Home Standard Operating Procedures Marketing Dept. Reference Distribution Channels Distribution Channels: An Overview Distribution Channel: Sub-Distributors

Distribution Channel: Sub-Distributors

Updated 2 yrs ago | 4 minutes

Applicable product ranges: Pharmaceuticals, Medical Devices, Supplements, Veterinary

Why don’t sub-distributors buy directly from AdvaCare?

Sub-distributors are a distribution channel for AdvaCare Pharma’s product range that is one stage after the distributor in the supply chain. Our distributors are usually the first stage of the supply chain in their country, who then will then sell to 2 types of sub-distributors:

● Small Sub-Distributors:

Smaller regional distributors that specialize in the wholesale distribution of pharmaceutical products in a specific area of their country (north, south, east, west), state/province, or city. By nature of covering a smaller area with less population and being positioned further down the supply chain, sub-distributors will rely on their supplier, our distributor, to supply them in quantities that they can sell.

● Large Sub-Distributors:

In some cases, the sub-distributor could be a larger company than the distributor. Why then wouldn’t such a distributor work directly with AdvaCare or even the manufacturer?

Some larger companies have many product divisions, each which can have differing procurement plans and arrangements. Some large sub-distributors might need the services provided by the distributor, for example the distributor might own the registration of the product(s), handle the importation or might just be easier to work with. In such cases, we should attempt to have our distributor open-up to us to reveal more about their sub-distributors so that we can better support them as it is in our interest to develop such larger sub-distributors even if the relationship is indirect.

Also, in many cases, distributors provide credit terms to allow sub-distributors, who are often less financially capable, to take possession of products, sell those products, then pay their supplier back after the agreed upon term. For example, some distributors will extend credit, allowing the sub-distributor to pay for the goods after 30, 60, 90 or even more days depending on the relationship and payment history of the sub-distributor.

Distributors vs Sub-Distributors

The structure and coverage of distribution depends on the complexity of the supply chain in each country. Some countries will have more stages of the supply chain in which products pass through multiple sub-distributors, whereas other countries will have minimal stages in which the sub-distributor is skipped and products go directly to hospitals/clinics, pharmacies and other points of sale/use.

Smaller sub-distributors often operate similarly to the distributor, but just on a smaller, more localized scale. The area covered by a sub-distributor is smaller than the distributor, who has national coverage, and the quantities sold by sub-distributors will be smaller. Larger sub-distributors might also have nationwide coverage and own their own brands under which AdvaCare and our distributor will register in some cases for larger sub-distributors.

Some larger distributors have their own network of sub-distribution, meaning the regional distribution is handled in-house, which means they will retain more control of the supply chain and profit margins. Other distributors, often smaller, will instead sell to sub-distributors if they do not have the scale and scope to handle regional distribution in-house.

It is also possible that distributors will sell directly to hospitals/clinics, pharmacies and other points of sale/use while at the same time also selling to sub-distributors. Other distributors will have a policy of not selling directly to hospitals/clinics, pharmacies, etc. and instead only sell to sub-distributors if it creates a conflict of interest.

Challenges facing Sub-Distributors in Developing Countries

In estimated order of priority from most impactful challenge to least:

CHALLENGES OF SUB-DISTRIBUTORS
Market Competition	Regional distributors often face competition from both national distributors and other regional distributors operating in the same market. Competing for market share, securing favorable supplier relationships, and differentiating their services in a competitive environment can be challenging.
Financial Constraints	Limited financial resources can impact the capacity of regional distributors to invest in infrastructure, technology, and human resources. Insufficient funds may hinder their ability to scale operations, expand distribution networks, or procure larger volumes of products.
Limited Infrastructure	Inadequate infrastructure, including poor road networks, unreliable transportation systems, and insufficient storage facilities, can pose challenges for regional distributors. Difficulties in accessing remote areas or poorly connected regions can hinder timely and efficient delivery of products.
Demand Variability	Demand for healthcare products can be unpredictable, with fluctuations influenced by factors such as disease outbreaks, seasonal variations, and economic conditions. Managing demand variability and forecasting accurately to optimize inventory levels and meet customer needs can be a complex task.
Training and Capacity Building	Developing a skilled workforce capable of managing complex distribution processes is crucial. Regional distributors may face challenges in finding and retaining trained personnel, providing ongoing training and development opportunities, and building the necessary capacity to meet evolving market demands.
Technological Adoption	Embracing and integrating technology into distribution operations can be a challenge for regional distributors in developing countries. Limited access to affordable technology, lack of digital infrastructure, and resistance to change can hinder the adoption of efficient distribution management systems and tools.
Market Fragmentation	Developing countries often have fragmented markets with diverse customer bases and distribution channels. Regional distributors may need to navigate various market segments, including urban and rural areas, different healthcare facilities, and diverse customer preferences, while tailoring their distribution strategies accordingly.
Supply Chain Complexity	Managing a complex and fragmented supply chain can be a significant challenge. Coordinating with multiple suppliers, ensuring product availability, managing inventory, and maintaining adequate stock levels require efficient logistics and distribution management.

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