution for such an item or product which is of highly perishable nature
...




Price of fuel; Distribution costs money so the price of things such as fuel must be
considered when choosing the most appropriate method of distribution
...
For example,
distributors of clothing would need to look at the most efficient way of delivering
their goods
...
The pay must be at least minimum wage so that no laws are being broken
...
It should be factored into accounting to
ensure the business can make a good return/profit
...
For
example, to pay for a lorry’s VAT/Tax and
insurance may be more expensive than actually
paying a hauler to distribute the goods
...


Conor Cunningham



Number of employees; a company such should have a number of staff which help
the business run efficiently and effectively
...
Regular check ups on the number of staff in an
organisation should be carried out to ensure the business doesn’t have extra
expenses which is doesn’t need
...
The
storage should be suitable with sufficient
space
...
Storage at the
warehouse should also be fit for purpose
...




Currency; products can cross between different products as they are being
distributed
...
For example, milk can be
manufactured in Northern Ireland with a consumer in the South of Ireland
...
The exchange rate can
change which has an affect on both the supplier and consumer
...
However, if it works against them, the exchange rate could mean that profits
could actually decrease
...
The
retail sector is made up of the wholesale sector which supplies the shops consumers go to
for goods and services
...
The most
was spent in the retail sector, online and in shops
...
The retail sector in the UK has come under
significant pressure in recent years in many ways including small shops being shut down
with the growth of supermarkets, online retailing and the most recent recession which
started to have its first effects in 2008
...
There are so many different types of
retail
...
Some of the different types of
ownership in retail include independent retailing, multiple retailing, voluntary retailing and
franchises
...
There are many different types of ownership in retail and factors which
decide on the ownership include the type of store, the brand and the product being sold
...
The
functions encourage the return of customers which boost sales and subsequently overall
profits
...
From an article Chris Rhodes I found out that in 2013, e-commerce had an
estimated worth of around £1trillion
...
files
...
uk/documents/SN06186/SN06186
...
From the way that stores have
went from brick to click, to the ways in which the methods and channels of distribution are
changing
...
Nowadays, it is now done by road which has actually taken over
rail
...
Businesses must evaluate – depending on their product – which is the most
suitable method and channel of distribution to their business
...
It is now a multi-billion pound
industry that is continuing to grow and grow
...


Bibliography
https://hbr
...
fao
...
htm
http://www
...
com/production/5-important-factors-affecting-the-choice-ofchannels-of-distribution-by-the-manufacturer/1100/
http://researchbriefings
...
parliament
...
pdf



---