After reading this article you will learn about Distribution Function:- 1. Factors Guiding Distribution Function 2. Questionnaires—Distribution Policies.

Factors Guiding Distribution Function:

For evaluation of distribution function in a large manufacturing organisation, the following key points (or elements) should be considered:

1. Customer service goals and objectives—drawing inventories through the procure­ment, production, and distribution processes.

2. Materials management—the integrated planning and control of materials flowing through the distribution network. Inventory goals and deployment characteristics.


3. Physical distribution network and operating plan—the sequential group of activities (such as warehousing, transportation, order processing, etc.) that receive, store, order, lift, transport, and deliver goods to customers; Transportation equipment and facilities, and transportation mode mix (public—private, rail—road—ship) etc.

4. Management reporting plan—systems and procedures for communication of infor­mation throughout the business; timeliness and accuracy.

5. Organisation—the roles and responsibilities of the various levels of management concerning distribution process; the allocation of work activities and effectiveness in discharging the function.

Questionnaires—Distribution Policies:

The questionnaire can be designed along the following lines:

1. Levels of Customer Service:


(a) Are the levels of service realistic and competitive to meet the needs of each geographic area, market segment, and product group?

(b) Does the management carry out periodic interviews with the customers to determine:

(i) Customers’ real service needs vs. Existing service levels?

(ii) Competitors’ abilities vs. Own abilities? (To measure performance gap).


(c) What is the stepwise approach to survey and determine the customer service requirements?

Does the approach follow the steps like:

Customer segments → Interview/Visit → Discussion/Guide

Personal/Telephonic → Results/Findings → Evaluation/Recommendations

2. Capacity Configuration:


(a) Do the production—marketing—distribution capacities provide an economical means of meeting the necessary customer service criteria within acceptable limits of investment on them?

(b) Does the management review the individual product-market segment objectives to determine marketing policies with respect to the channels of distribution and product flow?

(c) How are the capacity costs considered with respect to—Physical distribution operating costs? Inventory levels? Investment in distribution activities? Return on investment?

(d) How does the management identify and balance the following factors for optimisation of customer services:


Existing and potential distribution centre location?

Inventory stocking levels at each distribution centre?

Distribution centre capacity limits?

Distribution centre costs at each location?


Transportation costs on each origin-destination link?

Optimum number of distribution centres based on total freight and warehousing costs, service, and inventory investments?

3. Staging of Inventory:

(a) How is the volume of each product that should be at each stage of inventory (work-in-progress, semi-finished, finished goods at factory/in-transit/at distribu­tion centre location) at any particular time or season determined?

(b) Is the flow of finished goods inventory through the distribution process reasonable within acceptable service limits?


(c) Does the geographic deployment of inventories consider distribution location- wise factors so as to categories inventory based upon turnover, value, replace­ment and legal requirements?

4. Transportation Mode Mix:

(a) How is each and every transportation route in the distribution network identified (say, 80: 20 relationships whereby 80% costs attributable to 20% routes)?

(b) How are the characteristics of traffic movement in the key routes determined? Are there any considerations as to volume, frequency, shipment, size, transit time, service requirements, etc.?

(c) Are alternative transport modes, their costs, and service capabilities identified? Is the most appropriate mode selected?

5. Integrated Outlook (Overall):

Does the distribution policy indicate integrated character from the aspects of:

a. The needs of the key groups of customers?


b. The requirements of key product-market segments?

c. A realistic set of time-phased distribution goals?

d. The marketing-sales policy, etc.?