Between the consumer or end user and the manufacturer or service provider there are usually one or more intermediaries that add value to the exchange transaction.
There are two ways of analyzing the activities through which goods and services are brought to the market. The first takes the push and pull approach as the basis for understanding vertical relationships among members of the distribution channel. The second takes the process approach as the basis for understanding the horizontal relationships between them.
Conceptually, a distribution channel can be defined as the set of interrelated intermediaries that cover the distance between supplier and customer, adding value to the transaction in terms of place, time and possession.
This traditional vision fits perfectly into the 'push' approach that views distribution as a way to bring products and services from the place where they are generated to the place where the customer or end user can purchase them. The focus is on these activities but without losing sight of those that serve to 'attract' customers, such as advertising or sales promotion. The basic idea is that the market share of a company results from the balance it achieves to match customers and satisfactors at the point of sale.
The importance of using the traditional term Distribution Channel lies in the fact that it allows us to realize that a two-way flow of physical goods, services, money, property titles, information, promotion and risk occurs through this channel.
On the other hand, at the beginning of the 90's the simple but powerful idea was developed that companies should not be seen in functional, divisional or product and market terms, but in terms of processes. Today the term Value Chain seems to replace the traditional expression Distribution Channel, in the same way that the use of terms such as distribution logistics and others that refer to some particular aspect of said chain is favored.
The complexity of a global economy, the speed of technological change, the risks of an open market and the limited resources of a company lead to seeking alliances that translate into Competitive Advantages. Therefore, the elements of the Value Chain are those related to the operational effectiveness process.
Unlike what normally occurs among the members of a Distribution Channel, which is a relationship that is almost limited to the transactional, the horizontal vision of the value chain leads to identifying collaboration schemes, mainly among the members of a same stage, although at the end of the day we find alliances between suppliers, distributors and end customers.
The objectives that are sought to be achieved by establishing collaborative alliances are typically related to offering greater added value to customers, responding quickly to diversity, to the turbulence of technological change and to the risks derived from participating in a global economy.
Also, to cover deficiencies in productive resources, costs or efficiency; financial or information technology. But perhaps the most important goal of some alliances is to gain market access.
Typically, collaborative alliances occur between companies at the same level within the Value Chain and result in a complementary combination of each company's resources and skills. They are based on contracts concluded between them, seeking a win-win relationship and seek to achieve an integration of work systems (technology, operation, distribution, service, administration) to achieve common goals. And they envision a long-term relationship that is not limited to the business aspect, but extends to the cultural and personal.
There are some critical questions that need to be answered when evaluating the candidate to form an alliance.
- What is the strategic reason for each of the two parties to collaborate? What is the cost / benefit ratio of the collaborative relationship? To what extent is it essential to have that relationship? To what extent is it equitable for both parties? Are organizational cultures reconcilable? Are there better candidates than the one being evaluated?
The truth is that collaborative alliances can occur between members at any level and at different levels of the value chain. For example, we see that: - The Automotive Industry establishes alliances with its Suppliers, which it calls OEM's (original equipment manufacturers). An example followed by other industries. - In our country, Mexico, some companies in the United States and Canada are looking for who would be a competitor to them, but to ally with them and facilitate their entry into this market. - Also in Mexico, the breweries have established alliances with retailers whom they call Controlled Clients, thus ensuring the market launch of their beers on a preferential basis.- Frequent Flyer Programs of any airline started as an alliance between the company and its customers and have been extended to very comprehensive programs that include other airlines (competitors), hotels, shops, restaurants, credit cards, etc.
The answer is that a company can ally with any other, or with all other companies, in search of competitive advantages for all, within a win-win relationship.
While the vertical vision of a Distribution Channel corresponds to tactical or operational (transactional) decisions, the horizontal vision of the Value Chain corresponds to strategic (collaborative) decisions.
Just as the design of a distribution channel, or the configuration of a strategic alliance begins by considering the characteristics and needs of customers, to serve them better and better than the competition, the final result of distribution and logistics decisions must be evaluated. in terms of Customer Satisfaction.
