Distribution expense
| Distribution expense |
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| See also |
Distribution expenses of enterprise belong to the most complex phase costs and comprise the whole of commodity as well as informational costs flow connected with the sale of finished product. It results from the fact that the scope of material processes in the distribution sphere is very wide (Voordijk H. 2010, s. 458.).
Distribution - set of activities connected with physical commodities flow. It provides shipment of products from manufacturer to bulk and retail units, where customers may purchase these goods. Among elements of distribution process we can distinguish planning, storing up, reserves managing, transportation (Nguyen T. 2013, s. 12.).
In terms of marketing, the distribution has to be held in an appropriate place and time, in compliance with expectations and in the best form for a client. To achieve this goal it is necessary to keep in mind remaining elements of marketing mix (Nguyen T. 2013, s. 12.).
Types of distribution expenses
Fundamental classification of distribution expenditures (Voordijk H. 2010, s. 460-463.):
- Inventory expenses – all of the expenditures which the enterprise incurs in relation to purchase and storage of reserves, materials and half-finished products.
- Handling expenses – connected with transportation, storing up, assembling of orders, packing. Size of the handling expenses is changeable because it depends on the quantity of order, the way of packing as well as labour costs.
- Transport expenses – dependent on the specificity of shipping commodities, type of transportation, vehicle size, parcel size and the distance between locations. Transport expenses might be significantly diversified depending on the number as well as location of manufacturers, traders and contractors.
- Transaction expenses – related to costs of lease and costs connected with making an order, introducing changes in the system.
- Warehousing expenses – involve expenditures on related to tenancy, rent and services connected with electricity.
Types of distribution
Distribution are dependent on:
I. Distribution intensity level
Among intensity level disribution we can distinguish:
- Intensive distribution – distribution in a whole market. It uses all workable retail units in which consumer is disposed to purchase. Applied at disposal of often acquisition products and consumption products i.e. food and beverages. The use of intensive distribution required a great number of intercessors (Pride M.F. 2010, s. 16.).
- Selective distribution – use of limited number of outlets. At the selection, the outlets prestige is taken into account. Consequently, the number of intercessors is reduced. Selective distribution is applied in course of offering products which sale require creation of adequate conditions (i.e. cosmetics, domestic appliances) and the potential purchaser of these products is able to devote more time to make a satisfying choice (Kotler P. 2009, s. 53.).
- Exclusive distribution – based on selection of one outlet (alternatively, one commerce enterprise) on a given area. Applied with reference to lasting use products, regularly more expensive and rarely buying i.e. cars. The use of exclusive distribution strategy provides the better control of conditions in which products are offering to clients (Kotler P. 2009, s. 53.).
II. Distribution channel
The choice of distribution channel is dependent on:
1. Type of contributors We can distinguish (Saraf S. 2009, s. 1.):
- Direct channel – manufacturer delivers products directly to ultimate purchasers. Absence of commerce intercessors.
- Indirect channel – products are selling to ultimate purchasers by at least one commerce intercessor.
2. The number of indirect levels We can distinguish (Szopa P. 2012, s. 144.):
- Long channels – between manufacturer and ultimate purchaser occurs more than one intercessor.
- Short channels – between manufacturer and ultimate purchaser occurs one intermediating link.
3. The number of intercessors We can distinguish (Szopa P. 2012, s. 144.):
- Narrow channels – minor number of subjects on respective levels.
- Broad channels – the number of intercessors upon one level is large.
References
- Bond B.M. (2018). At the Expense of Quality, Massachusetts Institute of Tecnology, Massachusetts.
- Global Aviation Associates, Ltd. (2003). An analysis of distribution costs orbitz vs. sabre-based gds travel agency, Global Aviation Associates, Washington.
- Kotler P. (2009). Marketing Management., Pearson Prentice Hall, Pearson, s. 53.
- Nguyen T. (2013). E-business as a distributional strategy, Lahti University of Applied Sciences, Lahti, s. 12.
- Pride M.F. (2010). Marketing Express. 2nd edition, South-Western College/Cengage Learning, Mason, s. 16.
- Saraf S. (2009). Distribution system, Intensity of Market Coverage, Referenced 2019, s. 1.
- Szopa P. (2012). Distribution channels and their roles in the enterprise, Referenced 2019, s. 144.
- Villarejo-Ramos A.F. (2007). Distribution intensity level as an antecedent od brand equity of food products, Business Administration Faculty, Spain.
- Voordijk H. (2010). Physical distribution costs in construction supply chains: a systems approach, "Int. J. Logistics System and Management, Vol. 7", No. 4, s. 458, 460-463.
Author: Justyna Zalewska
