Multi-layer distribution system in India

Supply chain management is a vital business function in today’s hyper-competitive corporate arena. Supply chain management has emerged as a mean to earn a competitive advantage. It is one of the reasons why firms all across the globe are trying to build their marketing strategies based on it. However, companies in India still stand far behind their foreign counterparts in the logistics aspect. Diverse geography, extreme climates, poor infrastructure, lesser utilization of Information Technology (IT), complex taxation and high documentation requirements make it difficult for Indian logistics firms to survive in global competition. The logistics costs are very high in India and one of the reasons being the multi-layer distribution system is prevalent in the country.

Multi-layer distribution system

A multi-layer distribution system is one where the transfer of final goods from manufacturer to customers takes place through multiple intermediaries. There is an indirect transfer of goods through intermediaries at various sales levels. The distribution in a multi-layer distribution system takes place as follows:

Fig 1: Multi-layer distribution system

Fig 1: Multi-layer distribution system

The manufacturer transports the finished stock to the central warehouse from where it is picked up by the C&F agents or stockiest. These are the intermediaries who manage stock in bulk. From these agents, the stock is supplied to the retailers who are the final link between a manufacturer and the customers. At all these various stages, the intermediaries are paid commissions which add to the costs of the final products. This is why the firms try to minimize the number of intermediaries throughout the sales channel in order to save costs and enhance efficiency. Recent buzz of organized retailing is an effort in the direction of reducing the levels of the multi-layer distribution system.

References

Ankita Agarwal

Analyst at Project Guru
Ankita is working with the editorial board of Project Guru as a Research Analyst and Writer. With Masters in Commerce and Business Studies, Ankita learned much of what she knows about management through experience. She has previously worked in various financial institutions like Birla Global, HDFC Ltd. and Citi Financial. She is self-motivated and writes for the Knowledge Tank section of Project Guru. She has authored more than 80 articles so far in Human Resources Management, Strategic Management, Finance and Marketing. She likes to pen her thoughts about the latest issues gripping these areas across the world.

Related articles

  • Reverse logistics to manage returns Reverse logistics is a practice of physically moving materials that have already been received by a customer but they wish to return it (Harris & Martin 2014). The flow of reverse logistics involves planning, implementing and then controlling the flow of products and information from the […]
  • Lean and agile strategy for managing supply chain functions Supply chain functions comprise of activities that include the flow of products and services starting from the origin of the products and end with consumption and purchase (Heckmann et al., 2015). The primary objective of the supply chain functions is to supervise the production, […]
  • SCM evolution and it’s driving factors Understanding SCM involves consideration of a wide range of dimensions. Wolf’s (2011) definition of SCM is the most relevant in this regard.
  • Supply chain management in the e-commerce industry Supply chain management (SCM) refers to strategies that optimize the flow of materials or services to make available the product or service from inception to the end consumer. It aims to perform this task in an integrated and cost-effective manner (Reis et al, 2014).
  • No product returns, no product exchange policy Traditionally, the companies have always followed a 'push strategy' wherein the companies pushed their offerings to the target customers through excessive marketing.
Discussions

2 Comments.

  1. Hi I absolutely love this article and it has been too pleasing thus I am surely going to bookmark it. One thing to say the Indepth research this article has is trully exceptional . Who does that additional research these days? Hats off to You ! Just another advise you definetlyinstall a Translator Application for your Global Users !!!

    • Hi! Thanks a lot for your pleasing words!! Your suggestions mean a lot to me. Please keep reading and help me improve!

Discuss

We are looking for candidates who have completed their master's degree or Ph.D. Click here to know more about our vacancies.