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Creating efficient and cost-effect channels for industrial goods can create value for business-to-business exchanges.
Differentiate between consumer and industrial channels, and understand how to increase efficiency in B2B exchange
Industrial distribution channels mostly refer to business-to-business (B2B) transactions of relatively high volume. As a result, the channel strategy tends to be a bit different than that of consumergoods.
One of the most important decisions in a B2B channel is choosing the way goods are transported. This could be via road, rail, ship, or plane.
To understand industrial distribution channels, it's important to realize that industrial goods generally refer to business-to-business (B2B) transactions of relatively high volume. When business enter exchange agreements, the contracts tend to involve large shipments that are repeated consistently over an agreed period of time.
With this in mind, the distribution strategy of industrial goods tends to be different than the distribution channels commonly utilized in business-to-consumer (B2C) transactions (such as retail outlets).
Generally speaking, the distribution of industrial goods is planned carefully, negotiated in advance, and focused on maximizing cost savings through effective logistics. While there are many factors that may influence channel decisions, management generally needs to determine which modes of transportation to use, how to warehouse goods, environmental requirements (temperature, for example), intermediaries, and scheduling.
Mode of Transport
Getting goods from A to B requires a mode of transportation, and each will come with various tradeoffs. For the most part, these tradeoffs revolve around speed and capacity (how fast something can be moved, and how much of it). For industrial goods, the most common options are road, rail, ship, and plane.
Ship - Cheap, slow, and limited to places with ports, ship transportation is excellent for high volume orders with no time constraints.
Road - The trucking industry in the United States alone is a massive undertaking, with movement of goods happening around the clock. This is great for specificity in terms of location, and tends to be fairly fast.
Rail - Rail is an extremely cheap option, due to the low labor and resources involved. Rail, however, has the key weakness of only going where there are tracks.
Plane - The fastest, most accurate and most expensive form of transportation, air transportation is good for transporting a small volume of goods rapidly to a specific location.
Getting goods from A to B is only part of distribution. There will also be time between using a purchased asset and receiving it. This will be in the form of storage. Storage considerations are fairly simple: where to store goods, how much it will cost, how much space will be required, and what environment they should be stored in.
Sometimes organizations use intermediaries, such as UPS or Fedex, to improve upon the logistics involved. These organizations specialize in minimizing the cost of transportation (through economy of scale), and take on the responsibility of moving, storing, and maintaining the goods as they are transported between the two bartering parties. Of course, intermediaries must turn a profit too, so the cost savings must offset the cost of the intermediary.
All and all, the channels involved in selling industrial goods between businesses are mostly about moving a high volume of goods from the producer to the buyer, often using a third party to handle the logistics.
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