There are various important considerations to select an appropriate channel of distribution such as size of the company, type of product mix, degree of market penetration etc.
In Indian pharmaceutical marketing, manufacturer has to reach up to his consumer via his stockists and retailers. It is very difficult for a manufacturer that to reach directly up to consumer at national level. Therefore the shortest chain available with the pharmaceutical company is appointing stockists at each level through either appointing C&F agent or super distributor or company managed own depot.
For a small size company where operation and products are limited for them, best choice is to go for super distributor or C&F agent so as to reach up to consumer. But for big size i.e. national level company they can operate their own depot so as to minimize distribution cost.
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Also there is increasing trend in pharmaceutical industry to appoint C&F agent instead of super distributors. The basic reason is to minimize the cost of distribution by saving 4% C.S.T. (Central Excise Tax) which is not applicable to the sale while transferring goods from company’s warehouse to C&F agent and another reason is that company has a better control over its sale and receivables and reach up to micro level of market also.
Beside this C&F agent is like a company managed own depot because C&F agent has to bill all invoices on behalf of company guidelines and company has a tough control over its activities. Furthermore C&F agent has its own premises and network was company gets full exemption from investing on it.
Certainly there are some companies who use both C&F agents and own depot concept simultaneously in specific areas. The best examples of it are GlaxoSmithKline Ltd and Cipla Ltd that are having maximum own depot to sale the product across the country and maintain less cost on high volume of sales. This case is true especially for their new divisions like Animal Healthcare Product in case of Glaxo and Consumer and O.T.C. products in case of Cipla Ltd.
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Today institutional market is another opportunity for sale and distribution where profitability is more as goods transfers directly to institutions are by avoiding retail chemist margin. Some of these institutes having high contributory sale are Railway hospitals, E.S.I. (Employee State Insurance) hospitals, Armed forces Hospitals, Public Healthcare Centers, Ordinance factories operated healthcare centers etc. where Director General of Supplies and Disposals calls all India tenders against short supply of medicines.