Integrating Distribution Strategy and Tactics: A Model and an Application

Designing distribution systems requires two decisions, one strategic (i.e., the number of levels between the producer and the customer) and the other tactical (i.e., channel management policies such as trade discounts and rebates). While the modeling literature focuses on one or the other, evidence from the field indicates that the two decisions are in fact interactive. In this paper, we develop and then apply an integrated model that solves the strategic issue of channel levels and the tactical issue of price rebates simultaneously.