Commercial Distribution and the Role of Logistics Providers
Commercial distribution is the second-to-the-last phase in the commercial logistics cycle for businesses; the first two phases are procurement and production where the raw materials are shipped to the manufacturing facility for production into finished goods while the last phase is the disposal phase where the products are reused, among others. Because the distribution phase involves transporting the finished goods from the manufacturers to the channels of distribution before these are passed on to the actual users, its importance in business success cannot be overemphasized.
Let’s then take a look at the considerations in commercial logistics in general and commercial distribution in particular as it applies to choosing the best logistics provider.
Before you can choose a third-party logistics contractor, you must first choose a channel of distribution. Also known as a trade channel, it is the route where the finished goods move from their producers to their consumers, the latter of which can be retail or industrial customers. It is then composed of producers; middlemen like wholesalers, selling agents, and retailers; and consumers, all of whom are bridged by logistics companies providing handling, shipping and warehousing products and services.
Each channel of commercial distribution has three types of flows, namely:
Downward flow of finished commodities from producers to consumers
Upward flow from consumers and producers for cash payments
Flow of marketing information in both directions (i.e., uses of the products from producers and feedbacks from consumers on the goods)
All three types of flows are important, of course, and all three types can be addressed in many ways by logistics companies. For example, a logistics provider can be hired to secure the raw materials from suppliers and to transport the finished goods to the channels of distribution. Establishing a good working relationship with a reliable logistics provider is then a crucial aspect of business success.
Choices in Trade Channels
You can choose from four types of channels of distribution, namely:
Producer-to-consumer includes methods like direct mail, door-to-door salesmen, and selling in own retail outlets
Producer-to-retailer-to-customer involves a single set of middlemen known as retailers
Producer-to-wholesaler-to-retailer-to-customer is the most common channel of commercial distribution.
Producer-to-agent-to-wholesaler-to-retailer-customer is obviously the longest channel of distribution but is the most suitable for producers that desire wider distribution of their finished goods.
Keep in mind that in all these cases, you will require a reliable third-party logistics provider especially when your business possesses little to none of the required infrastructure.
With so many choices in channels of distribution, you will be hard-pressed to choose the best one for your business. Keep in mind that your choice in a trade channel will also affect your choice in a logistics provider in terms of the latter’s coverage area, type of equipment, and fee structure, among others. You must consider the type and nature of your products, nature of the target market, and distribution costs, to name a few factors.
No matter your choice in the trade channel, one thing remains clear: Your choice in a commercial distribution logistics partner can mean the difference between success and failure in the delivery of the right products to the right persons at the right time in the right place.
