The length of the distribution channel as a factor of its efficiency

Abstract

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. This network has two or more partners, so it has to be coordinated in the direction of order
fulfilment and satisfied demand.
As a partnership business network, distribution channels are very important, due to their role in responding to
customers’ requests. 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. Determining the right number of facilities and proper locations for
distribution network is an essential issue for companies involved in the channel.
The issue of distribution channel’s length has become more interesting due to the parallel existence of two
different trends. On one hand, there is tendency for reducing number of partners, facilities or stages of
distribution channels, with the purpose of avoiding extra expenses, but on the other hand there is a necessity to
involve more partners in distribution channel, because that is a way for providing greater market share.
Configuration of distribution channels depends on many factors. These factors have internal or external
character. Therefore, the fact that the distribution of the same products in different countries can be performed
completely differently is not surprising at all. In this regard, the aim of this papers is to classify the factors that
affect the length of the distribution channel. In addition, the paper will also indicate advantages as well
disadvantages of both long and short distribution channels. The goal of the analysis of the factors and the way
of designing distribution channels, in terms of its length, is to make an adequate decision for increasing efficiency
of the distribution network.