In general, distribution network is a system of activities that provide transfer of products between producers and final users. It is also known as distribution channel, marketing channel, distribution chain, distribution pipeline, market chain and trade chain.
Distribution channels are interorganizational networks, or super organizations. They could be described as pathways for providing product flows from producers to consumers.
A channel consists of two processes:
*A physical process - concerned with the non-monetary aspects of physical distribution, warehousing, retail location, etc. We might call this aspect the production or logistics aspect of distribution.
*A commercial process - the process by which title is transferred from the supplier to the final customer and payment transferred from him.
The purpose of distribution channels is overcoming the gap between place of production and place of consumption, by creating time, place, and possession utilities.
In the 1980’s and 1990’s, companies began to view distribution channels as more than simply a source of cost savings and recognize it as a source of enhancing product or serve offerings as part of the broader supply chain process to create competitive advantage.
The importance of distribution channels comes from the increasingly sophisticated consumer demands, producer’s focus on core competences, and the contribution of the distribution channels to achievement of goals at the national economy level.
Distribution channels could provide competitive advantage for all partners along the network, through shorter delivery lead time and higher product availability. Although the main purpose of distribution channels is providing continuous flows of products to customers, they should be designed to fill customer’s demand with minimum total cost.
Distribution channel
