Channels of distribution are the most powerful element when talking about order fulfillment. The main function of this element is to find out appropriate ways through which goods are made available to the market. It is a managerial function and hence proper decisions are to be taken in this matter before commercial production begins.

When the product is finally ready for the market, it has to be determined what methods and routes will be used to bring the product to the market i.e., to ultimate consumers and industrial users. This process involves establishing distribution and providing for physical handling and distribution. Distribution is concerned with various activities, such as the movement and storage of goods, the legal, promotional and financial activities involved in the transfer of ownership from the producer to the consumer.

A channel of distribution for a product is the route taken by the goods as they move from the organization to the user. According to American marketing association, "A channel of distribution, is the structure of intra-company organization units and extra-company agents and dealers wholesale and retail, through which a commodity, product or order is marketed".

It may be noted that every marketing channel contains one or more of the transfer points at each of which there is either an institution or a final buyer of the product. From the view point of the producer, such a network of institutions used for reaching a market is known as a marketing channel. A channel always includes both the producer and the final customer of the product, as well as all agents and middlemen involved in the transfer of title. However, the channel does not include firms such as bank and other institutions, which render a marketing service, but play no major role in purchase and sales.