Physical Distribution Management and

Strategy

Physical Distribution• The process of

– planning, implementing, and controlling– the efficient, effective flow and storage– of goods, services, and related information– from point of origin to point of consumption– for the purpose of conforming to customer's

requirements. • Physical distribution cost can represent 20%

or more of the selling price of a product.

Logistics Management• The efficient management of the flow of

materials inbound-through and outbound of an organization.

• Two primary product flows:– Physical supply (materials management):

Flows that provide raw materials, components, and supplies to the production process.

– Physical distribution management: Flows that deliver the completed product to customers and channel intermediaries.

Supplier

Manufacturer Customer

Materials manageme

nt

Physical distribution

management

Logistics Management

InboundLogistics

OutboundLogistics

Study Area Map

Supply chain management (a series of connected logistics flows)

Logistics management

Materials management Physical distribution

Incoming transportation Traffic managementReceiving ShippingPurchasing Customer serviceIncoming warehousing Finished goodsInventory control

Functions of Traffic Management

• Mode and carrier selection• Routing• Claims processing• Operation of private transportation

Many of the imported goods you purchase were shipped in 20-foot (TEU) or 40-foot (FEU) steel

containers

Large cranes load the containers onto ships.

(Image courtesy of the Port of Charleston))

Larger container ships can hold 4,000 to 6,000 containers.

(Image courtesy of Maersk Sealand)

After unloading from ships, containers can be loaded onto a flatbed rail car, or truck flatbed,

for additional intermodal shipping. (Image courtesy of CSX Corp.)

Alternatively, a container can be attached to a set of wheels for motor transport

(as an 18-wheeler trailer).

Major Advantages by Transportation Mode• Motor

– Speed of delivery

– Diversity of equipment

– Flexibility– Frequency of

movement– Transfer of

goods to other carriers

– Convenient to both shipper and receiver

• Rail– Mass movement of

goods– Low unit cost of

movement– Dependability– Long-haul moving– Wide coverage to

major markets and suppliers

– Many auxillary services (i.e., switching)

– Transfer of goods to other carriers

– Specialized equipment

• Water– Very low unit

cost of movement

– Movement of low-unit-value commodities

– Long-haul movement

– Mass movement of bulk commodities

(continued)

• Pipeline– Lowest unit cost

of movement– Mass movement

of liquid or gas products

– Long-haul moving

– Large capacity– Most

dependable mode

• Air– Frequent

service to major markets

– Large capability– Overnight

service– Most rapid

speed of any carrier

• Intermodal– Cost savings– Lower loss and

damage claims due to containerization

– Service extended to more shippers and receivers

– Reduced handling and storage costs

Major Advantages by Transportation Mode

Controllable Elements in a Logistics System

• Customer service• Logistics communications• Warehousing• Packaging• Production planning• Order processing• Transportation• Inventory control• Materials Handling• Plant and warehouse location