Evaluating the efficiency of distribution channels using the method of data envelopment analysis

Master's Thesis in Business Management-Marketing

Faculty of Management

Abstract:

One of the main concerns of organizations is the selection of a suitable distribution channel with high efficiency, which is one of the basic problems of most factories due to the diversity of distribution channels.

Based on the increasing development of technology and the creation of new competitors for CDs such as hard drives, flash drives, etc.

The product was stagnant and finally, the concern for choosing an efficient distribution channel is felt more in this branch.

In this regard, an opportunity was obtained to measure the efficiency of the distribution channels of this company and identify the most efficient channels through the data coverage analysis method by evaluating the inputs and outputs of Karane Tejarat International Company.

Key words: data envelopment analysis (DEA), multi-criteria decision models, efficiency, distribution channels. Based on this, deciding on the way to transfer goods to the place of purchase or consumption is one of the important decisions that the marketing manager faces. (Bakhtai and Golchinfar, 2015: 23) The distribution network [1] is a part of the economic system of a country whose economic developments are effective in determining its function and structure. This network is the link between producers and consumers and consists of agents who have mutual relations with each other and carry out the act of distributing goods. (Farzin, 2016: 77)

The decision about the distribution channel and sale of goods is one of the most important decisions facing managers. The decision about product distribution has a direct impact on other marketing decisions. The pulse of a company is in the hands of its distribution and sales network, but despite all these conditions, most companies do not pay enough attention to the distribution channels of their goods, and this sometimes has harmful consequences for them, and on the other hand, many companies have achieved a competitive advantage by using creative distribution systems. Therefore, it is necessary to make a lot of efforts to increase the efficiency of distribution channels and compare the sales of all types of channels. (Walker et al., 1378: 268)

In this chapter, the generalities related to the current research are examined, in such a way that the research problem is first described and explained in order to provide the necessary foundations to justify the reason for conducting the current research. In the following, the objectives of the research are stated and according to these objectives, the research questions are presented. Then, the scope of the research is determined in terms of time and space, and the method used in the present research is briefly explained. Finally, the practical definition of the research terms is discussed so that the study of the current research can be done in a simple and understandable way. According to many scientists in the field of management, decision-making is the criterion for evaluating the performance of every manager. Managers need various information in their decisions and go through specific steps to access the information. One of the bases of decision-making for managers is performance evaluation, which guides them in making decisions.  (Delgado et al., 2009)

If the performance evaluation is done in a scientific way, it is an effective guide for managers in making decisions. Among the types of organizations, one of the most important departments that need a performance evaluation is the departments and organizations related to the public. This is even included in the discussion of public administration. The importance of performance evaluation in these organizations is so much that the governments have different schemes such as the scheme of honoring clients and have been taken into consideration by spending large budgets. (Abbas Ali, 1389)

Data envelopment analysis is a radial measure of performance evaluation which assumes that an inefficient unit must reduce (increase) all its inputs (outputs) to a certain ratio in order to be efficient.

Karaneh Tejarat International Company operates in the field of CD and DVD production and ranks second in terms of production volume in Iran (5 million units per month) according to volume..

Karaneh Tejarat International Company operates in the field of CD and DVD production and ranks second in terms of production volume in Iran (5 million units per month). Due to the volume of production and fierce competition with domestic and foreign competitors, one of the problems and problems of this company is continuous and competitive distribution in the market, therefore one of the challenges of the managers of this company is to transfer its manufactured goods to the target markets.

Three main channels are considered for the products. Each of them has its own problems:

A. Direct communication with the consumer: due to the company's low production volume, which is 5 million units per month, it is very expensive from an economic point of view and is not economical in some way (the high cost is due to the provision of hardware equipment such as warehouses and distribution machines, hiring visitors, etc.) Their income is several times the company's profit. On the other hand, after working for a while, these wholesalers introduce themselves as the company's representatives and misuse the company's brands, and sometimes they destroy the company's brand to sell their imported products better.

C: Communication with retailers: This method also has a good turnover. On the other hand, the company does not depend on the wholesalers. It turns out that they cannot do this, because retailers buy a set of peripheral products from wholesalers, and if they buy CDs directly from the company, the wholesalers do not give them other peripheral products, and they inevitably get their needs from the wholesalers. And it cannot be changed easily, in this research we will examine and compare the types of distribution channels in relation to the marketing system according to the amount of sales and market share (results of efficiency and profitability) in the international trade bank. Currently, the competition to provide the best goods and services at the lowest price is one of the important issues that companies face in the Iranian market, and the main point in achieving this is to have a strong distribution network. Therefore, in order to achieve these goals, large production complexes are creating strong distribution networks in the markets they cover. Distribution channels are an intermingled set of organizations or individuals that are responsible for providing goods and services to the final consumer, and the logical balance between the interests of these institutions guarantees the life of the channel. A distribution channel is efficient when it can deliver the product at the right time, to the right amount, in the right conditions, at the right cost, in the right place, and to the right person. The well-considered choice of product distribution channels is of vital importance in the efficiency and output of the production and consumption process. The past decade has witnessed rapid and significant changes in the field of goods and services distribution channels in developed economies. The emergence of advanced telephone and logistics networks, and most importantly, The emergence of the international communication network (Internet) has made new distribution channels available to buyers, customers and consumers. It is obvious that the evaluation of the performance of different units of an organization in a strategic model, especially when they have multiple branches and departments, should occur systematically and within a logical framework. Many branches of Karaneh Tejarat International Company in Iran also need to be measured with a scientific and logical method in order to integrate their performance evaluation in order to be identified in terms of performance efficiency and create the context for their correct evaluation.

Of course, this action can help managers to make decisions in 1- upgrading the level of distributors 2- upgrading the level of managers 3- increasing or reducing the human resources of a group and things like them. However, the existence of a performance evaluation system provides a useful feedback in the organizational system. The necessity of which is not hidden from anyone. This factor can also help to explain the macro strategies of the organization because it is by evaluating which internal processes, human, customer-oriented or financial systems have weaknesses.