Classification of specialized Service providers

Specialized channel participants are classified as functional or support based on the type of services they provide. Functional Specialist: A functional specialist is a service provider that is engaged in the basic process of moving, modifying, or otherwise physically handling a product during the distribution process or that is directly involved in the selling process. In other words, a functional service provider is actively engaged in the day-to-day performance of the channel. The range of services performed by such functional specialist is broader than pure logistics. Many firms specialize in performing services related to physical sequencing of products to meet customers’ requirements. In some situations specialists may modify a product to a customer’s specification while it is passing through the distribution channel Others are engaged in performing social merchandising services related to their customers’ marketing operations.

The wide variety of specialized functional services available to primary channel members are: (1) transportation, (2) warehousing, (3) assembly, (4) fulfillment, (5) sequencing, and (6) merchandising. Firms that perform multiple functional services are referred to as integrated service providers. In the physical or functional provision of specialized services there is a clear trend toward proliferation of integrated service providers.

Support Specialist: A support is a firm that facilitates overall channel performance by providing an essential ingredient or service. Unlike the functional specialist, a support firm does not engage in actual selling or the logistics processes of the channel. In most situations, the service provided is truly support in the sense that proximity in time and place to the products being distributed is not necessary. Many support services are not readily apparent in the physical path a product follows to market. However, they are essential to satisfactory completion of the overall distribution process.

The variety of specialized support services available to primary channel participants are: (1) financial, (2) information, (3) advertising, (4) insurance, (5) advisory/research, and (6) arrangement. Given the technical nature of support services, most firms that provide such assistance tend to focus on performing a single service.

The summary is given below and brief definition to each significant type of specialized support service provider.

Functional Service Providers: Functional specialists are actively involved in getting products to the right place at the correct time to support the marketing strategies of primary channel participants. The range of service required to support the physical flow of products can include a variety of value added efforts. Choice exists concerning which business will provide a function and when it will be performed. No choice exists concerning whether the function will be performed during the distribution process.

Each of the six types of functional services listed below is discussed in greater detail.

Moving products between geographic locations

Store and sort merchandise

Modify products to customer’ specification

Take customers’ orders and provide specialized product shipment as a value added service.

Arrange products in specialized ways as a value added service.

Work at point of sale to increase appeal of product assortment.

Provide funding for inventory, account, account receivables, and factoring as well as basic assets.

Provide communication services to link channel operations.

Assist in planning and executing promotional efforts

Protecting against loss risk due to unexpected events.

Provide basic data and expert information to facilitate channel planning and operations.

Create special situations and incentive to facilitate product movement or sale in other than primary business operation methods.

Taking a case of US the $256 billion expended on trucking in 1999 represents 78.2 percent of the total freight bill. The cost of performing necessary trucking was $156 billion for intercity hauling and $100 billion more for local freight and delivery services. It is clear that trucking represents the primary source of transportation used to support channel performance.

Likewise there are services mentioned above but the above transportation example is explanatory in terms of data. The specialist service description given above gives very much the clarity and may not need data for further explanation.