Why do you think central distribution can be unprofitable? Are there any benefits, other than monetary, associated with central distribution? If so, what are they?
Answer:
Central distribution is the old and traditional method where a hub is made with all inventory and distribution is done to the suppliers and retailers. All it has some good advantages in cost reduction but nowadays scenario is shifted and company are becoming customer concerned, suppliers concerned too. The reason is goodwill, customer retaining, customer loyalty and being emphatic towards customer needs. The central distribution is more convenient to the company as its working in hieraricial manner were decision are under top management, communication is straight but no participation of lower level employees whereas decentralization gives more attention on customer service and their requirements. This makes intangible loss first than affects the whole profit cycle as customer switches, and competition increases. The other reasons are it becomes problematic to large firms, manager works becomes hectic, misuse of power, situational decision are not possible.
There are monetary advantages using Central distribution, cost is controlled by single place handling but other than that it has few more advantage like-
Every distribution has its own pros and cons, it depends on top management and the company to plan and make strategies according to their product and services, their demands, barriers, and favorable environment.
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