PHYSICAL DISTRIBUTION

Logistics & Supply Chain

LogisticsLogistics

Component parts & Raw material In-process inventory Finished goods

Supply ChainSupply Chain

Physical Distribution

• Creation of customer is task of mktg.• Product availability leads to satisfaction• To achieve this value adding generally have

a distribution activity known as distribution system, traffic mgt., mktg. logistics, or physical distribution

• So it is a mktg. activity that concerns the handling & movement of goods

Physical Distribution

• It includes all those activities concerned with the efficient movement of goods from the place of production to the place of consumption

• It involves the handling of raw material fabricates parts, supplies & finished goods from producers to consumers via intermediaries

Physical Distribution

• William Stanton: Involves the mgt.of physical flow of products & establishments & operation of flow systems

• Philip Kotler: Involves planning, implementing, & controlling the physical flow of material & final goods from the point of origin of use to meet customer need at a profit

Objective of Physical Distribution

• Basically two broad objective• 1. Attain customer satisfaction• 2. Profit maximization• 3. Getting the right product, at the right

place, at the right time, in right quantity, at the right customer at the lower cost

• 4. Proper co-ordination of distribution acivities

Objective of Physical Distribution

• 5. To use powerful tool of competitive mktg.

• 6. To provide better service of lower prices

• 7. To increase profit margin

Objective of Physical Distribution

– Meetings standards of customer service for• Timeliness of order fulfillment• Accuracy of order fulfillment

– Reducing total distribution costs• Inventory levels against warehousing costs• Materials costs versus transportation costs• Distribution costs against customer service standards• Overall goal is to achieve the lowest total distribution cost

compatible with the firm’s customer service objectives.– Reducing cycle (process completion) time

• Faster processes for increased customer service

Significance of Physical Distribution

• Creation if utilities: Place – Transportation Time – Warehousing

● Improved consumer service

● Cut in distribution cost

● Market share

● Price stabilization

● Play vital role where production location & markets are distanced

Cost of Physical Distribution Functions

Participants in physical distribution

• Supplier• Manufacturer• Intermediaries

Wholesalers, Retailers

• Agents – Selling, Manufacturing, C & F etc.

Component functions of physical distribution

• Planning the overall physical distribution system

• In bound transport

• Receiving – Raw material, orders

• In plant warehousing

• Inventory management

• Order processing

Component functions of physical distribution

• Packaging

• Dispatch of goods

• Out bound transport

• Field warehousing

• Customer service

Components of physical distribution

• Order Processing– The receipt and transmission of sales order information

• Order entry

• Order handling

• Order delivery

– Electronic data interchange• A computerized means

of integrating order processing with production, inventory, accounting, and transportation

Order processing

• Series of logical steps from receiving orders to dispatch –

there should be a standard procedure for receiving the orders, handling orders, granting of credit, invoicing, dispatching, collecting the bills and post dispatch adjustments

Steps in order processing

• Communication of orders – Verbal or written• Credit check• Inventory check• Order of dispatch• Intimation to customer• Dispatch of goods• Collection of payments

Material Handling

Material Handling• Sub system of PDS• Stands for movement & handling of goods• Represents product handling from plant to

warehouse & warehouse to place of loading• An agent of cost reduction & improved

customer service • Reflects on efficiency & speed of

warehousing operations• Efficient & effective MHS contributes

efficiency & effectiveness of total PDS

MH operations performed in following stages

• Unloading incoming material from transport

vehicles• Moving unloaded material to assigned warehouses • Lifting the mat. from warehouses during order

picking• Moving the material for inspection & packing• Loading packages/boxes to transport vehicles

MH Equipments & Systems

• Manual – Use of man power & animal

• Mechanised system – wheeled trolleys, forklift trucks, side loaders, mobile cranes, conveyors – wheel, roller, belt, chain

• Semiautomatic system – sorting device robotics

Warehousing

Warehousing

Storage (Location)

Balancing act

Warehousing

• An act of storing and assorting the finished goods so as to create maximum time utility at minimum cost

• Sub function – Storage, movement, assorting, hold, consolidation, break bulk, packing,

Advantage of Warehousing

• Serves as safeguard• Make provision for unloading• Serves economically at lower prices• Helps in determining the channel of distribution• Assist in maintaining continuous sales• Balancing demand & supply• Stabilizing prices • Reduces need for instant transportation