The D’s of Distribution
In my experience of the distribution trade, the points of negotiation or trade-offs between the customers and suppliers are invariably one of the following Diversity (width of SKU’s) Delivery (time) Discrepancy (accuracy in order execution) Discount (price negotiation) Let me elucidate each of these trade-offs and the interplay of negotiations which the entities concerned engage in. Diversity (width of SKU’s) The larger the SKU’s maintained at the supplier (distributor), the better is his ability to have a higher first fill ratio (FFR) w.r.t. to order of the customer. This creates a situation whereby the customer perceives the supplier to be reliable & well stocked. The offshoot of this is the scenario where supplier creates barriers to switching for the customer on account of better order servicing. Customers, on the other hand, are happy because their business downstream is addressed appropriately.