In the united states, the distribution network is well organized. However, in foreign countries, especially developing...

In the united states, the distribution network is well organized. However, in foreign countries, especially developing ones, distribution networks are not well organized.

Why is this so?

Expert Solution

Distribution network refers to an inter-connected or coordinated set of storage facilities as well as transportation systems that function as a receiver of inventories and then deliver these received goods to the ultimate customers. It acts as a link between the place of manufacturing and the place of ultimate consumption.

Developing countries lack facilities because of poor management and financial incompetence. This is because the developing countries remained in their own domestic market and border, even after decades of World War II. The distribution network in these nations is highly fragmented. The major challenge faced by the distribution network in developing countries is the cost of operation. Distribution network involves cost in terms of warehousing, delivery personnel, shipping, loading and unloading of goods, and a number of other costs.

Another challenge that exists in developing countries is competition from small stores that exist in the surroundings of the buyers. If a customer wishes to buy an iPhone, he has two options – (a) he goes to a nearby retail store or (b) he orders it from online seller. In going to retail store, he incurs costs in terms of time and transportation but he gets to feel the product physically in hand, even before purchasing the product. In online shopping, the product cannot be seen before purchasing it. The customer has to decide between the two options and then conclude the final buying decision. Also, customers belonging to middle-income groups find it easier to purchase through physical shops rather than online shopping.

Lack of logistics also act as an obstacle in distribution network. If the distribution network is highly dependent on humans rather than technology, it does defer the movement of goods from one place to another. There is delay in exchange of information from one agent to another. This delay leads to inefficiency in the whole network. Hence, these reasons together make distribution network in developing countries unorganized.

keosha answered 2 months ago

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