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Logistical network

Logistical channels and networks in logistics

     On a way of moving of production from the manufacturer irrespective of, in how many stages, with attraction of intermediaries or directly these movings will be executed, following procedures are realised:
1. Marketing research of the market.
2. Advertising and an information work on sale stimulation.
3. Definition of potential buyers.
4. Negotiations with potential buyers and registration of necessary documents.
5. Movement of commodity streams, including transportation and warehousing.
6. Financing of movement of production, including the account of possible financial risks.
    These procedures can be completely executed the manufacturer of production, and can be and are redistributed between it and the specialised enterprises-intermediaries involved for certain compensation. Thus, irrespective of the involved organisations and a combination of procedures of distribution carried out by them the chain of logistical operations of management is built by distribution. In this connection it is possible to speak about logistical channels of distribution.
     Distribution channels or as them still name, marketing channels as institutional business formations, represent one of the most difficult problems. Such channels serve as arena on which in system of the free market there is an exchange of the property for products and services. Because of a variety and difficult structure of such channels it is extremely difficult to describe shared problems which managers face at development of complex strategy of distribution. Successfully to plan and develop business relations, managers should understand well distribution and management economy economic communications in channels.
     In practice the establishment of definitive structure of the channel of distribution is preceded by long process of planning and negotiations. But even when distribution strategy is developed and accepted to execution, this process changes on those or other sites of the channel are continuously reconsidered, made. Thus, economic communications in distribution channels are dynamical, as the companies try to improve constantly the competitive positions, and the good structure of the channel offers to firms competitive advantages.
     There are various definitions of channels of distribution. So, the American marketing association (American Marketing Association) defines the distribution channel as follows: the structure uniting internal divisions of the organisation with external agents and dealers, wholesale and retail dealers through which sale of the goods, products or services is carried out. In the domestic literature there are such treatments of the channel of distribution. A.D.Chudakov marks: the distribution channel represents a number of the organisations or separate persons which carry out transfer of these or those goods on a way from the manufacturer to the consumer.
     Thus there is not a simple moving of the goods from hand to hand, and transfer of the property right to the transferred goods takes place. There is an original resale of the goods, and, except for the end user, other participants of this chain buy it for the purpose of the subsequent sale, instead of for use according to appointment. In this connection the logistical channel of distribution represents in appropriate way the organised chain more or less the constant secondhand dealers who are carrying out intermediary between the manufacturer and the consumer.
     Other authors represent the logistical channel of distribution as the isolated set of links of the logistical system focused on the basic stream, generated for the purpose of performance of marketing requirements and-or economy on scales of logistical activity at the expense of harmonisation transaction units of packing, storage, грузопереработки and production transportations.
     Technically the distribution channel represents group of the companies possessing the property right to a product or promoting transfer of the property from the initial owner to the final buyer in the course of a market exchange.
     On the basis of the above-stated it is possible to make following definition of the logistical channel of distribution is a set independent legal or the physical persons participating in process of advancement of the goods from the manufacturer to the consumer, and also service accompanying this movement; it is system of economic communications between the companies participating in process of purchase and sale of production and services.
     Thus it is important to note: not all participants of the channel of distribution bring the identical contribution to economic communications and equally win from it. In this connection allocate the basic and specialised participants of the channel. The basic participant of the channel is the company taking up responsibility, connected with possession of stocks, or other considerable forms of financial risk.
     The specialised participant of the channel is the company rendering the important special services to the basic participant for corresponding compensation. Risk distribution between these categories has great value. However at an establishment of economic communications in the channel of more attention give to to organise possibilities of all potential participants in such system which would answer expectations of the end user.
     The basic and specialised participants of the channel of distribution together should provide market requirements to assortment, i.e. To the qualitative and quantitative structure of products directed on satisfaction of concrete requirements of the buyer. The wide spectrum of the actions connected with purchase and sale concerns exchange functions, i.e. Necessary for property transfer. Functions of physical distribution is a delivery of the necessary products in a proper place and in due time. The category of auxiliary functions traditionally includes standardization, financing of market transactions, insurance of risks, and also information and scientific maintenance. Besides, distribution channels
• conduct marketing researches,
• carry out gathering of the information necessary for planning and simplification of an exchange,
• define conditions of purchase and production sale (upon, the advance payment, a consignment),
• stimulate sale,
• adjust and support contacts to steady customers,
• will co-ordinate the prices
     Full set of channels of distribution forms a distributive or distributive network of the enterprise.
     Kinds of channels of distribution and network structure depend on set of factors strategic and tactical targets and enterprise problems on a commodity market of finished goods, logistical strategy of the enterprise, kinds and parametres of material and other streams, grocery attributes and other factors.
     Use of channels of distribution promotes economy of financial assets on production distribution, to occurrence of possibility of an investment of the saved means in the basic manufacture and production sale by more effective ways, high efficiency of maintenance of wide availability of the goods and its finishing to the target markets, reduces amount of works for choice channels of distribution of production.
     Advantages of increase in quantity of channels of distribution
• degree of coverage of the market as new channels of distribution involve earlier inaccessible part of consumers grows, • level of the general charges of all channels of distribution the Additional channel decreases is formed with a view of decrease in level of the general expenses for sale of production to existing group of consumers,
• the degree of quality of sales, in the new created channel raises unsatisfactory requirements of consumers Channels of distribution irrespective of number of levels, as a rule, are considered it is possible to unite in groups
1) straight lines when economic communications between the enterprises counterparts are direct,
2) indirect when between them is one or several intermediaries,
3) mixed when with certain group of consumers direct communications are established, and with the others - indirect, or when by one kinds of production contacts to the customer direct, and on another - mediated. 
     The direct channel of distribution advancement of the goods is created on the basis of direct economic mutual relations with consumers under the scheme: the manufacturer - the end user. This variant is used in a case when the manufacturer does not wish to give a part have arrived to intermediaries (when demand for the goods high, the goods highly remunerative).
     However this variant has the limited possibilities in time, space and money. The indirect channel of distribution: necessarily there is an independent participant distribution - the intermediary. In this case the manufacturer loses a part of profit in favour of the intermediary. It is justified in the basic their efficiency in maintenance of wide availability of the goods and its finishing to the target markets. Thanks to the contacts, experience, specialisation and the sizes of activity intermediaries offer the enterprise more than that it is usually possible to make alone. So, for example, work of several manufacturers through one distributor who comes into contacts to several manufacturers, considerably promotes economy and time, both money, and to reduction of volume of work.
     Indirect channels of distribution are preferable, when: there is a quantitative and qualitative discrepancy of manufacture and consumption of the goods; geopolitical dissociation of manufacture and consumption is observed; manufacture and consumption have mass character; products do not demand considerable expenses on pre-sales and after-sales service; service of the intermediary above, than a commodity producer, etc. 
     The mixed channels of distribution combine functions of first two. On number of intermediate intermediary links all channels of distribution share on channels of various level. Channels of zero level are characterised by a total absence of any intermediaries, i.e. The manufacturer directly co-operates with the consumer. Channels of the first level are characterised by presence of one intermediary etc. The quantity of levels defines one more characteristic of the channel of distribution - extent. This characteristic is not connected in any way with physical distance between the manufacturer and the consumer.
     Thus level of the channel of distribution is understood as a link of contractors (logistical providers), carrying out certain functions on moving of production and transfer of the property right to it to the next link of contractors in a direction of the end user of production. The distribution channel characterise it звенность and width. The factor звенности the distribution channel shows an average of links through which there passes production at movement from the manufacturer to the end user.
     Width of the channel of distribution - number of participants of the channel of the distribution, allocated for each level of the channel. There are channels and with a considerable quantity of levels, but they meet less often. From the point of view of manufacturers, the more levels has the distribution channel, the it is less than possibility to supervise it. Besides, distribution channels are classified on horizontal and vertical. Horizontal channels are formed independent from each other by the manufacturer and intermediaries. Each link of the horizontal channel represents the legal body working at own risk and aspiring to maximise own profit. Vertical channels of distribution consist of links between which those or other interrelations are established.
     The most widespread is the situation at which one of participants of the channel of distribution is the proprietor of the others. In this case among participants of process of distribution the hierarchical connexion соподчинения is established, and all channel can function as a unit. 
     The choice of the channel of distribution is influenced by set of factors: a financial condition of the enterprise, its image, production potentialities, number of competitors, consumers, their relation to acquisition of the goods, their requirements to assortment and quality of the goods, solvency of consumers, characteristics of the goods. Besides, the great value has qualitative level of the organisation of intermediary activity in separate region or in the country as a whole.
     The structure of channels of distribution is developed in some stages:
1. The kinds of service necessary for the consumer are analyzed.
2. The purposes of the channel and possible restrictions for their achievement are defined.
3. The basic variants of construction of channels of distribution are developed.
4. Variants of construction of channels of distribution are estimated. The full set of channels of distribution forms distributive, or distributive, an enterprise network.  
     Kinds of channels of distribution and network structure depend on set of factors: Strategic and tactical targets and enterprise problems on a commodity market of finished goods, logistical strategy of the enterprise, kinds and parametres of material and other streams, grocery attributes, target groups of consumers of production, competitors, environment.       The structure of a distributive network and the scheme of possible logistical channels depend on a kind of made finished goods and, accordingly, groups of consumers. 
    The consumer goods usually arrive in logistical channels of wholesalers and ритейлеров though some firms possessing considerable resources, presume to themselves direct distribution and sale of finished goods to the population, for example, by mail or to catalogues.
     Usually, than more mass is demand (or character of manufacture), especially branched out becomes a distributive network. Distribution of finished goods for industrial consumers basically is carried out through agents (brokers) by means of industrial distributors.
     At construction of a distributive network it is necessary to consider:
• character of manufacture and demand for production;
• available resources in distribution;
•o territorial features of sale of production;
• the characteristic of the involved distributor (covered territory, knowledge of production and the market, technical possibilities, level of contacts to consumers, presence of system of information support, etc.). 
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