Introduction to Distribution Management System
Distribution Management System (DMS) refers to the process of supervising the supply chain from the movement of goods from the manufacturers or suppliers to the point of sale. Activities like orders, tracking inventory, supply, clients, packaging, warehousing, and logistics fall under it. It integrates all business processes into one software and keeps things organized.
DMS also plays a role in attracting and satisfying customers. It gives the organization longevity and competitive advantage. It aids in leading profitable operations. Amazon is a wonderful example of using DMS effectively and efficiently.
The latest distribution management systems gather and share relevant information to assess opportunities for growth and competitiveness in the industry. There are two categories in distribution:
- Commercial Distribution (Sales Distribution)
- Physical Distribution (Logistics)
Process of Distribution
An efficient distribution network ensures the timely delivery of goods and services. It means customer satisfaction and high-profit margins for the corporations.
The basic process of how a distribution system works is as follows:
- Orders are received from retailers or manufacturers (based on consumer demand).
- After checking the inventory, the company accepts or rejects the orders.
- All the departments coordinate to fulfill the order requirements of the client.
- The stock is categorized at a warehouse. Once the financial terms are confirmed, the shipment is loaded and delivered.
Everything is tracked and stored by the distribution management software in coordination with various other systems.
This distribution channel consists of producers, retailers, distributors, wholesalers, and the end consumers. Renting warehouses, reducing cost price, maintaining market price and constant feedback from the consumers are a part of this process.
The Role of Distribution Channels
Distribution channels facilitate the sales of goods to the supply chain and move products from the producer to the customer. These functions maximize profit and customer satisfaction.
The purpose of a distribution channel is to bridge the gap between the manufacturer and the user of the product.
The channel is composed of three main categories:
- The Producer of the Product (manufacturer, craftsman)
- The Middleman (at a retailer or wholesaler level)
- The Consumer of the Product (individual, institution)
The channel’s functions are divided into three categories:
- Transactional Functions (buying, selling, and risk assumption)
- Logistical Functions (assembly, storage, sorting, and transportation)
- Facilitating Functions (after-sales service, finance, carrying information, and leadership)
These factors affect the price of the product and influence the brand and marketing strategy.
Importance of Distribution Management System
Distribution Management directly affects the profit of the organization. To understand the importance of DMS, challenges faced by sales channels need to be examined. To reach a wider audience the company develops various sales and marketing techniques. The channels are an outlet to sell these products, but:
- The majority of the distributors are small and unorganized. They have insufficient capital and technology.
- To break into rural areas, it’s necessary to add several levels in the distribution chain, incurring extra costs.
- No real-time data on orders, inventory or claims, and returns lead to under or overstocking.
- Lack of data and information because of limited internet facilities.
DMS controls and monitors the distribution network. It stores all the data and information related to the clients, stock, and sales. This data is easier to access, analyze, and report.
CRM features are embedded in DMS so customer satisfaction is ensured. Less workforce, less operational cost, less processing time means an increase in productivity, and better sales for the company.
Advantages of a Distribution Management System
- DMS keeps everything in order.
- Easier for the shoppers because all information is available at one location.
- Lessens any form of error regarding time, location, or quantity of the delivery of the product.
- Low administration costs for the organization because of less involvement of employees. Distribution Management Software manages a lot of functions.
- Better time management
- Discrepancies between the actual numbers and recorded numbers can be found easily.
- Better inventory monitoring
- Increase in efficiency and accuracy of the services offered to the customer.
- Optimum utilization of resources
- Quick contract documentation processes and approval. Less paperwork because everything is digitalized.
- Hassle-free delivery and returns are managed online
- Methodized payment collection
- Improved sales target achievement
- Effective reporting both ways from producer to the middle agents and customers and vice versa.
Strategic Distribution Management
An organization’s profitability, scale of operations, and brand can be impacted by the strategic selection of distribution channels. The distribution management strategy depends on a variety of factors such as the company’s mission statement, goals, target market, area of service, types of products, etc.
There are three distribution management strategies:
- Mass: The mass strategy aims to distribute to the mass market
- Selective: This strategy aims to distribute to a selective group of sellers only
- Exclusive: The exclusive strategy aims to distribute the product to an extremely limited group
Conclusion
The end goal is to achieve efficiency in delivering raw materials or products to the right location and time in apt condition. So, a Distribution Management System:
- Does Order processing
- Warehousing and inventory
- Reducing overheads and management costs
- Synchronizes demand and supply of the products
- Arranges for deliveries and conducts billing process
- Creates Performa invoice/Bill of Exchange
- Analyzes business information and creates reports
- Makes business forecasts, etc.
That is why the role of DMS is incredibly important and should be adopted in every organization for its betterment, higher revenue generation, and cost reduction.