Channels of Distribution in Pharmaceutical Industry
Channels of distribution play an active role in
distributing the goods to the end consumers. It helps in eliminating the
unnecessary costs involved in the distribution of goods. The channel of distribution
varies according to the nature of goods. In pharmaceutical industry channels of
distribution play an active role since the knowledge of the pharmacist not only
delivers the drugs but the drug stores dealer is also supposed to know about
the dosage given to the buyer. Moreover the drug store dealer has to understand
the expiry date of various medicines. The pharmacist also needs to be in
constant touch with the physician. The medical representatives recommends the
various drugs to the pharmacist, the medical representatives also create awareness
about the drugs among the doctors being manufactured by the respective manufacturers.
Pharma business is concentrated on retail and institutional sales as well;
hence it makes altogether a difference to have effective channels of
distribution.
Channels of distribution in pharmaceutical industry
include producers, wholesalers and retailers and sometimes mercantile agents.
But channels of distribution do not include transport agencies, insurance
companies, warehouses and other non-middlemen institutions. Though they perform
very important functions in aid of trade, they do not play any major role in
negotiating purchase and sale of products.
India is geographically a very large country, with the
population located in both urban and rural areas. There is at present no system
of national chains of supermarkets or drugstores/pharmacies,
and so small independent shops dominate retailing. The
basic structure of supply chain management is depicted in Figure 9.1 consisting
of manufacturer, wholersaler, C&F agents, druggists, hospital and patients.
The flow of drugs starts from the manufacturer and ends with the customer who
is the end-user. The method of distribution is therefore from the manufacturer’s
location to local depots for stocking. These depots are either run by the
company or contracted out to so-called carrying and forwarding agents
(C&F), who operate the depots on the company’s behalf, but employ their own
staff and premises. The C&F is under the supervision of the company’s
regional office (usually at least four offices based in Mumbai, New Delhi,
Calcutta and Chennai, representing the West, North, East and South regions).
Each regional office looks after sales in four or five states.
The dispatch of goods takes place from the
manufacturer’s location to the C&F locations, but without invoicing at that
stage, as it is only a transfer of goods and not a sale. The C&F sends goods
to wholesalers who have stocking points. At this point the goods are invoiced
by the company to the wholesaler, and the legal sale takes place. However the
company also retains the responsibilities under the DCA as applicable to
manufacturers. The wholesaler has to pay the company for goods supplied.
Besides dispatch, the C&F agent also performs functions such as providing
sales staff, invoicing and collection. The wholesaler is responsible for
sending the goods to the various retailers and invoices the sales in his own
name and collects the money. The company’s sales representative co-ordinate
with both the C&F agent and the wholesaler to expedite sales and
dispatches. Usually sales representatives are paid a part of their salary as a fixed
monthly amount and partly by commission on sales in their territories.
Multiple shops are the group of shops in the same branch of retail trade
under a centralised management and dealing in similar lines of product. A single business
firm opens a number of branch shops which are situated at different locality in the city and
different parts of the country.The main objective is providing shopping facilities to the customers
near their residence. The multiple shops are centrally controlled and receive supply from the
central office and remit the sales proceeds regularly to the central office. They have uniformity of
operation and each branch deals in a similar line of goods. The price of all items is fixed by
head office and the same is charged at every branch. Purchasing, pricing and advertising are done
centrally. There is only decentralisation of selling. They display goods in an identical manner
and sell the same type of goods. Generally, they deal only in a limited variety of products and
all the goods are usually consumer goods. They generally sell goods on cash and carry basis and do
not allow credit and free delivery services to customers. When organised by manufacturers,
multiple shops aim at eliminating both sellers and retailers; Examples of multiple shops are
Dabur, Hamdard and Himalaya etc.
If you want Dissertations on Pharmaceutical Industry in Channels of Distribution, Contact Mahasagar Publications.
